Stock-Based Compensation

The Company accounts for the cost of all share-based payments, including stock options, by measuring the payments at fair value on the grant date and recognizing the cost in the results of operations. The fair values of stock options are estimated using the Black-Scholes option-pricing model based on certain assumptions. The fair values of service and performance based stock awards are estimated based on the fair market value of the Company’s stock price on the grant date. The fair value of market based performance share awards are estimated using the Monte Carlo valuation method. Estimated forfeiture rates are applied to outstanding awards. The Company records the cash flows resulting from tax deductions in excess of compensation for those options and other stock awards, if any, as financing cash flows. The Company has elected the shortcut method as described in the related accounting literature for determining the available pool of windfall tax benefits upon adoption. The Company accounts for the utilization of windfall tax benefits using the tax law ordering approach.

Please refer to Note 16 for a description of the Company’s stock-based compensation plans and their general terms. As of December 31, 2012, incentives have been awarded in the form of performance share unit awards and restricted stock unit awards (collectively, “Rights”) and stock options. The Company has elected to use the straight-line method to recognize compensation costs. Stock options and awards vest over a period ranging from six months to five years. The maximum term of stock option awards is 10 years. Upon exercise of a stock option or upon vesting of Rights, shares are issued from treasury shares held by the Company or from authorized shares.

During 2012, 2011 and 2010, the Company recognized $8,819, $8,319 and $7,655, respectively, of stock-based compensation cost and $3,345, $3,155 and $2,903, respectively, of related tax benefits in the accompanying consolidated statements of income. In addition, the Company has recorded $1,438, $8,056 and $0 of excess tax benefits in additional paid-in capital in 2012, 2011 and 2010, respectively. The Company has realized all available tax benefits related to deductions from excess stock awards exercised or issued in earlier periods. At December 31, 2012, the Company had $11,394 of unrecognized compensation costs related to unvested awards which are expected to be recognized over a weighted average period of 2.22 years.

The following table summarizes information about the Company’s stock option awards during 2012:



	Number of Shares		Weighted-Average Exercise Price
Outstanding, January 1, 2012	2,637,303		$	17.67
Granted	114,200		26.30
Exercised	(418,298	)	15.34
Forfeited	(106,060	)	20.88
Outstanding, December 31, 2012	2,227,145		18.40

The following table summarizes information about stock options outstanding at December 31, 2012:



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number of Shares	Average Remaining Life (Years)	Average Exercise Price		Number of Shares	Average Exercise Price
$9.56 to $14.77	558,182	5.06	$	11.78	536,257	$	11.79
$15.02 to $20.21	749,810	5.41	17.35		584,414	17.85
$20.69 to $22.34	566,438	6.15	21.45		358,104	21.89
$23.18 to $33.45	352,715	6.14	26.22		238,515	26.19

The Company received cash proceeds from the exercise of stock options of $6,415, $27,909 and $5,013 in 2012, 2011 and 2010, respectively. The total intrinsic value (the amount by which the stock price exceeds the exercise price of the option on the date of exercise) of the stock options exercised during 2012, 2011 and 2010 was $4,225, $14,263 and $1,854, respectively.

The weighted-average grant date fair value of stock options granted in 2012, 2011 and 2010 was $9.49, $7.50 and $5.64, respectively. The fair value of each stock option grant on the date of grant was estimated using the Black-Scholes option-pricing model based on the following weighted average assumptions:



	2012		2011		2010
Risk-free interest rate	0.98	%	2.04	%	2.32	%
Expected life (years)	5.3		5.2		5.2
Expected volatility	50.2	%	49.6	%	49.5	%
Expected dividend yield	2.56	%	2.75	%	2.98	%

The risk-free interest rate is based on the term structure of interest rates at the time of the option grant. The expected life represents an estimate of the period of time that options are expected to remain outstanding. Assumptions of expected volatility of the Company’s common stock and expected dividend yield are estimates of future volatility and dividend yields based on historical trends.

The following table summarizes information about stock options outstanding that are expected to vest and stock options outstanding that are exercisable at December 31, 2012:



Options Outstanding, Expected to Vest						Options Outstanding, Exercisable
Shares	Weighted- Average Exercise Price		Aggregate Intrinsic Value		Weighted- Average Remaining Term (Years)	Shares	Weighted- Average Exercise Price		Aggregate Intrinsic Value		Weighted- Average Remaining Term (Years)
2,192,695	$	18.40	$	10,208	5.63	1,717,290	$	17.96	$	8,616	4.95

The following table summarizes information about the Company’s Rights during 2012:



	Service Based Rights				Service and Performance Based Rights				Service and Market Based Rights
	Number of Units		Weighted-Average Grant Date Fair Value		Number of Units		Weighted-Average Grant Date Fair Value		Number of Units		Weighted-Average Grant Date Fair Value
Outstanding, January 1, 2012	486,805		$	14.85	65,407		$	20.58	24,970		$	36.33
Granted	252,997		25.63		75,107		26.41		37,553		42.31
Forfeited	(25,011	)	20.93		(6,314	)	21.17		(2,156	)	36.99
Additional Earned	—		—		2,533		20.73		—		—
Vested / Issued	(149,314	)	26.16		(12,666	)	20.73		—		—
Outstanding, December 31, 2012	565,477		18.11		124,067		24.08		60,367		40.03

The Company granted 252,997 restricted stock unit awards and 112,660 performance share unit awards in 2012. All of the restricted stock unit awards vest upon meeting certain service conditions. The performance share unit awards are part of the long-term Relative Measure Program, which is designed to assess the long-term Company performance relative to the performance of companies included in the Russell 2000 Index. The performance goals are independent of each other and based on three metrics, the Company's total shareholder return ("TSR"), basic earnings per share growth and operating income before depreciation and amortization growth (weighted equally). The participants can earn from zero to 250% of the target award and the award includes a forfeitable right to dividend equivalents, which are not included in the aggregate target award numbers. Compensation expense for the awards is recognized over the three year service period based upon the value determined under the intrinsic value method for the basic earnings per share growth and operating income before depreciation and amortization growth portions of the award and the Monte Carlo simulation valuation model for the TSR portion of the award since it contains a market condition. The weighted-average assumptions used to determine the weighted-average fair values of the market based portion of the 2012 awards include a 0.34% risk-free interest rate and a 43.6% expected volatility rate.

Compensation expense for the TSR portion of the awards is fixed at the date of grant and will not be adjusted in future periods based upon the achievement of the TSR performance goal. Compensation expense for the basic earnings per share growth and operating income before depreciation and amortization growth portions of the awards is recorded based upon a probability assessment of achieving the goals and will be adjusted at the end of the service period based upon the actual achievement of those performance goals.