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Share-Based Compensation and Employee Benefit Plans
 12 Months Ended
Dec. 31, 2010
Share-Based Compensation and Employee Benefit Plans [Abstract]  
Share-Based Compensation and Employee Benefit Plans
NOTE 12 — Share-Based Compensation and Employee Benefit Plans
Stock Award and Incentive Plan
We have a stock award and incentive plan to attract and retain officers, key employees and independent directors. Our plan reserves for issuance a maximum of 4.1 million shares, which may be in the form of incentive stock options, non-qualified stock options and restricted stock, or other types of awards as authorized under our plan. Pursuant to the anti-dilution provisions of our plan, the number of shares reserved for issuance has been adjusted to reflect the special dividends discussed in Note 11. At December 31, 2010 there were approximately 1.3 million shares available to be granted under our plan. Our plan is administered by the Compensation and Human Resources Committee of the Board of Directors. In the case of stock options, the exercise price of the options granted may not be less than the fair market value of Common Stock at the date of grant. The term of the options is generally ten years from the date of grant. The options typically vest over a period of one to four or five years from the date of grant. We generally issue new shares upon exercise of options. Restricted stock awards typically vest over a period of three to five years.
Refer to Note 2 for discussion of our accounting policy related to stock-based compensation.
We estimated the fair value of our options using a Black-Scholes closed-form valuation model using the assumptions set forth in the table below. The expected term of the options was based on historical option exercises and post-vesting terminations. Expected volatility reflects the historical volatility of our Common Stock during the historical period commensurate with the expected term of the options that ended on the date of grant. The expected dividend yield reflects expectations regarding cash dividend amounts per share paid on our Common Stock during the expected term of the option and the risk-free interest rate reflects the annualized yield of a zero coupon U.S. Treasury security with a term equal to the expected term of the option. The weighted average fair value of options and our valuation assumptions for the years ended December 31, 2010, 2009 and 2008 were as follows:
                         
    2010     2009     2008  
Weighted average grant-date fair value
  $ 9.27     $ 2.47     $ 4.34  
Assumptions:
                       
Risk-free interest rate
    3.14 %     2.26 %     3.12 %
Expected dividend yield
    2.90 %     8.00 %     6.02 %
Expected volatility
    52.16 %     45.64 %     24.02 %
Weighted average expected life of options
    7.8 years       6.9 years       6.5 years  
The following table summarizes activity for our outstanding stock options for the years ended December 31, 2010, 2009 and 2008 (numbers of options in thousands):
                                                 
    2010     2009(1)     2008(1)  
            Weighted             Weighted             Weighted  
    Number     Average     Number     Average     Number     Average  
    of     Exercise     of     Exercise     of     Exercise  
    Options     Price     Options     Price     Options     Price  
Outstanding at beginning of year
    8,873     $ 28.22       10,344     $ 31.01       8,555     $ 39.57  
Granted
    3       21.67       965       8.92       980       39.77  
Exercised
    (202 )     8.92       —       —       (14 )     37.45  
Forfeited
    (1,514 )     28.73       (2,436 )     32.03       (1,423 )     38.75  
Adjustment to outstanding options pursuant to special dividends
    —       n/a       —       n/a       2,246       n/a  
 
                                   
Outstanding at end of year
    7,160     $ 28.65       8,873     $ 28.22       10,344     $ 31.01  
Exercisable at end of year
    5,869     $ 30.18       6,840     $ 29.65       7,221     $ 29.51  
     
(1)  
In connection with the special dividends discussed in Note 11, effective on the record date of each dividend, the number of options and exercise prices of all outstanding awards were adjusted pursuant to the anti-dilution provisions of the applicable plans based on the market price of our stock on the ex-dividend dates of the related special dividends. The adjustment to the number of outstanding options is reflected in the table separate from the other activity during the periods at the weighted average exercise price for those outstanding options. The exercise prices for options granted, exercised and forfeited in the table above reflect the actual exercise prices at the time of the related activity. The number and weighted average exercise price for options outstanding and exercisable at the end of year reflect the adjustments for the applicable special dividends. The adjustment of the awards pursuant to the special dividends is considered a modification of the awards, but did not result in a change in the fair value of any awards and therefore did not result in a change in total compensation to be recognized over the remaining term of the awards.
The intrinsic value of a stock option represents the amount by which the current price of the underlying stock exceeds the exercise price of the option. Options outstanding at December 31, 2010, had an aggregate intrinsic value of $12.8 million and a weighted average remaining contractual term of 3.8 years. Options exercisable at December 31, 2010, had an aggregate intrinsic value of $2.4 million and a weighted average remaining contractual term of 3.1 years. The intrinsic value of stock options exercised during the years ended December 31, 2010 and 2008, was $2.9 million and less than $0.1 million, respectively. We may realize tax benefits in connection with the exercise of options by employees of our taxable subsidiaries. During the year ended December 31, 2010, we did not recognize any significant tax benefits related to options exercised during the year, and during the year ended December 31, 2009, as no stock options were exercised we realized no related tax benefits.
The following table summarizes activity for restricted stock awards for the years ended December 31, 2010, 2009 and 2008 (numbers of shares in thousands):
                                                 
    2010     2009     2008  
            Weighted             Weighted             Weighted  
    Number     Average     Number     Average     Number     Average  
    of     Grant-Date     of     Grant-Date     of     Grant-Date  
    Shares     Fair Value     Shares     Fair Value     Shares     Fair Value  
Unvested at beginning of year
    458     $ 26.73       893     $ 40.33       960     $ 46.08  
Granted
    381       16.72       378       8.92       248       39.85  
Vested
    (261 )     27.56       (418 )     32.83       (377 )     43.45  
Forfeited
    (34 )     26.11       (533 )     27.66       (128 )     46.85  
Issued pursuant to special dividends (1)
    —       —       138       9.58       190       22.51  
 
                                   
Unvested at end of year
    544     $ 19.36       458     $ 26.73       893     $ 40.33  
 
                                   
     
(1)  
This represents shares of restricted stock issued to holders of restricted stock pursuant to the special dividends discussed in Note 11. The weighted average grant-date fair value for these shares represents the price of our stock on the determination date for each dividend. The issuance of the additional shares of restricted stock resulted in no incremental compensation expense.
The aggregate fair value of shares that vested during the years ended December 31, 2010, 2009 and 2008 was $4.4 million, $3.1 million and $16.5 million, respectively.
Total compensation cost recognized for restricted stock and stock option awards was $8.1 million, $8.0 million and $17.6 million for the years ended December 31, 2010, 2009 and 2008, respectively. Of these amounts, $0.8 million, $1.3 million and $3.8 million, respectively, were capitalized. At December 31, 2010, total unvested compensation cost not yet recognized was $7.8 million. We expect to recognize this compensation over a weighted average period of approximately 1.7 years.
Employee Stock Purchase Plan
Under the terms of our employee stock purchase plan, eligible employees may authorize payroll deductions up to 15% of their base compensation to purchase shares of our Common Stock at a five percent discount from its fair value on the last day of the calendar quarter during which payroll deductions are made. In 2010, 2009 and 2008, 5,662, 20,076 and 8,926 shares were purchased under this plan at an average price of $20.92, $8.82 and $23.86, respectively. No compensation cost is recognized in connection with this plan. Shares of Common Stock purchased under the employee stock purchase plan are treated as issued and outstanding on the date of purchase and dividends paid on such shares are recognized as a reduction of equity when such dividends are declared.
401(k) Plan
We provide a 401(k) defined-contribution employee savings plan. Employees who have completed 30 days of service and are age 18 or older are eligible to participate. For the period from January 1, 2009 through January 29, 2009, and during the year ended December 31, 2008, our matching contributions were made in the following manner: (1) a 100% match on the first 3% of the participant’s compensation; and (2) a 50% match on the next 2% of the participant’s compensation. On December 31, 2008, we suspended employer matching contributions effective January 29, 2009. We may reinstate employer matching contributions at any time. We incurred costs in connection with this plan of less than $0.1 million in 2010, $0.6 million in 2009 and $5.2 million in 2008.