CAPITAL STOCK

The aggregate number of shares of all classes of stock with which we are authorized to issue is up to 1,000,500,000, divided into two classes consisting of 500,000 shares of $1 par value preferred stock and 1,000,000,000 shares of common stock with a par value of $0.10. No shares of preferred stock were outstanding on December 31, 2018.

In 2018 we repurchased 1.9 million shares at a cost of $300. The manner, timing and amount of repurchases are determined by management based on an evaluation of market conditions, stock price and other factors and are subject to regulatory considerations. Purchases are made from time-to-time in the open market, in privately negotiated transactions or otherwise. On December 31, 2018 the total dollar value of shares that could be purchased under our authorized repurchase program was $1,340.

Shares reserved for future compensation grants of our common stock were 33 million and 37 million on December 31, 2018 and 2017.

Stock Options

We measure the cost of employee stock options based on the grant-date fair value and recognize that cost using the straight-line method over the period in which a recipient is required to provide services in exchange for the options, typically the vesting period. The weighted-average fair value per share of options is estimated on the date of grant using the Black-Scholes option pricing model.



Option Value and Assumptions
	2018			2017			2016
Weighted-average fair value per share	$	28.52		$	22.43		$	17.73
Assumptions:
Risk-free interest rate	2.7		%	2.0		%	1.3		%
Expected dividend yield	1.2		%	1.5		%	1.6		%
Expected stock price volatility	16.8		%	19.4		%	20.5		%
Expected option life (years)	6.0			6.0			6.1

The risk-free interest rate for periods within the expected life of options granted is based on the United States Treasury yield curve in effect at the time of grant. Expected stock price volatility is based on the historical volatility of our stock. The expected option life, representing the period of time that options granted are expected to be outstanding, is based on historical option exercise and employee termination data.



2018 Stock Option Activity
	Shares (in millions)		Weighted Average Exercise Price		Weighted-Average Remaining Term (in years)	Aggregate Intrinsic Value
Outstanding January 1	14.7		$	83.71
Granted	2.4		154.50
Exercised	(2.5	)	66.98
Canceled	(0.5	)	114.98
Outstanding December 31	14.1		$	97.69	6.1	$	834.5
Exercisable December 31	7.3		$	74.10	4.4	$	598.4
Options expected to vest	6.2		$	121.48	7.8	$	220.7

The aggregate intrinsic value of options, which represents the cumulative difference between the fair market value of the underlying common stock and the option exercise prices, exercised was $247, $184, and $128 in 2018, 2017 and 2016. Exercise prices for options outstanding ranged from $38.88 to $169.42 on December 31, 2018. On December 31, 2018 there was $99 of unrecognized compensation cost related to nonvested stock options granted under the long-term incentive plans; that cost is expected to be recognized over the weighted-average period of approximately 1.5 years.



Restricted Stock Units (RSUs) and Performance Stock Units (PSUs) Activity
	Shares (in millions)				Weighted Average Grant Date Fair Value
	RSUs		PSUs		RSUs		PSUs
Nonvested on January 1	1.0		0.3		$	104.85	$	104.51
Granted	0.5		0.1		150.23		153.67
Vested	(0.5	)	(0.1	)	100.32		92.96
Canceled or forfeited	(0.1	)	—		117.86		—
Nonvested on December 31	0.9		0.3		$	129.90	$	122.39

On December 31, 2018 there was $63 of unrecognized compensation cost related to nonvested RSUs. That cost is expected to be recognized as expense over the weighted-average period of approximately one year. The weighted-average grant date fair value per share of RSUs granted was $150.23 and $117.44 in 2018 and 2017. The fair value of RSUs and PSUs vested in 2018 was $47 and $8. On December 31, 2018 there was $15 of unrecognized compensation cost related to nonvested PSUs; the cost is expected to be recognized as expense over the weighted-average period of approximately one year.

Employee Stock Purchase Plans (ESPP)

Full- and part-time employees may participate in our ESPP provided they meet certain eligibility requirements. The purchase price for our common stock under the terms of the ESPP is defined as 95% of the closing stock price on the last trading day of a purchase period. We issued 168,626 and 163,415 shares under the ESPP in 2018 and 2017.