STOCK-BASED COMPENSATION

12 Months Ended

Dec. 31, 2011

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

NOTE 21—STOCK-BASED COMPENSATION

In May 2010, our shareholders approved the 2010 Omnibus Incentive Compensation Plan (2010 Omnibus Plan). Under the provisions of the 2010 Omnibus Plan, the number of shares of stock that may be issued in satisfaction of plan awards may not exceed 3,000,000 shares, plus any shares remaining or forfeited under prior plans. No more than 900,000 shares of stock, plus shares remaining or forfeited under prior plans, can be granted as full value shares in the form of performance shares or restricted stock. No additional awards will be issued under prior plans, although the plans continue to exist for purposes of the existing outstanding stock-based compensation awards. At December 31, 2011, stock options, performance stock rights, and restricted share units were outstanding under the various plans.

The following table reflects the stock-based compensation expense and the related deferred tax benefit recognized in income for the years ended December 31:

(Millions)	2011		2010		2009
Stock options	$	1.8	$	2.3	$	2.0
Performance stock rights	3.5		10.0		4.6
Restricted shares and restricted share units	6.1		10.1		4.9
Total stock-based compensation expense	$	11.4	$	22.4	$	11.5
Income tax benefit	$	4.6	$	9.0	$	4.6

The total compensation cost capitalized for all awards during 2011, 2010, and 2009 was not significant.

Stock Options

Under the provisions of the 2010 Omnibus Plan, no single employee who is our chief executive officer or one of our other three highest compensated officers (including officers of our subsidiaries) can be granted options for more than 1,000,000 shares during any calendar year. No stock options will have a term longer than ten years. The exercise price of each stock option is equal to the fair market value of the stock on the date the stock option is granted. Generally, one-fourth of the stock options granted vest and become exercisable each year on the anniversary of the grant date.

The fair values of stock option awards granted were estimated using a binomial lattice model. The expected term of option awards is calculated based on historical exercise behavior and represents the period of time that options are expected to be outstanding. The risk-free interest rate is based on the United States Treasury yield curve. The expected dividend yield incorporates the current and historical dividend rate. Our expected stock price volatility was estimated using its 10-year historical volatility. The following table shows the weighted-average fair values per stock option along with the assumptions incorporated into the valuation models:

	2011 Grant	2010 Grant	2009 Grant
Weighted-average fair value per option	$6.57	$5.30	$3.83
Expected term	5 years	6 years	8 - 9 years
Risk-free interest rate	0.27% - 3.90%	2.38%	2.50% - 2.78%
Expected dividend yield	5.34%	5.46%	5.50%
Expected volatility	25%	25%	19%

A summary of stock option activity for 2011, and information related to outstanding and exercisable stock options at December 31, 2011, is presented below:

	Stock Options		Weighted-Average Exercise Price Per Share		Weighted-Average Remaining Contractual Life (in Years)	Aggregate Intrinsic Value (Millions)
Outstanding at December 31, 2010	2,992,699		$	47.59
Granted	241,207		49.40
Exercised	(241,302	)	42.72
Expired	(38,974	)	50.58
Outstanding at December 31, 2011	2,953,630		$	48.09	5.73	$	19.0
Exercisable at December 31, 2011	1,991,120		$	49.74	4.72	$	9.8

As of December 31, 2011, $1.2 million of compensation cost related to unvested and outstanding stock options was expected to be recognized over a weighted-average period of 2.5 years.

Cash received from option exercises was $2.3 million during 2011. Cash received from option exercises during 2010 was $18.8 million and was not significant during 2009. The actual tax benefit realized for the tax deductions from these option exercises was not significant in 2011, 2010, and 2009.

The aggregate intrinsic value for outstanding and exercisable options in the above table represents the total pre-tax intrinsic value that would have been received by the option holders had they all exercised their options at December 31, 2011. This is calculated as the difference between our closing stock price on December 31, 2011, and the option exercise price, multiplied by the number of in-the-money stock options. The intrinsic value of options exercised during 2011 and 2010 was $2.8 million and $4.9 million, respectively, and was not significant during 2009.

Performance Stock Rights

Performance stock rights vest over a three-year performance period. For accounting purposes, awards granted to retirement eligible employees vest over a shorter period; however, the distribution of these awards is not accelerated. No single employee who is our chief executive officer or one of our other three highest compensated officers (including officers of our subsidiaries) can receive a payout in excess of 250,000 performance shares during any calendar year. Performance stock rights are either paid out in shares of our common stock, or an eligible employee can elect to defer the value of their awards into the deferred compensation plan and choose among various investment options, some of which are ultimately paid out in our common stock and some of which are ultimately paid out in cash. Beginning in 2011, eligible employees can now only elect to defer up to 80% of the value of their awards. The number of shares paid out is calculated by multiplying a performance percentage by the number of outstanding stock rights at the completion of the performance period. The performance percentage is based on the total shareholder return of our common stock relative to the total shareholder return of a peer group of companies. The payout may range from 0% to 200% of target.

Performance stock rights are accounted for as either an equity award or a liability award depending on their settlement features. Awards that can only be settled in our common stock are accounted for as equity awards. Awards that an employee has elected to defer or is still able to defer into the deferred compensation plan are accounted for as liability awards and are recorded at fair value each reporting period.

Six months prior to the end of the performance period, employees can no longer change their election to defer the value of their performance stock rights into the deferred compensation plan. As a result, any awards not elected for deferral at this point in the performance period will be settled in our common stock. This changes the classification of these awards from a liability award to an equity award. The change in classification is accounted for as an award modification. The fair value on the modification date is used to measure these awards for the remaining six months of the performance period. No incremental compensation expense is recorded as a result of this award modification.

The fair values of performance stock rights were estimated using a Monte Carlo valuation model. The risk-free interest rate is based on the United States Treasury yield curve. The expected dividend yield incorporates the current and historical dividend rate. The expected volatility was estimated using one to three years of historical data. The table below reflects the assumptions used in the valuation of the outstanding grants at December 31:

	2011	2010	2009
Risk-free interest rate	0.00% - 1.27%	0.21% - 0.56%	1.38% - 4.71%
Expected dividend yield	5.28% - 5.34%	5.34%	4.50% - 5.50%
Expected volatility	21% - 36%	20% - 34%	15% - 26%

A summary of the 2011 activity related to performance stock rights accounted for as equity awards is presented below:

	Performance Stock Rights	Weighted-AverageFair Value*
Outstanding at December 31, 2010	—	$	—
Granted	16,959	49.21
Award modifications	118,989	45.75
Outstanding at December 31, 2011	135,948	$	46.18

*Reflects the weighted-average fair value used to measure equity awards. Equity awards are measured using the grant date fair value or the fair value on the modification date.

A summary of the 2011 activity related to performance stock rights accounted for as liability awards is presented below:

	Performance Stock Rights
Outstanding at December 31, 2010	341,638
Granted	67,790
Award modifications	(118,989	)
Distributed	(129,237	)
Adjustment for final payout	25,013
Outstanding at December 31, 2011	186,215

The weighted-average fair value of all outstanding performance stock rights accounted for as liability awards as of December 31, 2011, was $56.77 per performance stock right.

As of December 31, 2011, $2.1 million of compensation cost related to unvested and outstanding performance stock rights (equity and liability awards) was expected to be recognized over a weighted-average period of 1.5 years.

The total intrinsic value of performance stock rights distributed during the years ended December 31, 2011 and 2010, was $6.3 million and $1.9 million, respectively. The actual tax benefit realized for the tax deductions from the distribution of performance stock rights during the years ended December 31, 2011 was $2.5 million and was not significant in 2010. No performance stock rights were distributed in 2009 because the performance percentage was below the threshold payout level for those rights that were vested and eligible to be distributed during the year ended December 31, 2009.

Restricted Shares and Restricted Share Units

Restricted shares and restricted share units generally have a four-year vesting period, with 25% of each award vesting on each anniversary of the grant date. During the vesting period, restricted share recipients had voting rights and were entitled to dividends in the same manner as other common shareholders. Restricted share unit recipients do not have voting rights, but they receive dividend equivalents in the form of additional restricted share units. During 2011, the last of the outstanding restricted shares vested. Only restricted share units remain outstanding at December 31, 2011.

Restricted shares and restricted share units are accounted for as either an equity award or a liability award depending on their settlement features. Awards that can only be settled in our common stock and cannot be deferred into the deferred compensation plan are accounted for as equity awards. Beginning in 2011, eligible employees can now only elect to defer up to 80% of their awards into the deferred compensation plan. Equity awards are measured based on the fair value on the grant date. Awards that an employee has elected to defer into the deferred compensation plan are accounted for as liability awards and are recorded at fair value each reporting period.

A summary of the activity related to all restricted share and restricted share unit awards (equity and liability awards) for the year ended December 31, 2011, is presented below:

	Restricted Share and Restricted Share Unit Awards		Weighted-Average Grant Date Fair Value
Outstanding at December 31, 2010	455,933		$	43.36
Granted	179,584		49.39
Dividend equivalents	25,414		44.22
Vested	(151,505	)	44.46
Forfeited	(11,704	)	44.90
Outstanding at December 31, 2011	497,722		$	45.21

As of December 31, 2011, $9.5 million of compensation cost related to these awards was expected to be recognized over a weighted-average period of 2.5 years.

The total intrinsic value of restricted share and restricted share unit awards vested for the years ended December 31, 2011, 2010, and 2009 was $7.5 million, $4.9 million, and $2.7 million, respectively. The actual tax benefit realized for the tax deductions from the vesting of restricted shares and restricted share units during the years ended December 31, 2011, 2010, and 2009 was $3.0 million, $2.0 million, and $1.1 million, respectively.

The weighted-average grant date fair value of restricted shares and restricted share units awarded during the years ended December 31, 2011, 2010, and 2009 was $49.39, $41.67, and $42.12 per share, respectively.