XML 135 R27.htm IDEA: XBRL DOCUMENT v2.4.0.8
Share-Based Compensation
12 Months Ended
Dec. 31, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Share-Based Compensation
Share-Based Compensation
Share-Based Incentive Plans
The Company has established various plans under which it is authorized to grant restricted stock, restricted stock units, stock options and stock appreciation rights. Compensation payable under these plans is intended to qualify as performance-based compensation within the meaning of Section 162(m) of the Internal Revenue Code. The Company may also grant cash awards that can be notionally invested in one or more specified measurement funds, including the Company’s common stock.
Stock Options
The Company granted stock options with fair values of $16.8 million, $2.5 million, and $1.0 million in 2011, 2012 and 2013, respectively. Stock options generally vest over a period of three to five years and expire seven to ten years after the grant date. All options have been granted with exercise prices equal to the fair market value of the Company's common stock on the date of grant.
The following table summarizes the transactions of the Company's stock options:
 
Stock Options
 
Weighted
Average
Exercise
Price
 
Weighted
Average
Remaining
Contractual
Life (years)
Unexercised options outstanding—January 1, 2013
3.8

 
$
74.04

 
 
Options granted
0.0

 
191.75

 
 
Options exercised
(0.8
)
 
62.59

 
 
Options forfeited
(0.0
)
 
81.49

 
 
Unexercised options outstanding—December 31, 2013
3.0

 
77.71

 
3.4
Exercisable at December 31, 2013
2.4

 
73.56

 
3.2

The fair value of options granted is estimated using the Black-Scholes option pricing model. The weighted average fair value of options granted during the years ended December 31, 2011, 2012 and 2013 was $30.27, $40.43 and $61.82 per option, respectively, based on the weighted-average grant date assumptions stated below.
 
For the Years Ended December 31,
 
2011
 
2012
 
2013
Dividend yield
0.0
%
 
0.0
%
 
0.0
%
Expected volatility(1)
33.1
%
 
36.8
%
 
34.4
%
Risk-free interest rate(2)
1.3
%
 
0.7
%
 
1.5
%
Expected life of options (in years)(3)
4.8

 
5.0

 
5.0

Forfeiture rate(3)
2.4
%
 
1.4
%
 
0.0
%
_______________________________________________________________________________

(1)
Based on historical and implied volatility.

(2)
Based on the U.S. Treasury yield curve in effect at the date of grant.

(3)
Based on the Company's historical data and expected exercise behavior.
The Company generally uses treasury stock to settle stock option exercises. The total intrinsic value of options exercised during the years ended December 31, 2011, 2012 and 2013 was $35.4 million, $86.8 million and $77.4 million, respectively. As of December 31, 2013, the intrinsic value of exercisable options outstanding was $341.9 million and 3.4 million options are available for future grant under the Company's option plans.
Restricted Stock
The Company granted awards with fair values of $3.3 million, $18.1 million, and $53.5 million in 2011, 2012 and 2013, respectively. Awards contain service-based vesting conditions requiring service over a period of three to eight years. In certain circumstances, the Company may elect to settle the awards in shares of the Company's common stock or cash.
The following table summarizes the transactions of the Company's restricted stock:
 
Restricted
Stock
 
Weighted
Average
Grant Date
Value
Unvested units—January 1, 2013
0.4

 
$
84.53

Units granted
0.3

 
208.76

Units vested
(0.2
)
 
50.46

Units forfeited
(0.0
)
 
94.83

Unvested units—December 31, 2013
0.5

 
176.38


In 2013, 0.2 million of the units granted contained service-based vesting conditions and were valued based on the closing price of the Company's common stock on the date of grant. The remaining 0.1 million units vest when the required service period has been completed and if certain market conditions are satisfied. The market conditions require separate 15%, 25% and 35% increases in the price of the Company’s common stock to be achieved during the six-year term of the awards; however, shares underlying the awards are eligible to be delivered, assuming the service conditions have been satisfied, only on the fourth, fifth and sixth anniversaries of the grant date if the 15% market condition has been maintained. The awards were valued using a Monte Carlo simulation with grant date assumptions for expected volatility (31.6%), risk-free interest rate (2.0%) and dividend yield (0.0%). The weighted average fair value of the awards was $144.70. The fair value of the awards will be recognized as compensation over a service period of four years, which is the longer of the explicit service period or the period the market condition is expected to be met.
As of December 31, 2013, the Company has 1.8 million shares available for grant under its plans.
Share-Based Incentive Compensation
A summary of recent share-based compensation expense is as follows:
Period
Share-Based
Compensation
Expense
 
Tax Benefit
2011
$
21.2

 
$
8.1

2012
25.4

 
9.6

2013
27.5

 
10.6


The cash received and the actual tax benefit recognized for options exercised were $73.4 million and $25.5 million and $48.2 million and $20.7 million during the years ended December 31, 2012 and 2013, respectively. The excess tax benefit classified as a financing cash flow was $22.0 million and $17.3 million during the years ended December 31, 2012 and 2013, respectively, and is included in Other financing items.
There was $53.5 million and $79.3 million of unrecognized compensation expense related to share-based compensation arrangements as of December 31, 2012 and 2013, respectively. This expense will be recognized over a weighted average period of approximately three years (assuming no forfeitures).