Stock-Based Compensation

3 Months Ended

Mar. 31, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

Note 16. Stock-Based Compensation

In accordance with our 2004 Long-Term Incentive Compensation Plan, during the first quarter of 2013, we completed our annual grant of restricted stock, restricted stock units and performance shares to executive officers, members of the Board of Directors and certain employees.

For 2013, in lieu of stock options, a target number of contingent performance shares, which contain a market condition, were awarded to certain executives in February 2013. Vesting of the performance shares is dependent upon a market condition and three years of continuous service beginning at date of grant, subject to a prorated adjustment for employees who are terminated under certain circumstances or who retire. The market condition is based on our total shareholder return relative to the total shareholder return of a specified group of peer companies at the end of a three-calendar-year performance period beginning January 1, 2013 and ending December 31, 2015. The number of performance shares earned is determined based on our percentile ranking amongst these companies. The performance shares are entitled to any dividends made during the performance period in the same proportion as the number of performance shares that vest and will be paid at the end of the service period.

We classified the performance shares as a share-based equity award, and as such, compensation expense related to these shares is based on the grant-date fair value, which will be recognized ratably over the requisite service period. We determined the fair value of the performance shares using a Monte Carlo simulation valuation model. During the first quarter of 2013, we granted approximately 164,000 performance shares with a grant date fair value of $77.72 per share. In addition, we granted approximately 1,107,000 shares of restricted stock and restricted stock units that had a weighted average grant date fair value of $60.08 per share or unit.

We recorded stock-based employee compensation expense, including the impact of reimbursements from third parties, of $13 million and $18 million, in the three months ended March 31, 2013 and 2012, respectively.

As of March 31, 2013, there was approximately $105 million of unrecognized compensation cost, net of estimated forfeitures, including costs subject to reimbursement from third parties, which is expected to be recognized on a straight-line basis over a weighted-average period of 2.0 years.