Stock-Based Compensation | 9 Months Ended |
Sep. 30, 2013 |
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] | |
Stock-Based Compensation | J. | The Company’s 2005 Long Term Stock Incentive Plan (the “2005 Plan”) provides for the issuance of stock-based incentives in various forms to employees and non-employee Directors of the Company. At September 30, 2013, outstanding stock-based incentives were in the form of long-term stock awards, stock options, phantom stock awards and stock appreciation rights. Pre-tax compensation expense and the related income tax benefit for these stock-based incentives were as follows, in millions: | | | | | | | | | | | | | | | |
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| | Three Months Ended | | | Nine Months Ended | |
September 30, | September 30, |
| | 2013 | | | 2012 | | | 2013 | | | 2012 | |
Long-term stock awards | | $ | 7 | | | $ | 9 | | | $ | 27 | | | $ | 28 | |
Stock options | | | 2 | | | | 3 | | | | 12 | | | | 12 | |
Phantom stock awards and stock appreciation rights | | | 3 | | | | 2 | | | | 6 | | | | 8 | |
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Total | | $ | 12 | | | $ | 14 | | | $ | 45 | | | $ | 48 | |
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Income tax benefit (37 percent tax rate — before valuation allowance) | | $ | 5 | | | $ | 5 | | | $ | 17 | | | $ | 18 | |
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Long-Term Stock Awards. Long-term stock awards are granted to key employees and non-employee Directors of the Company and do not cause net share dilution inasmuch as the Company continues the practice of repurchasing and retiring an equal number of shares in the open market. The Company granted 1,683,980 shares of long-term stock awards in the nine months ended September 30, 2013. |
The Company’s long-term stock award activity was as follows, shares in millions: |
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| | Nine Months Ended | | | | | | | | | |
September 30, | | | | | | | | |
| | 2013 | | | 2012 | | | | | | | | | |
Unvested stock award shares at January 1 | | | 8 | | | | 10 | | | | | | | | | |
Weighted average grant date fair value | | $ | 16 | | | $ | 17 | | | | | | | | | |
Stock award shares granted | | | 2 | | | | 1 | | | | | | | | | |
Weighted average grant date fair value | | $ | 20 | | | $ | 12 | | | | | | | | | |
Stock award shares vested | | | 2 | | | | 2 | | | | | | | | | |
Weighted average grant date fair value | | $ | 17 | | | $ | 18 | | | | | | | | | |
Stock award shares forfeited | | | — | | | | 1 | | | | | | | | | |
Weighted average grant date fair value | | $ | 17 | | | $ | 17 | | | | | | | | | |
Unvested stock award shares at September 30 | | | 8 | | | | 8 | | | | | | | | | |
Weighted average grant date fair value | | $ | 17 | | | $ | 16 | | | | | | | | | |
At September 30, 2013 and 2012, there was $76 million and $79 million, respectively, of total unrecognized compensation expense related to unvested stock awards; such awards had a weighted average remaining vesting period of three years and four years in 2013 and 2012, respectively. |
The total market value (at the vesting date) of stock award shares which vested during the nine months ended September 30, 2013 and 2012 was $38 million and $27 million, respectively. |
Stock Options. Stock options are granted to key employees of the Company. The exercise price equals the market price of the Company’s common stock at the grant date. These options generally become exercisable (vest ratably) over five years beginning on the first anniversary from the date of grant and expire no later than 10 years after the grant date. |
The Company granted 899,000 of stock option shares in the nine months ended September 30, 2013 with a grant date exercise price approximating $20 per share. In the first nine months of 2013, 1,220,830 stock option shares were forfeited (including options that expired unexercised). |
The Company’s stock option activity was as follows, shares in millions: |
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| | Nine Months Ended | | | | | | | | | |
| | September 30, | | | | | | | | | |
| | 2013 | | | 2012 | | | | | | | | | |
Option shares outstanding, January 1 | | | 30 | | | | 36 | | | | | | | | | |
Weighted average exercise price | | $ | 21 | | | $ | 21 | | | | | | | | | |
Option shares granted, including restoration options | | | 1 | | | | 1 | | | | | | | | | |
Weighted average exercise price | | $ | 20 | | | $ | 12 | | | | | | | | | |
Option shares exercised | | | 3 | | | | 1 | | | | | | | | | |
Aggregate intrinsic value on date of exercise (A) | | $ | 22 | million | | $ | 4 | million | | | | | | | | |
Weighted average exercise price | | $ | 12 | | | $ | 9 | | | | | | | | | |
Option shares forfeited | | | 1 | | | | 3 | | | | | | | | | |
Weighted average exercise price | | $ | 23 | | | $ | 18 | | | | | | | | | |
Option shares outstanding, September 30 | | | 27 | | | | 33 | | | | | | | | | |
Weighted average exercise price | | $ | 22 | | | $ | 21 | | | | | | | | | |
Weighted average remaining option term (in years) | | | 4 | | | | 5 | | | | | | | | | |
Option shares vested and expected to vest, September 30 | | | 27 | | | | 33 | | | | | | | | | |
Weighted average exercise price | | $ | 22 | | | $ | 21 | | | | | | | | | |
Aggregate intrinsic value (A) | | $ | 91 | million | | $ | 39 | million | | | | | | | | |
Weighted average remaining option term (in years) | | | 4 | | | | 5 | | | | | | | | | |
Option shares exercisable (vested), September 30 | | | 22 | | | | 25 | | | | | | | | | |
Weighted average exercise price | | $ | 24 | | | $ | 24 | | | | | | | | | |
Aggregate intrinsic value (A) | | $ | 51 | million | | $ | 17 | million | | | | | | | | |
Weighted average remaining option term (in years) | | | 3 | | | | 4 | | | | | | | | | |
(A) Aggregate intrinsic value is calculated using the Company’s stock price at each respective date, less the exercise price (grant date price) multiplied by the number of shares. |
At September 30, 2013 and 2012, there was $10 million and $19 million, respectively, of unrecognized compensation expense (using the Black-Scholes option pricing model) related to unvested stock options; such options had a weighted average vesting period of two years in both periods. |
The weighted average grant date fair value of option shares granted and the assumptions used to estimate those values using a Black-Scholes option pricing model were as follows: |
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| | Nine Months Ended | | | | | | | | | |
| | September 30, | | | | | | | | | |
| | 2013 | | | 2012 | | | | | | | | | |
Weighted average grant date fair value | | $ | 8.35 | | | $ | 4.44 | | | | | | | | | |
Risk-free interest rate | | | 1.22 | % | | | 1.09 | % | | | | | | | | |
Dividend yield | | | 1.47 | % | | | 2.57 | % | | | | | | | | |
Volatility factor | | | 49.07 | % | | | 50.97 | % | | | | | | | | |
Expected option life | | | 6 years | | | | 6 years | | | | | | | | | |