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STOCK-BASED COMPENSATION | 9 Months Ended
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Sep. 30, 2012
STOCK-BASED COMPENSATION |
STOCK-BASED COMPENSATION |
NOTE 11 – STOCK-BASED COMPENSATION The Company issues stock options and restricted stock units to employees under Stock Awards Plans approved by shareholders. Stock options are issued to non-employee directors for their services as directors under Director Stock Option Plans approved by shareholders. Options are awarded with the exercise price equal to the market price on the date of grant and generally become exercisable over three years and expire 10 years after grant. Restricted stock units generally vest over three years. Compensation expense recorded attributable to stock options for the first nine months of 2012 was approximately $10.8 million ($7.2 million after tax), or $0.11 per basic and diluted share. The income tax benefit related to this compensation expense was approximately $3.6 million. Approximately $9.6 million of the compensation expense was recorded in selling, research & development and administrative expenses and the balance was recorded in cost of sales. Compensation expense recorded attributable to stock options for the first nine months of 2011 was approximately $12.1 million ($8.5 million after tax), or $0.13 per basic share and $0.12 per diluted share. The income tax benefit related to this compensation expense was approximately $3.6 million. Approximately $11.2 million of the compensation expense was recorded in selling, research & development and administrative expenses and the balance was recorded in cost of sales. The Company uses historical data to estimate expected life and volatility. The weighted-average fair value of stock options granted under the Stock Awards Plans was $10.35 and $11.36 per share in 2012 and 2011, respectively. These values were estimated on the respective dates of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
Stock Awards Plans: |  |  |  |  |
Nine months ended September 30, |  | 2012 |  | 2011 |
Dividend Yield |  | 1.8 | % | 1.7 | %
Expected Stock Price Volatility |  | 22.9 | % | 23.3 | %
Risk-free Interest Rate |  | 1.3 | % | 2.7 | %
Expected Life of Option (years) |  | 6.9 |  | 6.9 |
The fair value of stock options granted under the Director Stock Option Plan during the first nine months of 2012 was $10.59. The fair value of stock options granted under the Director Stock Option Plan during the first nine months of 2011 was $12.00. These values were estimated on the respective date of the grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:
Director Stock Option Plans: |  |  |  |  |
Nine months ended September 30, |  | 2012 |  | 2011 |
Dividend Yield |  | 1.7 | % | 1.6 | %
Expected Stock Price Volatility |  | 22.5 | % | 22.9 | %
Risk-free Interest Rate |  | 1.3 | % | 2.5 | %
Expected Life of Option (years) |  | 6.9 |  | 6.9 |
A summary of option activity under the Company’s stock option plans as of September 30, 2012, and changes during the nine months then ended is presented below:
|  | Stock Awards Plans |  | Director Stock Option Plans |
|  |  |  | Weighted Average |  |  |  | Weighted Average |
|  | Shares |  | Exercise Price |  | Shares |  | Exercise Price |
Outstanding, January 1, 2012 |  | 8,345,917 |  | $ | 32.90 |  | 270,000 |  | $ | 37.98 |
Granted |  | 1,245,300 |  | 51.81 |  | 85,500 |  | 53.72 |
Exercised |  | (1,292,803 | ) | 25.37 |  | (34,500 | ) | 25.67 |
Forfeited or expired |  | (25,321 | ) | 44.45 |  | (9,000 | ) | 48.02 |
Outstanding at September 30, 2012 |  | 8,273,093 |  | $ | 36.88 |  | 312,000 |  | $ | 43.37 |
Exercisable at September 30, 2012 |  | 5,792,455 |  | $ | 32.06 |  | 157,167 |  | $ | 35.55 |
Weighted-Average Remaining Contractual Term (Years): |  |  |  |  |  |  |
Outstanding at September 30, 2012 |  | 6.1 |  |  |  | 7.5 |  |  |
Exercisable at September 30, 2012 |  | 5.0 |  |  |  | 6.1 |  |  |
Aggregate Intrinsic Value ($000): |  |  |  |  |  |  |  |  |
Outstanding at September 30, 2012 |  | $ | 122,783 |  |  |  | $ | 2,775 |  |  |
Exercisable at September 30, 2012 |  | $ | 113,823 |  |  |  | $ | 2,540 |  |  |
Intrinsic Value of Options Exercised ($000) During the Nine Months Ended: |  |  |  |  |
September 30, 2012 |  | $ | 34,674 |  |  |  | $ | 937 |  |  |
September 30, 2011 |  | $ | 25,475 |  |  |  | $ | 970 |  |  |
The fair value of shares vested during the nine months ended September 30, 2012 and 2011 was $12.1 million and $11.1 million, respectively. Cash received from option exercises was approximately $35.2 million and the actual tax benefit realized for the tax deduction from option exercises was approximately $9.0 million in the nine months ended September 30, 2012. Cash received from option exercises was approximately $17.1 million and the actual tax benefit realized for the tax deduction from option exercises was approximately $6.3 million in the nine months ended September 30, 2011. As of September 30, 2012, the remaining valuation of stock option awards to be expensed in future periods was $10.6 million and the related weighted-average period over which it is expected to be recognized is 1.5 years. The fair value of restricted stock unit grants is the market price of the underlying shares on the grant date. A summary of restricted stock unit activity as of September 30, 2012, and changes during the period then ended is presented below:
|  |  |  | Weighted-Average |
|  | Shares |  | Grant-Date Fair Value |
Nonvested at January 1, 2012 |  | 17,293 |  | $ | 39.21 |
Granted |  | 17,592 |  | 52.52 |
Vested |  | (8,440 | ) | 37.47 |
Forfeited |  | (333 | ) | 35.08 |
Nonvested at September 30, 2012 |  | 26,112 |  | $ | 48.79 |
Compensation expense recorded attributable to restricted stock unit grants for the first nine months of 2012 and 2011 was approximately $438 and $247 thousand, respectively. The fair value of units vested during the nine months ended September 30, 2012 and 2011 was $316 and $346 thousand, respectively. The intrinsic value of units vested during the nine months ended September 30, 2012 and 2011 was $448 and $492 thousand, respectively. As of September 30, 2012 there was $590 thousand of total unrecognized compensation cost relating to restricted stock unit awards which is expected to be recognized over a weighted average period of 1.7 years.

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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 SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 Reference 2: 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 Reference 3: 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 4: 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 5: 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 6: 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 7: 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 8: 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 + Details
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