Stock-Based Compensation

9 Months Ended

Sep. 30, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

The Company recorded stock-based compensation expense of $7 million and $8 million ($5 million and $5 million, net of tax) during the three months ended September 30, 2016 and 2015, respectively, and $21 million and $19 million ($14 million and $12 million, net of tax) during the nine months ended September 30, 2016 and 2015, respectively. In jurisdictions with net operating loss carryforwards, exercises and/or vestings of stock-based awards have generated $96 million of total tax deductions at September 30, 2016. Approximately $38 million of tax benefits will be recorded in additional paid-in capital when these tax deductions are realized in these jurisdictions.

The weighted average assumptions used in the Monte Carlo simulation model to calculate the fair value of the Company’s stock unit awards containing a market condition were as follows:



	Nine Months Ended September 30,
	2016	2015
Expected volatility of stock price	46%	37%
Risk-free interest rate	0.98%	0.74%
Valuation period	3 years	3 years
Dividend yield	0.0%	0.0%

The activity related to the Company’s restricted stock units (“RSUs”) and cash units, consisted of (in thousands of shares):



		Time-Based RSUs				Performance-Based and Market-Based RSUs				Cash Unit Awards
		Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value		Number of Units		Weighted Average Grant Date Fair Value
Outstanding at January 1, 2016 ^(a)		819		$	43.34	941		$	35.18	111		$	18.04
	Granted	587		25.92		528		23.33		—		—
	Vested ^(b)	(422	)	36.06		(488	)	25.13		(111	)	18.04
	Forfeited/expired	(25	)	38.34		(51	)	27.16		—		—
Outstanding at September 30, 2016 ^(c)		959		$	36.01	930		$	34.14	—		$	—

__________


^(a)	Reflects the maximum number of stock units assuming achievement of all time-, performance- and market-vesting criteria and does not include those for non-employee directors. The weighted-average fair value of time-based RSUs and performance-based and market-based RSUs granted during the nine months ended September 30, 2015 was $54.72 and $55.51, respectively.


^(b)	The total grant date fair value of RSUs vested during the nine months ended September 30, 2016 and 2015 was $27 million and $24 million, respectively. The total grant date fair value of cash units vested during the nine months ended September 30, 2016 and 2015 was $2 million, in each period.

^(c)

The Company’s outstanding time-based RSUs and performance-based and market-based RSUs had aggregate intrinsic values of $33 million and $32 million, respectively. Aggregate unrecognized compensation expense related to time-based RSUs and performance-based and market-based RSUs amounted to $34 million and will be recognized over a weighted average vesting period of 1.3 years. The Company assumes that substantially all outstanding awards will vest over time.

The stock option activity consisted of (in thousands of shares):



		Number of Options		Weighted Average Exercise Price		Aggregate Intrinsic Value (in millions)		Weighted Average Remaining Contractual Term (years)
Outstanding at January 1, 2016		827		$	2.87	$	28	3.3
	Granted	—		—
	Exercised	(13	)	0.79		—
	Forfeited/expired	—		—
Outstanding and exercisable at September 30, 2016		814		$	2.90	$	25	2.5

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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