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STOCK-BASED COMPENSATION | 6 Months Ended
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Jun. 30, 2013
STOCK-BASED COMPENSATION |
STOCK-BASED COMPENSATION | NOTE 12 – 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 half of 2013 was approximately $9.3 million ($6.2 million after tax). The income tax benefit related to this compensation expense was approximately $3.1 million. Approximately $8.3 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 half of 2012 was approximately $8.7 million ($5.8 million after tax). The income tax benefit related to this compensation expense was approximately $2.9 million. Approximately $7.8 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 $10.07 and $10.35 per share in 2013 and 2012, 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: |  |  |  |  |
Six months ended June 30, |  | 2013 |  | 2012 |
Dividend Yield |  | 1.8 | % | 1.8 | %
Expected Stock Price Volatility |  | 22.7 | % | 22.9 | %
Risk-free Interest Rate |  | 1.2 | % | 1.3 | %
Expected Life of Option (years) |  | 6.9 |  | 6.9 |
The fair value of stock options granted under the Director Stock Option Plan during the second quarter of 2013 was $10.89. The fair value of stock options granted under the Director Stock Option Plan during the second quarter of 2012 was $10.59. 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: |  |  |  |  |
Six months ended June 30, |  | 2013 |  | 2012 |
Dividend Yield |  | 1.9 | % | 1.7 | %
Expected Stock Price Volatility |  | 23.0 | % | 22.5 | %
Risk-free Interest Rate |  | 1.3 | % | 1.3 | %
Expected Life of Option (years) |  | 6.9 |  | 6.9 |
A summary of option activity under the Company’s stock option plans during the first half of 2013 is presented below:
|  | Stock Awards Plans |  | Director Stock Option Plans |
|  |  |  | Weighted Average |  |  |  | Weighted Average |
|  | Shares |  | Exercise Price |  | Shares |  | Exercise Price |
Outstanding, January 1, 2013 |  | 7,879,197 |  | $ | 37.27 |  | 276,667 |  | $ | 45.48 |
Granted |  | 1,335,300 |  | 51.57 |  | 85,500 |  | 56.49 |
Exercised |  | (1,065,594 | ) | 27.96 |  | (18,500 | ) | 41.11 |
Forfeited or expired |  | (33,527 | ) | 46.03 |  | -- |  | -- |
Outstanding at June 30, 2013 |  | 8,115,376 |  | $ | 40.81 |  | 343,667 |  | $ | 48.46 |
Exercisable at June 30, 2013 |  | 5,579,645 |  | $ | 36.13 |  | 175,834 |  | $ | 42.44 |
Weighted-Average Remaining Contractual Term (Years): |  |  |  |  |  |
Outstanding at June 30, 2013 |  | 6.5 |  |  |  | 8.0 |  |  |
Exercisable at June 30, 2013 |  | 5.3 |  |  |  | 6.8 |  |  |
Aggregate Intrinsic Value ($000): |  |  |  |  |  |  |  |  |
Outstanding at June 30, 2013 |  | $ | 116,880 |  |  |  | $ | 2,430 |  |  |
Exercisable at June 30, 2013 |  | $ | 106,473 |  |  |  | $ | 2,245 |  |  |
Intrinsic Value of Options Exercised ($000) During the Six Months Ended: |  |  |  |  |
June 30, 2013 |  | $ | 28,188 |  |  |  | $ | 285 |  |  |
June 30, 2012 |  | $ | 25,101 |  |  |  | $ | 509 |  |  |
The grant date fair value of options vested during the six months ended June 30, 2013 and 2012 was $12.9 million and $12.1 million, respectively. Cash received from option exercises was approximately $31.1 million and the actual tax benefit realized for the tax deduction from option exercises was approximately $6.2 million in the six months ended June 30, 2013. As of June 30, 2013, the remaining valuation of stock option awards to be expensed in future periods was $13.4 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 June 30, 2013, and changes during the period then ended is presented below:
|  |  |  | Weighted-Average |
|  | Shares |  | Grant-Date Fair Value |
Nonvested at January 1, 2013 |  | 25,862 |  | $ | 48.76 |
Granted |  | 9,948 |  | 53.94 |
Vested |  | (11,208 | ) | 44.27 |
Nonvested at June 30, 2013 |  | 24,602 |  | $ | 52.90 |
Compensation expense recorded attributable to restricted stock unit grants for the first half of 2013 and 2012 was approximately $493 thousand and $282 thousand, respectively. The fair value of units vested during the six months ended June 30, 2013 and 2012 was $496 thousand and $316 thousand, respectively. The intrinsic value of units vested during the six months ended June 30, 2013 and 2012 was $582 thousand and $448 thousand, respectively. As of June 30, 2013 there was $545 thousand of total unrecognized compensation cost relating to restricted stock unit awards which is expected to be recognized over a weighted-average period of 1.5 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 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 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 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 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 Reference 8: 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. + Details
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