Stock-Based Compensation

9 Months Ended

Sep. 30, 2019

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation

Stock-based compensation

Accounting for stock-based compensation requires that the cost resulting from all stock-based payments be recognized in the financial statements based on the grant date fair value of the award.  Our stock-based compensation primarily consists of stock options, restricted stock units (RSUs) and performance-based restricted stock units (PRSUs).

Upon separation from service, if a participant is 55 years of age or older with more than five years of service, the participant meets the criteria for a “Long Service Separation.” For PRSU awards granted prior to 2019, only a prorated number of shares may vest at the end of the performance period based upon achievement of the performance target, with the proration based upon the number of months of continuous employment during the three-year performance period. Award terms for the 2019 PRSU grant allow for continued vesting upon achievement of the performance target specified in the award document for employees who meet the criteria for a “Long Service Separation” and fulfill a requisite service period of six months. Compensation expense for the 2019 PRSU grant with respect to employees who have met the criteria for a “Long Service Separation” is recognized over the period from the grant date to the end of the six-month requisite service period. For employees who become eligible for a “Long Service Separation” subsequent to the end date of the six-month requisite service period and prior to the completion of the vesting period, compensation expense is recognized over the period from the grant date to the date eligibility is achieved.

We recognized pretax stock-based compensation expense of $57 million and $170 million for the three and nine months ended September 30, 2019, respectively, and $52 million and $164 million for the three and nine months ended September 30, 2018, respectively.

The following table illustrates the type and fair value of the stock-based compensation awards granted during the nine months ended September 30, 2019 and 2018, respectively:

	Nine Months Ended September 30, 2019					Nine Months Ended September 30, 2018
	Shares Granted	Weighted-Average Fair Value Per Share		Weighted-Average Grant Date Stock Price		Shares Granted	Weighted-Average Fair Value Per Share		Weighted-Average Grant Date Stock Price
Stock options	1,499,524	$	40.98	$	138.35	1,605,220	$	46.11	$	150.90
RSUs	657,389	$	138.35	$	138.35	722,521	$	150.64	$	150.64
PRSUs	342,097	$	138.35	$	138.35	344,866	$	150.93	$	150.93

The following table provides the assumptions used in determining the fair value of the stock-based awards for the nine months ended September 30, 2019 and 2018, respectively:

	Grant Year
	2019	2018
Weighted-average dividend yield	2.56%	2.70%
Weighted-average volatility	29.1%	30.2%
Range of volatilities	25.1-38.7%	21.5-33.0%
Range of risk-free interest rates	2.48-2.68%	2.02-2.87%
Weighted-average expected lives	7 years	8 years

As of September 30, 2019, the total remaining unrecognized compensation expense related to nonvested stock-based compensation awards was $201 million, which will be amortized over the weighted-average remaining requisite service periods of approximately 1.6 years.