| Share-Based Payments |
Share-Based Payments
The Company’s general practice has been to make a single annual grant of share-based compensation to key employees and to make other employee grants only in connection with new employment or promotions. Forms of share-based compensation granted to employees by the Company include stock options, non-vested shares of common stock (“non-vested share”), and performance shares. The Company also typically makes a single annual grant of non-vested shares to non-employee directors in conjunction with the annual election of non-employee directors to the Board of Directors. Share-based compensation is based on the grant date fair value of the instrument and is recognized, net of estimated forfeitures, ratably over the requisite service period, or vesting period. The Company estimates forfeitures based upon historical experience. All share-based compensation expense is recognized in salaries, wages and employee benefits.
Employee Activity - Stock Options
Stock option grants to employees typically expire seven years from the grant date and vest ratably over a three-year period. The Company used the Black-Scholes option-pricing model to estimate the grant-date fair value of options granted. The weighted-average fair value of options granted and assumptions used to calculate their fair value during the nine months ended September 30, 2012 and 2011 were as follows:
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Nine months ended |
|
September 30,
2012 |
|
September 30,
2011 |
Expected dividend yield |
0.9 |
% |
|
1.0 |
% |
Expected stock price volatility |
46.6 |
% |
|
44.9 |
% |
Weighted average risk-free interest rate |
0.8 |
% |
|
2.4 |
% |
Expected life of options (years) |
4.2 |
|
|
4.6 |
|
Weighted average grant date fair value |
$ |
13 |
|
|
$ |
11 |
|
The following tables summarize the Company’s employee stock option activity and related information:
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Three months ended September 30, 2012 |
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Weighted- |
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Weighted- |
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Aggregate |
|
Average |
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|
Average |
|
Intrinsic |
|
Remaining |
|
Options |
|
Exercise |
|
Value |
|
Contractual |
|
(000) |
|
Price |
|
(000) |
|
Term |
Outstanding at June 30, 2012 |
3,138 |
|
|
$ |
27 |
|
|
|
|
|
Granted |
— |
|
|
— |
|
|
|
|
|
Exercised |
(252 |
) |
|
28 |
|
|
|
|
|
Forfeited |
(11 |
) |
|
29 |
|
|
|
|
|
Outstanding at September 30, 2012 |
2,875 |
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|
$ |
26 |
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|
$ |
20,497 |
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|
2.8 |
|
Exercisable at September 30, 2012 |
2,487 |
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|
$ |
26 |
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|
$ |
17,994 |
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|
2.4 |
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Three months ended |
|
September 30,
2012 |
|
September 30,
2011 |
Shared-based compensation for options |
$ |
575 |
|
|
$ |
959 |
|
Tax benefit for option compensation |
$ |
167 |
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|
$ |
252 |
|
Unrecognized compensation cost for options, net of estimated forfeitures |
$ |
2,052 |
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|
$ |
3,769 |
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Nine months ended September 30, 2012 |
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Weighted- |
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Weighted- |
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Aggregate |
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Average |
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Average |
|
Intrinsic |
|
Remaining |
|
Options |
|
Exercise |
|
Value |
|
Contractual |
|
(000) |
|
Price |
|
(000) |
|
Term |
Outstanding at December 31, 2011 |
3,363 |
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|
$ |
26 |
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|
|
Granted |
93 |
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|
37 |
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Exercised |
(570 |
) |
|
27 |
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Forfeited |
(11 |
) |
|
$ |
29 |
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Outstanding at September 30, 2012 |
2,875 |
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|
$ |
26 |
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|
$ |
20,497 |
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|
2.8 |
|
Exercisable at September 30, 2012 |
2,487 |
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|
$ |
26 |
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|
$ |
17,994 |
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|
2.4 |
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Nine months ended |
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September 30,
2012 |
|
September 30,
2011 |
Shared-based compensation for options |
$ |
1,994 |
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|
$ |
3,023 |
|
Tax benefit for option compensation |
$ |
546 |
|
|
$ |
803 |
|
Unrecognized compensation cost for options, net of estimated forfeitures |
$ |
2,052 |
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|
$ |
3,769 |
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Employee Activity - Non-vested Shares
Non-vested share grants to employees vest ratably over a three-year period. The non-vested shares’ fair values were estimated using closing market prices on the day of grant. The following tables summarize the Company’s employee non-vested share activity and related information:
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Three months ended September 30, 2012 |
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Weighted- |
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Aggregate |
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Non-vested |
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Average |
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Grant Date |
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Shares |
|
Grant Date |
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Fair Value |
|
(000) |
|
Fair Value |
|
(000) |
Outstanding and non-vested at June 30, 2012 |
174 |
|
|
$ |
33 |
|
|
|
Granted |
— |
|
|
— |
|
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|
Vested |
— |
|
|
— |
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Forfeited |
(6 |
) |
|
$ |
33 |
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|
Outstanding and non-vested at September 30, 2012 |
168 |
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|
$ |
33 |
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$ |
5,579 |
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Three months ended |
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September 30,
2012 |
|
September 30,
2011 |
Shared-based compensation for non-vested shares |
$ |
506 |
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|
$ |
253 |
|
Tax benefit for non-vested share compensation |
$ |
196 |
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|
$ |
100 |
|
Unrecognized compensation cost for non-vested shares, net of estimated forfeitures |
$ |
4,035 |
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$ |
2,348 |
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Nine months ended September 30, 2012 |
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Weighted- |
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Aggregate |
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Non-vested |
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Average |
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Grant Date |
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Shares |
|
Grant Date |
|
Fair Value |
|
(000) |
|
Fair Value |
|
(000) |
Outstanding and non-vested at December 31, 2011 |
108 |
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|
$ |
29 |
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Granted |
103 |
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|
37 |
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Vested |
(36 |
) |
|
29 |
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Forfeited |
(7 |
) |
|
33 |
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Outstanding and non-vested at September 30, 2012 |
168 |
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|
$ |
33 |
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$ |
5,579 |
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Nine months ended |
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September 30,
2012 |
|
September 30,
2011 |
Shared-based compensation for non-vested shares |
$ |
1,502 |
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|
$ |
641 |
|
Tax benefit for non-vested share compensation |
$ |
581 |
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|
$ |
252 |
|
Unrecognized compensation cost for non-vested shares, net of estimated forfeitures |
$ |
4,035 |
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|
$ |
2,348 |
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Employee Activity - Performance Shares
In 2011 and 2012, the Company granted performance shares to key employees. Under the terms of the performance share agreements, on the third anniversary of the grant date, the Company will issue to the employees a calculated number of common stock shares based on the three year performance of the Company’s common stock share price as compared to the share price performance of a selected peer group. No shares may be issued if the Company share price performance outperforms 30% or less of the peer group, but the number of shares issued may be doubled if the Company share price performs better than 90% of the peer group. The fair value of the performance shares was estimated using a Monte Carlo simulation. The weighted average assumptions used in the Monte Carlo calculation were as follows:
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Nine months ended |
|
September 30,
2012 |
|
September 30,
2011 |
Expected stock price volatility |
40.8 |
% |
|
47.7 |
% |
Weighted average risk-free interest rate |
0.4 |
% |
|
1.4 |
% |
The following tables summarize the Company’s employee performance share activity, assuming median share awards, and related information:
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Three months ended September 30, 2012 |
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Weighted- |
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Aggregate |
|
Performance |
|
Average |
|
Grant Date |
|
Shares |
|
Grant Date |
|
Fair Value |
|
(000) |
|
Fair Value |
|
(000) |
Outstanding and non-vested at June 30, 2012 |
62 |
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|
$ |
36 |
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Granted |
— |
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— |
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Vested |
— |
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|
— |
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Outstanding and non-vested at September 30, 2012 |
62 |
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$ |
36 |
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$ |
2,205 |
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Three months ended |
|
September 30,
2012 |
|
September 30,
2011 |
Shared-based compensation for performance shares |
$ |
185 |
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$ |
95 |
|
Tax benefit for performance share compensation |
$ |
72 |
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$ |
37 |
|
Unrecognized compensation cost for performance shares, net of estimated forfeitures |
$ |
1,356 |
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$ |
893 |
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Nine months ended September 30, 2012 |
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Weighted- |
|
Aggregate |
|
Performance |
|
Average |
|
Grant Date |
|
Shares |
|
Grant Date |
|
Fair Value |
|
(000) |
|
Fair Value |
|
(000) |
Outstanding and non-vested at December 31, 2011 |
38 |
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$ |
30 |
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Granted |
24 |
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|
45 |
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Vested |
— |
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|
— |
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Outstanding and non-vested at September 30, 2012 |
62 |
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$ |
36 |
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$ |
2,205 |
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Nine months ended |
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September 30,
2012 |
|
September 30,
2011 |
Shared-based compensation for performance shares |
$ |
515 |
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|
$ |
240 |
|
Tax benefit for performance share compensation |
$ |
199 |
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|
$ |
94 |
|
Unrecognized compensation cost for performance shares, net of estimated forfeitures |
$ |
1,356 |
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|
$ |
893 |
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Employee Activity - Employee Stock Purchase Plan
Under the 2005 Employee Stock Purchase Plan (the “ESPP”), which has been approved by shareholders, the Company is authorized to issue up to a remaining 425,848 shares of common stock to employees of the Company. These shares may be issued at a price equal to 90% of the lesser of the market value on the first day or the last day of each six-month purchase period. Common stock purchases are paid for through periodic payroll deductions and/or up to two large lump sum contributions. For the nine months ended September 30, 2012, participants under the plan purchased 4,121 shares at an average price of $29.04 per share. For the nine months ended September 30, 2011, participants under the plan purchased 4,941 shares at an average price of $25.82 per share. The weighted-average fair value of each purchase right under the ESPP granted for the nine months ended September 30, 2012, which is equal to the discount from the market value of the common stock at the end of each six month purchase period, was $3.23 per share. The weighted-average fair value of each purchase right under the ESPP granted for the nine months ended September 30, 2011, which is equal to the discount from the market value of the common stock at the end of each six month purchase period, was $7.97 per share. Share-based compensation expense of $13 and $40 was recognized during the nine months ended September 30, 2012 and 2011, respectively.
Non-employee Director Activity - Non-vested Shares
Grants of non-vested shares to non-employee directors vest ratably over the elected term to the Board of Directors, or one year. The following tables summarize the Company’s non-employee non-vested share activity and related information:
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Three months ended September 30, 2012 |
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Weighted- |
|
Aggregate |
|
Non-vested |
|
Average |
|
Grant Date |
|
Shares |
|
Grant Date |
|
Fair Value |
|
(000) |
|
Fair Value |
|
(000) |
Outstanding and non-vested at June 30, 2012 |
20 |
|
|
$ |
32 |
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|
|
Granted |
— |
|
|
— |
|
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Vested |
— |
|
|
— |
|
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|
Outstanding and non-vested at September 30, 2012 |
20 |
|
|
$ |
32 |
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|
$ |
640 |
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Three months ended |
|
September 30,
2012 |
|
September 30,
2011 |
Shared-based compensation for non-vested shares |
$ |
161 |
|
|
$ |
195 |
|
Tax benefit for non-vested share compensation |
$ |
62 |
|
|
$ |
76 |
|
Unrecognized compensation cost for non-vested shares, net of estimated forfeitures |
$ |
385 |
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|
$ |
465 |
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|
Nine months ended September 30, 2012 |
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Weighted- |
|
Aggregate |
|
Non-vested |
|
Average |
|
Grant Date |
|
Shares |
|
Grant Date |
|
Fair Value |
|
(000) |
|
Fair Value |
|
(000) |
Outstanding and non-vested at December 31, 2011 |
24 |
|
|
$ |
33 |
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|
Granted |
20 |
|
|
32 |
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|
Vested |
(24 |
) |
|
33 |
|
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|
Outstanding and non-vested at September 30, 2012 |
20 |
|
|
$ |
32 |
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|
$ |
640 |
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Nine months ended |
|
September 30,
2012 |
|
September 30,
2011 |
Shared-based compensation for non-vested shares |
$ |
526 |
|
|
$ |
513 |
|
Tax benefit for non-vested share compensation |
$ |
204 |
|
|
$ |
201 |
|
Unrecognized compensation cost for non-vested shares, net of estimated forfeitures |
$ |
385 |
|
|
$ |
465 |
|
Non-employee Director Activity - Stock Options
In addition to the above activity, each May from 1995 to 2005 options were granted to the non-employee directors of the Company. The options have terms of ten years and are fully exercisable. At September 30, 2012, 29,375 options were outstanding and will expire between May 2014 and May 2015. At September 30, 2012, the weighted average exercise price per share and remaining contractual term for the outstanding options of non-employee directors were $23 and 2.2 years, respectively.
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