Stock Plans:
Performance Incentive Plan and Stock Compensation Plan for Non-Employee Directors
In May 2012, PMI's stockholders approved the Philip Morris International Inc. 2012 Performance Incentive Plan (the "2012 Plan"). The 2012 Plan replaced the 2008 Performance Incentive Plan (the "2008 Plan") and, as a result, there will be no additional grants under the 2008 Plan. Under the 2012 Plan, PMI may grant to eligible employees restricted stock, restricted stock units and deferred stock units, performance-based cash incentive awards and performance-based equity awards. While the 2008 Plan authorized incentive stock options, non-qualified stock options and stock appreciation rights, the 2012 Plan does not authorize any stock options or stock appreciation rights. Up to 30 million shares of PMI’s common stock may be issued under the 2012 Plan. At December 31, 2013, shares available for grant under the 2012 Plan were 27,211,610.
In 2008, PMI adopted the Philip Morris International Inc. 2008 Stock Compensation Plan for Non-Employee Directors (the “Non-Employee Directors Plan”). A non-employee director is defined as a member of the PMI Board of Directors who is not a full-time employee of PMI or of any corporation in which PMI owns, directly or indirectly, stock possessing at least 50% of the total combined voting power of all classes of stock entitled to vote in the election of directors in such corporation. Up to 1 million shares of PMI common stock may be awarded under the Non-Employee Directors Plan. As of December 31, 2013, shares available for grant under the plan were 783,905.
Restricted and Deferred Stock Awards
PMI may grant restricted stock and deferred stock awards to eligible employees; recipients may not sell, assign, pledge or otherwise encumber such shares or awards. Such shares or awards are subject to forfeiture if certain employment conditions are not met. Restricted stock and deferred stock awards generally vest on the third anniversary of the grant date.
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Shares of restricted stock carry voting and dividend rights. Deferred stock awards carry no such rights, although they do earn dividend equivalents.
During 2013, the activity for restricted stock and deferred stock awards was as follows:
|
| | | | | | |
| Number of
Shares | | Weighted-
Average Grant
Date Fair Value
Per Share |
Balance at January 1, 2013 | 9,484,865 |
| | $ | 62.44 |
|
Granted | 2,783,310 |
| | 88.43 |
|
Vested | (3,276,901 | ) | | 50.02 |
|
Forfeited | (171,974 | ) | | 73.02 |
|
Balance at December 31, 2013 | 8,819,300 |
| | $ | 75.05 |
|
The weighted-average grant date fair value of the restricted stock and deferred stock awards granted to PMI employees during the years ended December 31, 2013, 2012 and 2011, was $246 million, $258 million and $229 million, or $88.43, $79.59 and $59.44 per restricted or deferred share, respectively. The fair value of the restricted stock and deferred stock awards at the date of grant is amortized to expense ratably over the restriction period. PMI recorded compensation expense for the restricted and deferred stock awards of $220 million, $242 million and $162 million for the years ended December 31, 2013, 2012 and 2011, respectively. During the first quarter of 2012, compensation expense included approximately $27 million of accelerated expense primarily associated with employees approaching or reaching certain age milestones that accelerate the vesting. As of December 31, 2013, PMI had $225 million of total unrecognized compensation costs related to non-vested restricted and deferred stock awards. These costs are expected to be recognized over a weighted-average period of two years, subject to earlier vesting on death or disability or normal retirement, or separation from employment by mutual agreement after reaching age 58.
During the year ended December 31, 2013, 3.3 million shares of PMI restricted and deferred stock awards vested. The grant date fair value of all the vested shares was approximately $164 million. The total fair value of the awards that vested in 2013 was approximately $296 million.
During the year ended December 31, 2012, 3.7 million shares of PMI restricted and deferred stock awards vested. The grant date fair value of all the vested shares was approximately $148 million. The total fair value of the awards that vested in 2012 was approximately $298 million.
During the year ended December 31, 2011, 1.8 million shares of PMI restricted and deferred stock awards vested. The grant date fair value of all the vested shares was approximately $84 million. The total fair value of the awards that vested in 2011 was approximately $107 million.
Stock Option Awards
At December 31, 2013, PMI shares subject to option that remain under the 2008 Plan were as follows:
|
| | | | | | | | | | | | |
| Shares
Subject
to Option | | Weighted-
Average
Exercise
Price | | Average
Remaining
Contractual
Term | | Aggregate
Intrinsic
Value |
Balance at January 1, 2013 | 36,811 |
| | $ | 26.13 |
| | | | |
Options exercised | (14,097 | ) | | 22.50 |
| | | | |
Options cancelled | — |
| | — |
| | | | |
Balance/Exercisable at December 31, 2013 | 22,714 |
| | $ | 28.38 |
| | 0.4 years | | $ | 1 | million |
For the years ended December 31, 2013, 2012 and 2011, the total intrinsic value of PMI stock options exercised was $1 million, $2 million and $129 million, respectively.
