Common Stock

Equity Plans — We have granted a variety of awards, including common stock, restricted stock, restricted stock units, performance units, stock appreciation rights (“SARs”), and stock options to our directors, officers, and employees.

Accounting Methods — We recorded compensation expense (net of taxes) of less than $1 million and $1 million in the three month periods ended June 30, 2015 and 2014 and $1 million and $3 million in compensation expense for each of the six month periods ended June 30, 2015 and 2014, related to nonqualified stock options as part of our selling, general and administrative expense. This resulted in a decrease of $0.01 in both basic and diluted earnings per share for each of the three month periods ended June 30, 2015 and 2014 and a decrease of $0.02 and $0.04 in both basic and diluted earnings per share for the six month period ended June 30, 2015 and 2014.

For employees eligible to retire at the grant date, we immediately expense stock options and restricted stock. If employees become eligible to retire during the vesting period, we immediately recognize any remaining expense associated with their stock options and restricted stock.

As of June 30, 2015, there was approximately $4 million of unrecognized compensation costs related to our stock option awards that we expect to recognize over a weighted average period of 0.7 years.

Compensation expense for restricted stock, restricted stock units, long-term performance units and SARs (net of taxes) was $4 million and $5 million for the three month periods ended June 30, 2015 and 2014 and $10 million for each of the six month periods ended June 30, 2015 and 2014, and was recorded in selling, general, and administrative expense in our condensed consolidated statements of income.

Cash received from stock option exercises for the six months ended June 30, 2015 and 2014 was $4 million and $1 million, respectively.

Stock options exercised in the first six months of 2015 and 2014 generated a tax benefit of $6 million and $3 million, respectively. We started to record this tax benefit in the third quarter of 2013 when we began utilizing our federal and state NOLs.

Assumptions — We calculated the fair values of stock option awards using the Black-Scholes option pricing model with the weighted average assumptions listed below. The fair value of share-based awards is determined at the time the awards are granted which is generally in January of each year, and requires judgment in estimating employee and market behavior. There were no stock options granted in 2015.



	Six Months Ended June 30,
	2015			2014
Stock Options Granted
Weighted average grant date fair value, per share	$	—		$	26.46
Weighted average assumptions used:
Expected volatility	—		%	52.8		%
Expected lives				5.0
Risk-free interest rates	—		%	1.7		%
Dividend yields	—		%	—		%

Expected volatility is calculated based on current implied volatility and historical realized volatility for the Company.

Expected lives of options are based upon the historical and expected time to post-vesting forfeiture and exercise. We believe this method is the best estimate of the future exercise patterns currently available.

The risk-free interest rates are based upon the Constant Maturity Rates provided by the U.S. Treasury. For our valuations, we used the continuous rate with a term equal to the expected life of the options.

Stock Options — The following table reflects the status and activity for all options to purchase common stock for the period indicated:



	Six Months Ended June 30, 2015
	Shares Under Option		Weighted Avg. Exercise Prices		Weighted Avg. Remaining Life in Years	Aggregate Intrinsic Value
						(Millions)
Outstanding Stock Options
Outstanding, January 1, 2015	1,454,003		$	31.16	4.4	$	33
Canceled	(20,427	)	23.75
Exercised	(96,997	)	20.78			3
Outstanding, March 31, 2015	1,336,579		$	32.03	4.3	$	31
Forfeited	(7,531	)	47.36
Exercised	(141,644	)	14.68			6
Outstanding, June 30, 2015	1,187,404		$	34.00	4.2	$	30

The weighted average grant-date fair value of options granted during the six months ended June 30, 2014 was $26.46. There were no stock options granted in 2015. The total fair value of shares vested was $4 million and $6 million for the periods ended June 30, 2015 and 2014, respectively.

Restricted Stock — The following table reflects the status for all nonvested restricted shares for the period indicated:



	Six Months Ended June 30, 2015
	Shares		Weighted Avg. Grant Date Fair Value
Nonvested Restricted Shares
Nonvested balance at January 1, 2015	286,051		$	42.35
Granted	350,101		53.40
Vested	(150,171	)	37.86
Nonvested balance at March 31, 2015	485,981		$	51.70
Granted	17,164		56.06
Vested	(13,008	)	46.37
Forfeited	(11,034	)	48.85
Nonvested balance at June 30, 2015	479,103		$	52.07

The fair value of restricted stock grants is usually equal to the average of the high and low trading price of our stock on the date of grant. As of June 30, 2015, approximately $18 million of total unrecognized compensation costs related to restricted stock awards is expected to be recognized over a weighted-average period of approximately 2.7 years. The total fair value of restricted shares vested was $6 million and $7 million at June 30, 2015 and 2014, respectively.

In January 2015, our Board of Directors approved a share repurchase program, authorizing our company to repurchase up to $350 million of our outstanding common stock over a three-year period. This repurchase program does not obligate Tenneco to make repurchases at any specific time or situation and is part of our overall capital allocation strategy. We repurchased 748,000 shares through this program in the six months ended June 30, 2015.

Repurchased shares held as part of our treasury stock were 3,992,692 and 3,244,692 shares at June 30, 2015 and December 31, 2014, respectively.

Long-Term Performance Units, Restricted Stock Units and SARs — Long-term performance units, restricted stock units and SARs are paid in cash and recognized as a liability based upon their fair value. As of June 30, 2015, $26 million of total unrecognized compensation costs is expected to be recognized over a weighted-average period of approximately 2.0 years.