EMPLOYEE BENEFIT PLANS

6 Months Ended

Jun. 30, 2020

Share-based Payment Arrangement [Abstract]

Share-Based Compensation Plans

In recent years, we have granted options and restricted stock units to certain of our employees and directors pursuant to our stock incentive plans. Options have an exercise price equal to the fair market value of the shares on the date of grant and generally expire 10 years from the date of grant. A restricted stock unit is a contractual right to receive one share of our common stock in the future, and the fair value of the restricted stock unit is based on our share price on the grant date. Typically, options and time-based restricted stock units vest one-third on each of the first three anniversary dates of the grant; however, certain special retention awards may have different vesting terms. In addition, we grant performance-based options and performance-based restricted stock units that vest subject to the achievement of specified performance goals within a specified time frame. At June 30, 2020, assuming outstanding performance-based restricted stock units and options for which performance has not yet been determined will achieve target performance, approximately 6.0 million shares of common stock were available under our 2019 Stock Incentive Plan for future stock option grants and other equity incentive awards, including restricted stock units.

The accompanying Condensed Consolidated Statements of Operations for the six months ended June 30, 2020 and 2019 include $27 million and $23 million, respectively, of pre-tax compensation costs related to our stock-based compensation arrangements.

Stock Options

The following table summarizes stock option activity during the six months ended June 30, 2020:


	Options	Weighted Average Exercise Price Per Share		Aggregate Intrinsic Value		Weighted Average Remaining Life
				(In Millions)
Outstanding at December 31, 2019	1,960,992	$	20.24

Exercised	(108,488)	19.13

Outstanding at June 30, 2020	1,852,504	$	20.31	$	1	5.8 years
Vested and expected to vest at June 30, 2020	1,852,504	$	20.31	$	1	5.8 years
Exercisable at June 30, 2020	1,161,635	$	18.30	$	1	4.9 years

There were 108,488 and 76,159 stock options exercised during the six months ended June 30, 2020 and 2019, respectively, with aggregate intrinsic values of less than $1 million and $1 million, respectively.

At June 30, 2020, there were $2 million of total unrecognized compensation costs related to stock options. These costs are expected to be recognized over a weighted average period of 1.2 years.

The following table summarizes information about our outstanding stock options at June 30, 2020:


	Options Outstanding							Options Exercisable
Range of Exercise Prices	Number of Options	Weighted Average Remaining Contractual Life	Weighted Average Exercise Price		Number of Options	Weighted Average Exercise Price
$16.43 to $19.759	1,119,968	5.0 years	$	18.06	1,119,968	$	18.06
$19.76 to $35.430	732,536	7.0 years	23.75		41,667	24.83
	1,852,504	5.8 years	$	20.31	1,161,635	$	18.30

Restricted Stock Units

The following table summarizes restricted stock unit activity during the six months ended June 30, 2020:


	Restricted Stock Units	Weighted Average Grant Date Fair Value Per Unit
Unvested at December 31, 2019	1,463,499	$	25.08
Granted	1,574,325	28.24
Vested	(598,037)	25.20
Forfeited	(40,721)	26.72
Unvested at June 30, 2020	2,399,066	$	27.10

In the six months ended June 30, 2020, we granted an aggregate of 1,574,325 restricted stock units. Of these, 517,398 will vest and be settled ratably over a three-year period from the grant date, 104,167 will vest and be settled ratably over a four-year period from the grant date, and 359,713 will vest and be settled ratably over 11 quarterly periods from the grant date. In addition, we granted 409,485 performance-based restricted stock units; the vesting of these restricted stock units is contingent on our achievement of specified performance goals for the years 2020 to 2022. Provided the goals are achieved, the performance-based restricted stock units will vest and settle on the third anniversary of the grant date. The actual number of performance-based restricted stock units that could vest will range from 0% to 200% of the 409,485 units granted, depending on our level of achievement with respect to the performance goals. In addition to the 104,167 time-vested restricted stock units mentioned above, we also granted 80,128 performance-based restricted stock units to a Conifer senior officer; the vesting of these restricted stock units is contingent on Conifer’s achievement of specified performance goals for each of the years 2020 to 2023. Provided the goals are achieved, the performance-based restricted stock units will vest and settle ratably over the four-year period from the grant date. The actual number of performance-based restricted stock units that could vest will range from 0% to 200% of the 80,128 units granted, depending on Conifer’s level of achievement with respect to the performance goals. In addition, in May 2020, we made an annual grant of 103,434 restricted stock units to our non-employee directors for the 2020-2021 board service year, which units vested immediately and will settle in shares of our common stock on the third anniversary of the date of the grant.

In the six months ended June 30, 2019, we granted an aggregate of 1,235,876 restricted stock units. Of these, 243,506 will vest and be settled ratably over a three-year period from the grant date, 566,172 will vest and be settled ratably over nine quarterly periods from the grant date, and 318,327 will vest and be settled on the third anniversary of the grant date. In addition, in May 2019, we made an annual grant of 100,444 restricted stock units to our non-employee directors for the 2019-2020 board service year, which units vested immediately and will settle in shares of our common stock on the third anniversary of the date of the grant. We also granted 7,427 additional restricted stock units that vested and settled immediately as a result of our level of achievement with respect to a performance goal on a 2013 grant.

At June 30, 2020, there were $43 million of total unrecognized compensation costs related to restricted stock units. These costs are expected to be recognized over a weighted average period of 2.1 years.

USPI Management Equity Plan

In February 2020, USPI's previous management equity plan and all unvested options granted under the plan were terminated in accordance with the terms of the plan as previously disclosed. USPI repurchased all vested options and all shares of USPI stock acquired upon exercise of an option for approximately $35 million. USPI then adopted a new restricted stock plan whereby USPI granted 2,444,049 shares of restricted non-voting common stock to eligible plan participants in the three months ended March 31, 2020. The restricted stock units vest 20% in each of the first three years on the anniversary of the grant date with the remaining 40% vesting on the fourth anniversary of the grant date.

Employee Retirement Plans

In the six months ended June 30, 2020 and 2019, we recognized (i) service cost related to one of our frozen nonqualified defined benefit pension plans of less than $1 million for both periods in salaries, wages and benefits expense, and (ii) other components of net periodic pension cost and net periodic postretirement benefit cost related to our frozen qualified and nonqualified defined benefit plans of $4 million and $11 million, respectively, in other non-operating income (expense), net, in the accompanying Condensed Consolidated Statements of Operations.