
6.	STOCK-BASED COMPENSATION

At December 31, 2014, we had grants outstanding under stock incentive compensation plans approved by our stockholders. Under these plans, a total of 18.5 million shares have been authorized for issuance to our directors, officers and certain other associates in the form of options, unvested restricted stock or other awards that are based on the value of our common stock. Shares available for future grants at December 31, 2014 were 2.2 million. The current stock plan will expire in April 2022.

STOCK OPTIONS Under the terms of the plans, stock options are granted at the market price of the stock on the grant date. The contractual term of outstanding stock options is 10 years. We issue new shares to satisfy stock-based awards.

Stock option awards become exercisable in three approximately equal annual installments beginning one year from the date of grant.

The following table summarizes activity relating to our stock options:



			Weighted-
	Number of		Average Exercise
	Shares		Price Per Share
	(in millions, except per share data)
Outstanding at January 1, 2012	3.9		$	26.95
Options granted	0.2		9.19
Options exercised	(0.1	)	2.81
Options canceled	(1.0	)	25.12
Outstanding at December 31, 2012	3.0		$	27.08
Options granted	—		—
Options exercised	(0.1	)	10.59
Options canceled	(0.9	)	24.28
Outstanding at December 31, 2013	2.0		$	29.22
Options granted	—		—
Options exercised	(0.1	)	13.87
Options canceled	(1.0	)	37.70
Outstanding at December 31, 2014	0.9		$	20.66

Exercisable at December 31, 2012	2.8		$	28.02
Exercisable at December 31, 2013	2.0		$	29.22
Exercisable at December 31, 2014	0.9		$	20.66

As of December 31, 2014, there were no unvested stock options. The total intrinsic value of options outstanding and exercisable as of December 31, 2014 was $3.4 million. The total intrinsic value of stock options exercised was $0.5 million in 2014, $0.8 million in 2013 and $0.5 million in 2012.

The following is a summary of the range of exercise prices for stock options that are outstanding and exercisable at December 31, 2014:



		Weighted-				Weighted-
Range of	Stock Options	Average Exercise		Weighted-Average	Stock Options	Average Exercise
Exercise Prices	Outstanding	Price Per Share		Contractual Life	Exercisable	Price Per Share
	(in millions, except per share data)			(in years)	(in millions, except per share data)
$9.19 - $15.58	0.4	$	13.22	3.2	0.4	$	13.22
$19.54 - $26.65	0.5	26.05		1.2	0.5	26.05
	0.9	$	20.66	2.0	0.9	$	20.66

OTHER STOCK-BASED COMPENSATION We awarded performance accelerated restricted stock, restricted stock and restricted stock units (PARS, RS and RSUs, respectively). The total amount of compensation expense associated with the RSUs settled in cash is recorded as an accrued liability when incurred while the total amount of compensation expense associated with PARS, RS and RSUs settled in stock is recorded to paid-in-capital. The PARS and RSUs vest over three years contingent upon the satisfaction of future financial performance targets specified by the plan and the RS vests over three years. The unearned compensation is expensed over the expected vesting period.

The following table summarizes activity relating to our PARS, RS and RSUs:



			Weighted Average
	Number of		Grant Date Fair
	Shares/Units		Value per Share/Unit
	(in millions, except per share data)
Outstanding at January 1, 2012	1.6		$	10.74
Granted	1.0		10.31
Vested	(1.4	)	10.19
Canceled	(0.1	)	26.02
Outstanding at December 31, 2012	1.1		$	11.08
Granted	0.9		12.79
Vested	(0.7	)	11.06
Canceled	—		—
Outstanding at December 31, 2013	1.3		$	12.24
Granted	0.5		19.58
Vested	(0.1	)	13.95
Canceled	(0.1	)	12.76
Outstanding at December 31, 2014	1.6		$	14.54

As of December 31, 2014, unrecognized compensation cost related to unvested RSUs totaled $10.4 million. The weighted average period over which this cost is expected to be recognized is approximately one year. In 2014 and 2013, the total fair market value of RS and RSUs vested was $1.7 million and $13.8 million, respectively.

We made cash payments of $0.2 million related to vested RSUs in 2012.

PERFORMANCE SHARES As of December 31, 2014, we have performance shares (PS) outstanding under our 2012 Omnibus Incentive Plan. We granted performance shares payable in stock to officers which vest in full over a three-year performance period. The payout of these stock-based awards is based equally on a total shareholder return (TSR) measure and AAM's three-year earnings before interest, taxes and depreciation and amortization margin (EBITDA). The TSR metric compares our TSR over the three-year performance period relative to the TSR of our pre-defined competitor peer group. Share price appreciation and dividends paid are measured over the performance period to determine TSR. As these awards are settled in stock, the compensation expense booked ratably over the vesting period is recorded to paid-in-capital.

The following table summarizes activity relating to our performance shares:



		Weighted Average
	Number of	Grant Date Fair
	Shares	Value per Share
EBITDA	(in millions, except per share data)
Outstanding at January 1, 2014	—	$	—
Granted	0.2	27.66
Vested	—	—
Canceled	—	—
Outstanding at December 31, 2014	0.2	$	27.66
TSR
Outstanding at January 1, 2014	—	$	—
Granted	0.2	21.11
Vested	—	—
Canceled	—	—
Outstanding at December 31, 2014	0.2	$	21.11

We estimated the fair value of our performance shares related to EBITDA on the date of grant using our estimated three-year EBITDA margin, based on AAM's budget and long-range plan assumptions at that time. We estimated the fair value of our performance shares related to TSR on the date of grant using the Monte Carlo simulation approach. The Monte Carlo simulation approach utilizes inputs on volatility assumptions, risk free rates, the price of the Company’s and our competitor peer group's common stock and their correlation as of each valuation date. Volatility assumptions are based on historical and implied volatility measurements.

Based on the current fair value, the estimated unrecognized compensation cost related to unvested PS totaled $5.3 million, as of December 31, 2014. The weighted average period over which this cost is expected to be recognized is approximately two years.

PERFORMANCE AWARDS As of December 31, 2014, we have performance awards outstanding under our 2012 Omnibus Incentive Plan, which are fully vested. We granted performance awards payable in cash to our officers and executives which vest in full over a three year performance period. The payout of these awards is based on a TSR measure that compares our TSR over the three-year performance period relative to the TSR of our pre-defined competitor peer group. Share price appreciation and dividends paid is measured over the performance period to determine TSR.

According to the applicable accounting guidance, these awards are considered to be stock-based compensation because the final payout amount is based “at least in part” on the price of our shares. However, as these awards are settled in cash, they are determined to be liability awards and have been remeasured at the end of each reporting period until settlement. The fair value of the performance awards was calculated on a quarterly basis using the Monte Carlo simulation approach, described above, and the liability was adjusted accordingly based on changes to the fair value and the percentage of time vested.

We recognized compensation expense associated with the performance awards of approximately $1.4 million in 2014, $7.9 million in 2013 and $3.0 million in 2012. We have a liability of $3.7 million recorded as of December 31, 2014, which will be paid out in the first quarter of 2015. As of December 31, 2014, there is no unrecognized compensation cost related to the performance awards.