Stock-Based Compensation

12 Months Ended

Dec. 31, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION

14. STOCK-BASED COMPENSATION

Overview

Under our 2011 Omnibus Stock Incentive Plan (the OSIP), various stock and stock-based awards may be granted to employees and non-employee directors. Awards available under the OSIP include options to purchase shares of common stock, performance awards that vest upon the achievement of an objective performance goal, stock appreciation rights, restricted stock that vests over a period determined by our compensation committee, and dividend equivalent rights (DERs). The OSIP was approved by our stockholders on April 28, 2011. As of December 31, 2015, 12,109,301 shares of our common stock remained available to be awarded under the OSIP.

We also maintain other stock-based compensation plans under which previously granted equity awards remain outstanding. No additional grants may be awarded under these plans.

The following table reflects activity related to our stock-based compensation arrangements (in millions):

	Year Ended December 31,
	2015		2014		2013
Stock-based compensation expense:
Restricted stock	$	47	$	43	$	49
Performance awards	11		15		11
Stock options	1		2		4
Total stock-based compensation expense	$	59	$	60	$	64
Tax benefit recognized on stock-based compensation expense	$	21	$	21	$	22
Tax benefit realized for tax deductions resulting from exercises and vestings	66		64		66
Effect of tax deductions in excess of recognized stock-based compensation expense reported as a financing cash flow	44		47		47

Each of our significant stock-based compensation arrangements is discussed below.

Restricted Stock

Restricted stock is granted to employees and non-employee directors. Restricted stock granted to employees vests in accordance with individual written agreements between the participants and us, usually in equal annual installments over a period of three years beginning one year after the date of grant. Restricted stock granted to our non-employee directors vests in equal annual installments over a period of three years beginning one year after the date of grant. The fair value of each restricted stock per share is equal to the market price of our common stock. A summary of the status of our restricted stock awards is presented in the table below.

	Number of Shares		Weighted- Average Grant-Date Fair Value Per Share
Nonvested shares as of January 1, 2015	1,758,150		$	41.96
Granted	829,213		70.07
Vested	(1,016,862	)	41.72
Forfeited	(19,061	)	41.42
Nonvested shares as of December 31, 2015	1,551,440		57.15

As of December 31, 2015, there was $55 million of unrecognized compensation cost related to outstanding unvested restricted stock awards, which is expected to be recognized over a weighted-average period of approximately two years.

The following table reflects activity related to our restricted stock (in millions, except per share data):

	Year Ended December 31,
	2015		2014		2013
Weighted-average grant-date fair value per share of restricted stock granted	$	70.07	$	49.40	$	39.55
Fair value of restricted stock vested	69		60		74

Performance Awards

Performance awards are issued to certain of our key employees and represent rights to receive shares of our common stock upon the achievement by us of an objective performance measure. The objective performance measure is our total shareholder return, which is ranked among the total shareholder returns of a defined peer group of companies. Our ranking determines the rate at which the performance awards convert into our common shares. Conversion rates can range from zero to 200 percent.

Performance awards vest in equal one-third increments (tranches) on an annual basis. Our compensation committee establishes the peer group of companies for each tranche of awards at the beginning of the one-year vesting period for that tranche. Therefore, performance awards are not considered to be granted for accounting purposes until our compensation committee establishes the peer group of companies for each tranche of awards. The fair value of each tranche of awards is determined at the grant date principally using a Monte Carlo simulation model.

A summary of the status of our performance awards is presented below.

	Nonvested Awards		Weighted- Average Grant-Date Fair Value Per Share
Awards outstanding as of January 1, 2015	614,390		$	42.06
Granted	183,299		88.97
Vested	(388,561	)	38.77
Forfeited	(703	)	48.57
Awards outstanding as of December 31, 2015	408,425		66.23

As of December 31, 2015, there was $16 million of unrecognized compensation cost related to outstanding unvested performance awards, which will be recognized during 2016.

Performance awards converted during the year ended December 31, 2015 were as follows:

	Vested Awards Converted	Actual Conversion Rate	Number of Shares Issued
2011 awards	213,299	166.7%	355,576
2012 awards	96,845	200.0%	193,690
2013 awards	78,417	200.0%	156,834
Total	388,561		706,100