Stock-Based Compensation (Tables)

12 Months Ended

Dec. 31, 2012

Stock based compensation expense, including stock-based compensation expense recorded in discontinued operations as a result of the spin-off of Engility, is summarized in the table below.


	Year Ended December 31,
	2012		2011		2010
	(in millions)
Stock options	$	10	$	11	$	12
Restricted stock units		46		48		52
Performance units		8		5		3
Employee stock purchase plan		—		—		12

Total before income taxes		64		64		79
Income taxes		24		24		27

Total after income taxes		40		40		52
Less: Stock based compensation recorded in discontinued operations, net of income taxes		1		4		6

Stock based compensation recorded in continuing operations, net of income taxes	$	39	$	36	$	46

Company's Stock Option Activity and Changes

The table below presents a summary of the Company’s stock option activity as of December 31, 2012 and changes during the year then ended.


	Number of Options			Weighted Average Exercise Price			Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value
	(in thousands)						(in Years)		(in millions)
Number of shares under option
Outstanding at January 1, 2012		4,623.6		$	79.55			5.9	$	8

Options granted		789.9			70.42
Options exercised		(369.6	)		53.82
Options forfeited		(207.1	)		80.55
Engility spin-off adjustments		153.1			83.24	⁽¹⁾

Outstanding at December 31, 2012		4,989.9		$	76.57	⁽¹⁾		5.8	$	23

Vested and expected to vest at December 31, 2012⁽²⁾		4,966.9		$	76.57	⁽¹⁾		5.8	$	23

Exercisable at December 31, 2012		3,531.1		$	78.03	⁽¹⁾		4.7	$	16

⁽¹⁾

The weighted average exercise price of the Engility spin-off adjustments reflects the pre-spin-off weighted average exercise price of such stock options included in the spin-off adjustments. The weighted average exercise prices of the stock options outstanding, vested and expected to vest and exercisable at December 31, 2012, reflect the decrease in the exercise price as a result of the spin-off adjustments.

⁽²⁾	Represents outstanding options reduced by expected forfeitures for options not fully vested.

Weighted Average Assumptions in Valuation Model

The weighted average assumptions used in the valuation model are presented in the table below.


	2012 Grants			2011 Grants			2010 Grants
Expected holding period (in years)		5.4			5.2			4.7
Expected volatility		27.0	%		26.4	%		26.2	%
Expected dividend yield		3.6	%		2.8	%		2.2	%
Risk-free interest rate		1.0	%		2.2	%		2.3	%

	2011 Grants
Expected volatility		16.4	%
Expected dividend yield		2.6	%
Risk-free interest rate		0.2	%

Company's Nonvested Restricted Stock Unit Awards and Changes

The table below presents a summary of the Company’s nonvested restricted stock unit awards as of December 31, 2012 and changes during the year then ended.


	Number of Shares			Weighted Average Grant Date Fair Value
	(in thousands)
Nonvested balance at January 1, 2012		1,824.3		$	80.74
Granted		724.6			70.42
Vested		(632.7	)		71.62	⁽¹⁾
Forfeited		(117.2	)		78.79
Engility spin-off adjustments		(69.3	)		79.83

Nonvested balance at December 31, 2012		1,729.7		$	83.13	⁽²⁾

⁽¹⁾	The weighted average grant date fair value of awards that vested after the spin-off date reflect the revised weighted average grant date fair value as a result of the spin-off adjustments.

⁽²⁾	The weighted average grant date fair value of nonvested awards at December 31, 2012 reflects the revised weighted average grant date fair value as a result of the spin-off adjustments.

Company's Performance Unit Awards Based on Expected Performance

The table below presents a summary of the Company’s performance unit awards based on expected performance as of December 31, 2012 and changes during the year then ended.


	Payable in Cash (TSR)						Payable in Shares (EPS)
	Number of Units			Weighted Average Grant Date Fair Value			Number of Units			Weighted Average Grant Date Fair Value
	(in thousands)						(in thousands)

Outstanding at January 1, 2012		60.5		$	111.19			66.4		$	84.07
Granted		—			—			64.0			70.43
(Decrease) Increase due to expected performance		(3.6	)		117.03			40.9			86.49
Vested		—			—			(53.2	)		90.32
Engility spin-off adjustments		2.4			111.19	⁽¹⁾		7.5			79.87	⁽¹⁾

Outstanding at December 31, 2012		59.3		$	106.20	⁽²⁾		125.6		$	71.86	⁽²⁾

⁽¹⁾	The weighted average grant date fair value of the Engility spin-off adjustments reflects the pre-spin-off weighted average grant date fair value of such performance units included in the Engility spin-off adjustments.

⁽²⁾

The weighted average grant date fair value of performance unit awards outstanding as of December 31, 2012 reflects the decrease in the weighted average grant date fair value as a result of the Engility spin-off adjustments. The Engility spin-off adjustments do not changes compensation expenses as the number of units were increased to maintain the aggregate intrinsic value of the awards.