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STOCK-BASED COMPENSATION
 12 Months Ended
Dec. 31, 2012
STOCK-BASED COMPENSATION
4. STOCK-BASED COMPENSATION

In October 1999, the Company adopted a long-term equity incentive plan, which allows for grants of stock options, stock appreciation rights, restricted stock and performance awards to directors, officers and employees of PCA, as well as others who engage in services for PCA. The plan, which will terminate on October 19, 2014, provides for the issuance of up to 8,550,000 shares of common stock over the life of the plan. As of December 31, 2012, options and restricted stock for 8,040,958 shares have been granted, net of forfeitures. Forfeitures are added back to the pool of shares of common stock available to be granted at a future date.

A summary of the Company’s stock option activity and related information follows:

 

     Options     Weighted-
Average
Exercise Price		      Weighted-
Average
Remaining
Contractual
Term (years)		      Aggregate
Intrinsic
Value		  
                         (In thousands)  

Outstanding at December 31, 2009

      1,973,301        20.92         

Exercised

      (394,420 )      19.01         

Forfeited

      (10,497 )      24.62         
  

 

 

    

 

 

        

Outstanding at December 31, 2010

      1,568,384        21.38         

Exercised

      (343,685 )      20.34         
  

 

 

    

 

 

        

Outstanding at December 31, 2011

      1,224,699        21.64         

Exercised

      (944,869 )      21.06         

Forfeited

      (1,250 )      23.09         
  

 

 

    

 

 

        

Outstanding and exercisable at December 31, 2012

      278,580      $ 23.65         1.3       $ 4,130   
  

 

 

    

 

 

     

 

 

     

 

 

  

 

The total intrinsic value of options exercised during the years ended December 31, 2012, 2011, and 2010 was $9.5 million, $2.8 million, and $2.4 million, respectively. As of December 31, 2012, there is no unrecognized compensation cost related to stock option awards granted under the Company’s equity incentive plan as all outstanding awards have vested.

A summary of the Company’s restricted stock activity follows:

 

     2012     2011     2010  
     Shares     Fair Market
Value at
Date of
Grant		     Shares     Fair Market
Value at
Date of
Grant		     Shares     Fair Market
Value at
Date of
Grant		  
     (Dollars in thousands)  

Restricted stock at January 1

      1,817,745      $ 40,655        1,478,000      $ 30,600        1,235,505      $ 24,718   

Granted

      394,928        10,846        575,694        16,005        573,440        12,693   

Vested

      (429,034 )      (9,722 )      (229,979 )      (5,816 )      (318,350 )      (6,563 ) 

Cancellations

      (11,975 )      (257 )      (5,970 )      (134 )      (12,595 )      (248 ) 
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Restricted stock at December 31

      1,771,664      $ 41,522        1,817,745      $ 40,655        1,478,000      $ 30,600   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

  

Compensation expense for both stock options, which were fully vested at June 30, 2010, and restricted stock recognized in the consolidated statements of income for the years ended December 31, 2012, 2011 and 2010 was as follows:

 

     Year Ended December 31,  
     2012     2011     2010  
     (In thousands)  

Stock options

    $ —      $ —      $ 226   

Restricted stock

      11,687        9,736        6,780   
  

 

 

    

 

 

    

 

 

  

Impact on income before income taxes

      11,687        9,736        7,006   

Income tax benefit

      (4,543 )      (3,784 )      (2,721 ) 
  

 

 

    

 

 

    

 

 

  

Impact on net income

    $ 7,144      $ 5,952      $ 4,285   
  

 

 

    

 

 

    

 

 

  

The Company uses the Black-Scholes-Merton option-pricing model to estimate the fair value of each option grant as of the date of grant. Expected volatilities are based on historical volatility of the Company’s common stock. The expected life of the option is estimated using historical data pertaining to option exercises and employee terminations. Separate groups of employees that have similar historical exercise behavior are considered separately for estimating the expected life. The risk-free interest rate is based on U.S. Treasury yields in effect at the time of grant.

The fair value of restricted stock is determined based on the closing price of the Company’s common stock on the grant date. Restricted stock awards granted to employees generally vest at the end of a four-year period, and stock awards granted to directors vest immediately. The Company generally recognizes compensation expense associated with restricted stock awards ratably over their vesting periods. As PCA’s Board of Directors has the ability to accelerate vesting of restricted stock upon an employee’s retirement, the Company accelerates the recognition of compensation expense for certain employees approaching normal retirement age. As of December 31, 2012, there was $21.1 million of total unrecognized compensation costs related to the restricted stock awards. The Company expects to recognize the cost of these stock awards over a weighted-average period of 2.5 years.