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STOCK-BASED COMPENSATION | 6 Months Ended
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Jun. 30, 2012
STOCK-BASED COMPENSATION |
STOCK-BASED COMPENSATION |
NOTE 4 — STOCK-BASED COMPENSATION During the three and six months ended June 30, 2012, total compensation expense recognized in the condensed consolidated statements of income related to both stock options and restricted stock awards reduced income before taxes by $4.1 million and $7.8 million, respectively, and net income by $2.4 million and $4.5 million, respectively. During the three and six months ended June 30, 2011, total compensation expense recognized in the condensed consolidated statements of income related to both stock options and restricted stock awards reduced income before taxes by $3.3 million and $5.6 million, respectively, and net income by $1.9 million and $3.2 million, respectively. The Company received $2.2 million and $2.9 million as of June 30, 2012 and June 30, 2011, respectively, in cash proceeds from stock option exercises. The net tax benefit recognized in equity for stock compensation plans was $157 thousand and $474 thousand for June 30, 2012 and June 30, 2011, respectively. As of June 30, 2012, there are 4,366,140 shares available to be issued, subject to the Company’s current 1998 Stock Incentive Plan, as amended. Stock Options The Company issues fixed stock options to certain employees, officers, and directors. Stock options are issued at the current market price on the date of grant with a three-year or four-year vesting period and contractual terms of 7 or 10 years. The Company issues new shares upon the exercise of stock options. A summary of activity for the Company’s stock options as of and for the six months ended June 30, 2012 is presented below:
|  |  |  |  |  | Weighted |  |  |
|  |  |  | Weighted |  | Average |  | Aggregate |
|  |  |  | Average |  | Remaining |  | Intrinsic |
|  |  |  | Exercise |  | Contractual |  | Value |
|  | Shares |  | Price |  | Term |  | (In thousands) |
Outstanding at beginning of period |  | 945,080 |  | $ | 27.19 |  |  |  |  |
Granted |  | — |  | — |  |  |  |  |
Exercised |  | (135,898 | ) | 16.18 |  |  |  |  |
Forfeited |  | (84,698 | ) | 35.92 |  |  |  |  |
Outstanding at end of period |  | 724,484 |  | $ | 28.23 |  | 1.92 years |  | $ | 1,278 |
Vested or expected to vest at end of period |  | 722,811 |  | $ | 28.28 |  | 1.92 years |  | $ | 1,252 |
Exercisable at end of period |  | 707,750 |  | $ | 28.71 |  | 1.88 years |  | $ | 1,018 |
A summary of changes in unvested stock options and related information for the six months ended June 30, 2012 is presented below:
|  |  |  | Weighted Average |
|  |  |  | Grant Date Fair Value |
Unvested Options |  | Shares |  | (per share) |
Unvested at January 1, 2012 |  | 186,914 |  | $ | 4.77 |
Granted |  | — |  | — |
Vested |  | (161,526 | ) | 4.47 |
Forfeited |  | (8,654 | ) | 13.21 |
Unvested at June 30, 2012 |  | 16,734 |  | $ | 3.26 |
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions:
|  | Three Months Ended |  | Six Months Ended |
|  | June 30, |  | June 30, |
|  | 2012 (5) |  | 2011 (5) |  | 2012 (5) |  | 2011 |
Expected term (1) |  | N/A |  | N/A |  | N/A |  | 4 years |
Expected volatility (2) |  | N/A |  | N/A |  | N/A |  | 78.1 | %
Expected dividend yield (3) |  | N/A |  | N/A |  | N/A |  | 0.2 | %
Risk-free interest rate (4) |  | N/A |  | N/A |  | N/A |  | 1.6 | %
(1) The expected term (estimated period of time outstanding) of stock options granted was estimated using the historical exercise behavior of employees. (2) The expected volatility was based on historical volatility for a period equal to the stock option’s expected term. (3) The expected dividend yield is based on the Company’s prevailing dividend rate at the time of grant. (4) The risk-free rate is based on the U.S. Treasury strips in effect at the time of grant equal to the stock option’s expected term. (5) The Company did not issue any stock options during the three and six months ended June 30, 2012 and the three months ended June 30, 2011. During the three and six months ended June 30, 2012 and 2011, information related to stock options is presented as follows:
|  | Three Months Ended |  | Six Months Ended |
|  | June 30, |  | June 30, |
|  | 2012 |  | 2011 |  | 2012 |  | 2011 |
Weighted average grant date fair value of stock options granted during the period (1) |  | N/A |  | N/A |  | N/A |  | $ | 13.21 |
Total intrinsic value of options exercised (in thousands) |  | $ | 280 |  | $ | 855 |  | $ | 855 |  | $ | 2,052 |
Total fair value of options vested (in thousands) |  | $ | 671 |  | $ | 119 |  | $ | 3,672 |  | $ | 1,263 |
(1) The Company did not issue any stock options during the three and six months ended June 30, 2012 and the three months ended June 30, 2011. As of June 30, 2012, total unrecognized compensation cost related to stock options amounted to $55 thousand. The cost is expected to be recognized over a weighted average period of 1.1 years. Restricted Stock Awards In addition to stock options, the Company also grants restricted stock awards to directors, officers and employees. The restricted stock awards fully vest after one to five years of continued employment from the date of grant; some of the awards are also subject to achievement of certain established financial goals. The Company becomes entitled to an income tax deduction in an amount equal to the taxable income reported by the holders of the restricted stock when the restrictions are released and the shares are issued. Restricted stock awards are forfeited if officers and employees terminate prior to the lapsing of restrictions or if established financial goals are not achieved. The Company records forfeitures of issued restricted stock as treasury share repurchases. A summary of the activity for the Company’s time-based and performance-based restricted stock awards as of June 30, 2012, including changes during the six months then ended, is presented below:
|  | June 30, 2012 |
|  | Restricted Stock Awards |
|  | Time-Based |  | Performance-Based |
|  |  |  | Weighted |  |  |  | Weighted |
|  |  |  | Average |  |  |  | Average |
|  | Shares |  | Price |  | Shares |  | Price |
Outstanding at beginning of period |  | 1,812,890 |  | $ | 16.79 |  | 480,735 |  | $ | 22.19 |
Granted |  | 26,767 |  | 21.67 |  | 465,175 |  | 22.05 |
Vested |  | (89,497 | ) | 26.44 |  | (90,550 | ) | 23.11 |
Forfeited |  | (108,662 | ) | 17.15 |  | (19,552 | ) | 22.67 |
Outstanding at end of period |  | 1,641,498 |  | $ | 16.32 |  | 835,808 |  | $ | 22.00 |
Restricted stock awards are valued at the closing price of the Company’s stock on the date of award. The weighted average fair values of time-based restricted stock awards granted during the period ended June 30, 2012 and 2011 were $21.67 and $21.02, respectively. The weighted average fair value of performance-based restricted stock awards granted during the period ended June 30, 2012 and 2011 were $22.05 and $23.11, respectively. The total fair value of time-based restricted stock awards vested for the three months ended June 30, 2012 and 2011 was $232 thousand and $846 thousand, respectively. The total fair value of time-based restricted stock awards vested for the six months ended June 30, 2012 and 2011 was $2.0 million and $2.5 million, respectively. The total fair value of performance-based restricted stock awards vested during the three and six months ended June 30, 2012 was a nominal amount, and $1.9 million, respectively. There were no performance-based restricted stock awards vested during the period ended June 30, 2011. As of June 30, 2012, total unrecognized compensation cost related to time-based and performance-based restricted stock awards amounted to $11.1 million and $13.7 million, respectively. This cost is expected to be recognized over a weighted average period of 1.9 years and 2.3 years, respectively.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Statement of Position (SOP) -Number 93-6 -Paragraph 53 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 64, 65, A240 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 + Details
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