STOCK-BASED COMPENSATION

3 Months Ended

Mar. 31, 2012

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

NOTE 14—STOCK-BASED COMPENSATION

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

(Millions)	2012		2011
Performance stock rights	$	1.2	$	(0.7	)
Restricted shares and restricted share units	2.1		2.2
Total stock-based compensation expense	$	3.3	$	1.5
Deferred income tax benefit	$	1.3	$	0.6

Compensation cost recognized for stock options during the three months ended March 31, 2012, and 2011, was not significant.

The total compensation cost capitalized for all awards during the three months ended March 31, 2012, and 2011, was not significant.

Stock Options

The fair value of stock option awards granted is 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 is estimated using its 10-year historical volatility. The following table shows the weighted-average fair value per stock option granted during the three months ended March 31, 2012, along with the assumptions incorporated into the valuation model:

	February 2012 Grant
Weighted-average fair value per option	$	6.30
Expected term		5 years
Risk-free interest rate		0.17% - 2.18%
Expected dividend yield		5.28%
Expected volatility		25%

A summary of stock option activity for the three months ended March 31, 2012, and information related to outstanding and exercisable stock options at March 31, 2012, 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, 2011	2,953,630		$	48.09
Granted	279,535		53.24
Exercised	(225,986	)	44.83
Outstanding at March 31, 2012	3,007,179		$	48.82	5.97	$	14.2
Exercisable at March 31, 2012	2,221,968		$	49.24	5.02	$	9.9

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 March 31, 2012. This is calculated as the difference between our closing stock price on March 31, 2012, and the option exercise price, multiplied by the number of in-the-money stock options. The intrinsic value of options exercised during the three months ended March 31, 2012, and 2011, was $2.0 million and $0.6 million, respectively.

As of March 31, 2012, $2.6 million of compensation cost related to unvested and outstanding stock options was expected to be recognized over a weighted-average period of 3.2 years.

Cash received from option exercises during the three months ended March 31, 2012 was $10.1 million, and was not significant for the three months ended March 31, 2011. The actual tax benefit realized for the tax deductions from these option exercises was not significant for the three months ended March 31, 2012, and 2011.

Performance Stock Rights

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 March 31:

	2012
Risk-free interest rate	0.32% - 1.27%
Expected dividend yield	5.28% - 5.34%
Expected volatility	21% - 36%

A summary of the activity for the three months ended March 31, 2012, related to performance stock rights accounted for as equity awards is presented below:

	Performance Stock Rights		Weighted-AverageFair Value*
Outstanding at December 31, 2011	135,948		$	46.18
Granted	18,865		52.70
Distributed	(70,598	)	42.93
Adjustment for final payout	(24,804	)	42.93
Outstanding at March 31, 2012	59,411		$	53.48

*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 for awards that have not been elected for deferral into the deferred compensation plan six months prior to the completion of the performance period.

A summary of the activity for the three months ended March 31, 2012, related to performance stock rights accounted for as liability awards is presented below:

	Performance Stock Rights
Outstanding at December 31, 2011	186,215
Granted	75,408
Distributed	(16,001	)
Adjustment for final payout	(5,622	)
Outstanding at March 31, 2012	240,000

The weighted-average fair value of all outstanding performance stock rights accounted for as liability awards as of March 31, 2012, was $56.22 per performance stock right.

As of March 31, 2012, $5.7 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 2.3 years.

The total intrinsic value of performance stock rights distributed during the three months ended March 31, 2012, and 2011, was $4.7 million and $6.3 million, respectively. The actual tax benefit realized for the tax deductions from the distribution of performance stock rights during the three months ended March 31, 2012, and 2011 was $1.9 million and $2.5 million, respectively.

Restricted Shares and Restricted Share Units

During the second quarter of 2011, the last of the outstanding restricted shares vested. Only restricted share units remain outstanding at March 31, 2012.

A summary of the activity related to all restricted share unit awards (equity and liability awards) for the three months ended March 31, 2012, is presented below:

	Restricted ShareUnit Awards		Weighted-AverageGrant Date Fair Value
Outstanding at December 31, 2011	497,722		$	45.21
Granted	188,346		53.24
Dividend equivalents	6,821		47.94
Vested	(193,878	)	45.07
Forfeited	(1,440	)	46.48
Outstanding at March 31, 2012	497,571		$	48.39

As of March 31, 2012, $16.7 million of compensation cost related to these awards was expected to be recognized over a weighted-average period of 3.1 years.

The total intrinsic value of restricted share and restricted share unit awards vested for the three months ended March 31, 2012, and 2011, was $10.4 million and $6.3 million, respectively. The actual tax benefit realized for the tax deductions from the vesting of restricted shares and restricted share units during the three months ended March 31, 2012, and 2011, was $4.2 million and $2.5 million, respectively.

The weighted-average grant date fair value of restricted share units awarded during the three months ended March 31, 2012, and 2011, was $53.24 and $49.40 per share, respectively.