Stock-Based Compensation

9 Months Ended

Sep. 30, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

Note 17. Stock-Based Compensation

In accordance with our 2004 Long-Term Incentive Compensation Plan (the “2004 LTIP”), during the five month period ended May 31, 2013, we granted 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 nine months ended September 30, 2013, we granted approximately 164,000 performance shares with a grant date fair value of $77.72 per share under the 2004 LTIP. In addition, we granted approximately 1,173,000 shares of restricted stock and restricted stock units that had a weighted average grant date fair value of $60.30 per share or unit under the 2004 LTIP.

On May 31, 2013, our shareholders approved the 2013 Long-Term Incentive Compensation Plan (“2013 LTIP”), which superseded the 2004 LTIP. The 2013 LTIP authorizes the Compensation Committee of the Board of Directors to provide equity-based compensation in the form of stock options, stock appreciation rights, unrestricted stock, restricted stock, restricted stock units, performance shares, performance units and other stock-based awards for the purpose of providing our officers and other employees, and those of our subsidiaries, and non-employees who perform employee functions, incentives and rewards for performance. During the nine months ended September 30, 2013, we granted approximately 28,000 shares of restricted stock and restricted stock units that had a weighted average grant date fair value of $63.23 per share or unit under the 2013 LTIP.

Although no additional awards will be granted under the 2004 LTIP, the provisions under the previous plan will continue to govern awards that have been granted and remain outstanding under that plan. No awards may be granted under the 2013 LTIP after the tenth anniversary of the date on which the stockholders approved the 2013 LTIP. However, awards outstanding under the 2013 LTIP will continue to be governed by the 2013 LTIP until all awards granted prior to that date are no longer outstanding. The approval of the 2013 LTIP significantly decreased the number of shares that we may issue pursuant to equity-based awards from 56 million shares to 11 million shares of common stock. The aggregate number of shares available to be granted under the 2013 LTIP at September 30, 2013 was approximately 11 million.

We recorded stock-based employee compensation expense, including the impact of reimbursements from third parties, of $13 million and $40 million, in the three and nine months ended September 30, 2013, respectively, and $15 million and $49 million, in the three and nine months ended September 30, 2012, respectively.

As of September 30, 2013, there was approximately $77 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 1.68 years.