Stock-based Compensation Plans
Stock-based compensation expense and the associated tax benefits were as follows:
|
| | | | | | | | | | | |
(In millions) | 2013 |
| | 2012 |
| | 2011 |
|
Stock-based compensation expense | $ | 129 |
| | $ | 122 |
| | $ | 102 |
|
Stock-based tax benefit | 39 |
| | 37 |
| | 34 |
|
At December 31, 2013, there was $183 million of compensation expense related to nonvested awards not yet recognized which is expected to be recognized over a weighted-average period of 1.6 years.
At December 31, 2013, we had stock-based compensation awards outstanding under a number of stock plans, including our 2010 Stock Plan. Future grants of awards will be made from the 2010 Stock Plan and not from our prior plans.
Shares issued as a result of stock awards, stock option exercises or conversion of restricted stock unit awards will be funded through the issuance of new shares. Of the 41.8 million shares authorized under our stock plans, there were 7.3 million shares available for awards under such plans as of December 31, 2013.
Restricted Stock
The 2010 Stock Plan provides for the award of restricted stock awards, restricted stock units and stock appreciation rights to our employees, officers, nonemployee directors and consultants. Awards of restricted stock, restricted stock units and stock appreciation rights generally are made by the Management Development and Compensation Committee of our Board of Directors (MDCC) and are compensatory in nature. These awards vest over a specified period of time as determined by the MDCC, generally four years for employee awards and one year for nonemployee directors. Restricted stock awards entitle the recipient to full dividend and voting rights beginning on the date of grant. Non-vested shares are restricted as to disposition and subject to forfeiture under certain circumstances. At the date of award each share of restricted stock is credited to common stock at par value. The fair value of restricted stock, calculated under the intrinsic value method at the date of award, is charged to income as compensation expense over the vesting period with a corresponding credit to additional paid-in capital.
Restricted stock activity was as follows:
|
| | | | | | |
| Shares (in thousands) | | Weighted-Average Grant Date Fair Value |
|
Outstanding at December 31, 2010 | 5,443 |
| | $ | 51.30 |
|
Granted | 2,089 |
| | 49.63 |
|
Vested | (1,701 | ) | | 52.25 |
|
Forfeited | (292 | ) | | 51.25 |
|
Outstanding at December 31, 2011 | 5,539 |
| | 50.38 |
|
Granted | 2,370 |
| | 50.38 |
|
Vested | (1,733 | ) | | 51.78 |
|
Forfeited | (338 | ) | | 50.07 |
|
Outstanding at December 31, 2012 | 5,838 |
| | 49.98 |
|
Granted | 1,855 |
| | 67.46 |
|
Vested | (1,708 | ) | | 48.93 |
|
Forfeited | (648 | ) | | 52.39 |
|
Outstanding at December 31, 2013 | 5,337 |
| | $ | 56.10 |
|
Long-Term Performance Plan (LTPP)
In 2004, we established the LTPP, which provides for restricted stock unit awards granted from our stock plans to our senior leadership. These awards vest at the end of a three-year performance cycle based upon the achievement of specific pre-established levels of performance.
The performance goals for the three outstanding performance cycles at December 31, 2013, are independent of each other and based on three metrics, as defined in the award agreements: return on invested capital (ROIC), weighted at 50%; total shareholder return (TSR) relative to a peer group, weighted at 25%; and cumulative free cash flow from continuing operations (CFCF), weighted at 25%.
The ultimate award, which is determined at the end of each of the three-year performance cycles, can range from zero to 200% of the target award and also includes dividend equivalents, which are not included in the table below. Compensation expense for the awards is recognized over the performance period based upon the value determined under the intrinsic value method for the CFCF and ROIC portions of the award and the Monte Carlo simulation method for the TSR portion of the award using historic volatility. Compensation expense for the CFCF and ROIC portions of the awards will be adjusted based upon the expected achievement of those performance goals.
LTPP activity related to the expected units was as follows:
|
| | | | | | |
| Units (in thousands) | | Weighted-Average Grant Date Fair Value |
|
Outstanding at December 31, 2010 | 1,072 |
| | $ | 50.34 |
|
Granted | 458 |
| | 52.33 |
|
Decrease | (66 | ) | | 57.83 |
|
Vested | (473 | ) | | 74.79 |
|
Outstanding at December 31, 2011 | 991 |
| | 50.07 |
|
Granted | 484 |
| | 50.83 |
|
Increase | 407 |
| | 53.32 |
|
Vested | (462 | ) | | 46.04 |
|
Outstanding at December 31, 2012 | 1,420 |
| | 52.57 |
|
Granted | 402 |
| | 61.38 |
|
Increase | 398 |
| | 53.86 |
|
Vested | (383 | ) | | 55.74 |
|
Forfeited | (10 | ) | | 51.22 |
|
Outstanding at December 31, 2013 | 1,827 |
| | $ | 54.13 |
|
The increase (decrease) above relates to changes in the amount of expected awards as achievement is measured against performance goals.
Stock Options
In 2004, we changed the primary form of our broad-based equity compensation from stock options to restricted stock. There have been no stock options granted since 2005.
Stock option activity was as follows:
|
| | | | | | | | | | | | | |
| Shares (in thousands) | | Weighted- Average Option Price |
| | Weighted- Average Remaining Contractual Term (in years) |
| | Aggregate Intrinsic Value (in millions) |
|
Outstanding at December 31, 2010 | 6,450 |
| | $ | 37.23 |
| | 1.5 |
| | $ | 59 |
|
Exercised | (1,867 | ) | | 33.73 |
| | | | |
Forfeited or expired | (185 | ) | | 30.85 |
| | | | |
Outstanding at December 31, 2011 | 4,398 |
| | 38.98 |
| | 0.8 |
| | 41 |
|
Exercised | (3,238 | ) | | 40.61 |
| | | | |
Forfeited or expired | (271 | ) | | 44.00 |
| | | | |
Outstanding at December 31, 2012 | 889 |
| | 31.56 |
| | 0.5 |
| | 23 |
|
Exercised | (755 | ) | | 31.45 |
| | | | |
Forfeited or expired | (82 | ) | | 31.23 |
| | | | |
Outstanding at December 31, 2013 | 52 |
| | $ | 33.55 |
| | 0.5 |
| | $ | 3 |
|
Exercisable at December 31, 2013 | 52 |
| | $ | 33.55 |
| | 0.5 |
| | $ | 3 |
|
The total intrinsic value of options exercised in the years ended December 31, 2013, 2012 and 2011 was $21 million, $38 million and $29 million, respectively.
As of December 31, 2013 and December 31, 2012 all outstanding options were fully vested and exercisable. No options vested during the years ended December 31, 2013 and December 31, 2012.
The following table summarizes information about stock options outstanding and exercisable at December 31, 2013:
|
| | | | | | | | | |
Exercise Price Range | Shares (in thousands) | | Weighted- Average Remaining Contractual Life (in years) |
| | Weighted- Average Exercise Price |
|
29.65 to 32.84 | 33 |
| | 0.3 |
| | $ | 31.60 |
|
32.85 to 37.00 | 14 |
| | 0.7 |
| | $ | 35.78 |
|
37.01 to 39.21 | 5 |
| | 0.9 |
| | $ | 39.21 |
|
Total | 52 |
| | 0.5 |
| | $ | 33.55 |
|
Shares exercisable at the corresponding weighted-average exercise price at December 31, 2013, 2012 and 2011, were 0.1 million at $33.55, 0.9 million at $31.56 and 4.4 million at $38.98, respectively.
