Share-based Compensation

12 Months Ended

Dec. 31, 2019

Share-based Payment Arrangement [Abstract]

The Company maintains a share-based compensation plan which authorizes the granting of various equity-based incentives including stock options and restricted stock units to employees and nonemployee directors. The number of shares of common stock reserved for issuance under the plans was 42.5 million at December 31, 2019, including 26.5 million available for future grants.

STOCK OPTIONS

Stock options to purchase common stock are granted with an exercise price equal to the closing market price of the Company’s stock on the date of grant. Substantially all of the options become exercisable in four equal installments, beginning a year from the date of the grant, and generally expire 10 years from the grant date.

Intrinsic value for stock options is defined as the difference between the current market value of the Company’s stock and the exercise price. During 2019, 2018 and 2017, the total intrinsic value of stock options exercised was $356.1 million, $364.4 million and $353.6 million, respectively. Cash received from stock options exercised during 2019 was $350.5 million and the tax benefit realized from stock options exercised totaled $70.5 million. The Company uses treasury shares purchased under the Company’s share repurchase program to satisfy share-based exercises.

A summary of the status of the Company’s stock option grants as of December 31, 2019, 2018 and 2017, and changes during the years then ended, is presented in the following table:



	2019									2018					2017
Options	Shares in millions		Weighted- average exercise price			Weighted- average remaining contractual life in years	Aggregate intrinsic value in millions			Shares in millions		Weighted- average exercise price			Shares in millions		Weighted- average exercise price
Outstanding at beginning of year	16.6			$	113.06					18.9			$	101.55	21.5			$	92.25
Granted	2.0			175.17						2.7			157.95		4.0			128.74
Exercised	(3.6	)		97.70						(4.5	)		89.31		(5.6	)		81.77
Forfeited/expired	(0.4	)		154.65						(0.5	)		137.08		(1.0	)		118.38
Outstanding at end of year	14.6			$	124.21	5.9		$	1,074.6	16.6			$	113.06	18.9			$	101.55
Exercisable at end of year	9.2			$	107.51	4.7		$	826.4	10.0					11.3

RSUs

RSUs generally vest 100% on the third anniversary of the grant and are payable in either shares of McDonald’s common stock or cash, at the Company’s discretion. The fair value of each RSU granted is equal to the market price of the Company’s stock at date of grant, and prior to 2018 included a reduction for the present value of expected dividends over the vesting period. Separately, Company executives have been awarded RSUs that vest based on Company performance. For performance-based RSUs, the Company includes a relative TSR modifier to determine the number of shares earned at the end of the performance period. The fair value of performance-based RSUs that include the TSR modifier is determined using a Monte Carlo valuation model.

A summary of the Company’s RSU activity during the years ended December 31, 2019, 2018 and 2017 is presented in the following table:



	2019					2018					2017
RSUs	Shares in millions		Weighted- average grant date fair value			Shares in millions		Weighted- average grant date fair value			Shares in millions		Weighted- average grant date fair value
Nonvested at beginning of year	1.5			$	132.56	1.6			$	107.34	1.9			$	94.13
Granted	0.6			171.48		0.6			158.28		0.6			123.98
Vested	(0.6	)		116.42		(0.6	)		91.20		(0.7	)		87.18
Forfeited	(0.1	)		153.58		(0.1	)		132.14		(0.2	)		117.24
Nonvested at end of year	1.4			$	150.95	1.5			$	132.56	1.6			$	107.34

The total fair value of RSUs vested during 2019, 2018 and 2017 was $111.0 million, $117.9 million and $87.6 million, respectively. The tax benefit realized from RSUs vested during 2019 was $21.3 million.