Share-Based and Long-Term Incentive Compensation (Tables)

6 Months Ended

Jul. 02, 2011

Share-Based and Long-Term Incentive Compensation [Abstract]

Share-Based and Long-Term Incentive Compensation Expense

Share-based and long-term incentive compensation expense consists of:

		Second Quarter				First Six Months
		2011		2010		2011		2010
		(In millions)
Cash-settled restricted or performance stock units	$	17	$	3	$	31	$	7
Stock-settled restricted stock units		1		1		2		1
Stock options		1		3		4		4
Total share-based compensation expense		19		7		37		12
Fixed value cash awards		1		1		2		2
Total share-based and long-term incentive compensation expense	$	20	$	8	$	39	$	14

Share-based and long-term incentive compensation expense is included in:

		Second Quarter				First Six Months
		2011		2010		2011		2010
		(In millions)
Cost of sales	$	1	$	1	$	3	$	2
Selling expense		--		1		1		1
General and administrative expense		19		6		35		11
Total share-based and long-term incentive compensation expense	$	20	$	8	$	39	$	14

Nonvested Share Activity

A summary of activity for first six months 2011 follows:

	Cash-Settled Units			Weighted Average Grant Date Fair Value Per Share		Aggregate Current Value
	(In thousands)					(In millions)
Not vested beginning of year	2,627		$	12
Granted	447			24
Vested and settled	(651	)		19
Forfeited	(6	)		17
Not vested at second quarter-end 2011	2,417			12	$	73
Not vested units at second quarter-end 2011 subject  to:
Time vesting requirements	439				$	13
Performance requirements	1,978					60
	2,417				$	73

Unrecognized share-based compensation expense related to non-vested cash-settled restricted or performance stock units was $23 million at second quarter-end 2011 share price of $30 per share.  We expect to recognize this cost over a weighted average period of two years.  The fair value of awards settled in cash was $17 million in first six months 2011 and $16 million in first six months 2010.  The fair value of units vested and to be settled in cash, including accrued dividends of $2 million in 2011 and $1 million in 2010, was $48 million at second quarter-end 2011, of which $36 million is included in other current liabilities and $12 million in long-term liabilities; and $40 million at year-end 2010, of which $14 million was included in other current liabilities and $26 million in long-term liabilities.  In addition, approximately one-half of the annual director compensation is paid in the form of cash-settled restricted stock units that are deferred until retirement.  The fair value of these units vested and to be settled in cash included in long-term liabilities was $20 million at second quarter-end 2011 and $14 million at year-end 2010.

Stock-settled restricted stock units

Stock-settled restricted stock units vest after three years from the date of grant upon attainment of stated ROI-based performance goals or if there is a change of control.  There is no accelerated vesting upon retirement for these awards.

A summary of activity for first six months 2011 follows:

	Stock-Settled Units		Weighted Average Grant Date Fair Value Per Share		Aggregate Current Value
	(In thousands)				(In millions)
Not vested beginning of year	369	$	20	$
Granted	241		24
Vested and settled	--		--
Forfeited	--		--
Not vested at second quarter-end 2011	610	$	21	$	18

Stock Option Activity

A summary of activity for first six months 2011 follows:

	Shares			Weighted Average Exercise Price Per Share	Weighted Average Remaining Contractual Term		Aggregate Intrinsic Value (Current value less exercise price)
	(In thousands)				(In years)		(In millions)
Outstanding beginning of year	7,416		$	15
Granted	431			24
Exercised	(714	)		15
Forfeited	(29	)		14
Outstanding at second quarter-end 2011	7,104			16	6	$	101
Exercisable at second quarter-end 2011	5,158			16	6	$	71

Fair Value Valuation Assumptions

We estimated the fair value of our options using the Black-Scholes-Merton option-pricing model and the following assumptions:

		First Six Months
		2011			2010
Expected dividend yield		2.2	%		3.2	%
Expected stock price volatility		65.0	%		66.6	%
Risk-free interest rate		3.3	%		3.2	%
Expected life of options (in years)		8			8
Weighted average estimated fair value of options at grant date	$	13.40		$	10.23