Stock-Based Compensation

12 Months Ended

Dec. 31, 2012

Share-based Compensation [Abstract]

Stock-Based Compensation

Stock-Based Compensation

We have a stock-based Equity Participation Plan and an Outside Directors' Compensation Plan (the "Plans"), under which we can grant stock options, restricted shares and restricted share units to employees and outside directors. As of December 31, 2012, the number of shares of common stock available for grants under the Plans aggregated 23.2 million shares.

Stock options are granted at an exercise price equal to the fair market value of our common stock on the date of grant, and they have a term of 10 years. Stock options granted to employees in the U.S. and certain non-U.S. employees are subject to graded vesting whereby options vest 30 percent at the end of each of the first two 12-month periods following the grant and 40 percent at the end of the third 12-month period. Options granted to certain non-U.S. employees cliff vest at the end of three or four years.

Restricted shares, time-vested restricted share units and performance-based restricted share units granted to employees are valued at the closing market price of our common stock on the grant date and vest generally at the end of three years. The number of performance-based share units that ultimately vest ranges from zero to 200 percent of the number granted, based on performance tied to return on invested capital ("ROIC") and net sales during the three-year performance period. ROIC and net sales targets are set at the beginning of the performance period. Restricted share units granted to outside directors are valued at the closing market price of our common stock on the grant date and vest when they are granted. The restricted period begins on the date of grant and expires on the date the outside director retires from or otherwise terminates service on our Board.

At the time stock options are exercised or restricted shares and restricted share units become payable, common stock is issued from our accumulated treasury shares. Dividend equivalents are credited on restricted share units, on the same date and at the same rate as dividends are paid on Kimberly-Clark's common stock. These dividend equivalents, net of estimated forfeitures, are charged to retained earnings.

Stock-based compensation costs of $67, $48 and $52 and related deferred income tax benefits of $20, $15 and $19 were recognized for 2012, 2011 and 2010, respectively.

The fair value of stock option awards was determined using a Black-Scholes-Merton option-pricing model utilizing a range of assumptions related to dividend yield, volatility, risk-free interest rate, and employee exercise behavior. Dividend yield is based on historical experience and expected future dividend actions. Expected volatility is based on a blend of historical volatility and implied volatility from traded options on Kimberly-Clark's common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. We estimate forfeitures based on historical data.

The weighted-average fair value of options granted was estimated at $3.25, $2.98 and $4.15, in 2012, 2011 and 2010, respectively, per option on the date of grant based on the following assumptions:

	Year Ended December 31
	2012		2011		2010
Dividend yield	4.50	%	5.00	%	5.00	%
Volatility	12.86	%	12.54	%	14.77	%
Risk-free interest rate	1.08	%	2.26	%	2.74	%
Expected life—years	5.8		6.3		6.4

Total remaining unrecognized compensation costs and amortization period are as follows:

	December 31, 2012		Weighted- Average Service Years
Nonvested stock options	$	6	0.9
Restricted shares and time-vested restricted share units	14		1.7
Nonvested performance-based restricted share units	43		1.3

Excess tax benefits, resulting from tax deductions in excess of the compensation cost recognized, aggregating $50, $15 and $6 were classified as Other cash inflows under Financing Activities for the years ended December 31, 2012, 2011 and 2010, respectively.

A summary of stock-based compensation under the Plans is presented below:

Stock Options	Shares (in thousands)		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2012	17,084		$	61.92
Granted	1,780		78.54
Exercised	(9,189	)	61.55
Forfeited or expired	(407	)	64.41
Outstanding at December 31, 2012	9,268		65.38		6.3	$	177
Exercisable at December 31, 2012	5,057		62.14		4.5	$	113

The following summarizes the effect of the exercises of stock options:

	Year Ended December 31
	2012		2011		2010
Cash received	$	565	$	435	$	131
Income tax benefit received	49		13		5
Intrinsic value	161		69		19

	Time-Vested Restricted Share Units				Performance-Based Restricted Share Units
Other Stock-Based Awards	Shares (in thousands)		Weighted- Average Grant-Date Fair Value		Shares (in thousands)		Weighted- Average Grant-Date Fair Value
Nonvested at January 1, 2012	276		$	61.07	2,398		$	59.08
Granted	270		77.89		1,127		66.57
Vested	(198	)	60.23		(1,143	)	49.53
Forfeited	(24	)	65.62		(195	)	65.02
Nonvested at December 31, 2012	324		75.24		2,187		67.41

The total fair value of restricted shares and restricted share units that were distributed to participants during 2012, 2011 and 2010 was $101, $28 and $31, respectively.