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Stock-Based Compensation
 12 Months Ended
Dec. 31, 2013
Stock-Based Compensation
17. Stock-Based Compensation

Stock Options

Stock options may be granted to Nucor’s key employees, officers and non-employee directors with exercise prices at 100% of the market value on the date of the grant. The stock options granted since 2010 are generally exercisable at the end of three years and have a term of 10 years. All stock options granted prior to the beginning of 2010 were fully exercised as of December 31, 2013. New shares are issued upon exercise of stock options.

A summary of activity under Nucor’s stock option plans is as follows:

 

     (shares in thousands)  
     2013      2012      2011  
     Shares      Weighted -
Average
Exercise
Price		      Shares     Weighted -
Average
Exercise
Price		      Shares     Weighted -
Average
Exercise
Price		  

Number of shares under option:

                

Outstanding at beginning of year

      1,543       $ 39.03         1,156      $ 38.26         983      $ 29.14   

Granted

      546       $ 44.51         741      $ 35.76         560      $ 42.34   

Exercised

      —           —           (354 )    $ 29.67         (387 )    $ 20.96   

Canceled

      —           —           —          —           —          —     
  

 

 

        

 

 

       

 

 

    

Outstanding at end of year

      2,089       $ 40.47         1,543      $ 39.03         1,156      $ 38.26   
  

 

 

        

 

 

       

 

 

    

Options exercisable at end of year

      1,012       $ 39.75         —          —           354      $ 29.67   
  

 

 

        

 

 

       

 

 

    

The shares reserved for future grants as of December 31, 2013, 2012, and 2011 are reflected in the restricted stock units table below. The total intrinsic value of options (the amount by which the stock price exceeded the exercise price of the option on the date of exercise) that were exercised during 2012 and 2011 was $4.3 million and $7.6 million, respectively.

The following table summarizes information about stock options outstanding at December 31, 2013:

 

                   (shares in thousands)  

Exercise Price

    Options Outstanding      Options Exercisable      Weighted-
Average
Remaining
Contractual Life		  

               $35.76

      741         391         8.4 years   

               $41.43

      242         242         6.4 years   

               $42.34

      560         299         7.4 years   

               $44.51

      546         80         9.4 years   
  

 

 

     

 

 

     

$35.76 - $44.51

      2,089         1,012         8.2 years   
  

 

 

     

 

 

     

As of December 31, 2013, the total aggregate intrinsic value of options outstanding and options exercisable was $27.0 million and $13.8 million, respectively.

The grant date fair value of options granted was $15.03 in 2013 ($11.40 in 2012 and $15.37 in 2011). The fair value was estimated using the Black-Scholes option-pricing model with the following assumptions:

 

     2013     2012     2011  

Exercise price

    $ 44.51      $ 35.76      $ 42.34   

Expected dividend yield

      3.30 %      4.08 %      3.42 % 

Expected stock price volatility

      46.94 %      48.99 %      49.40 % 

Risk-free interest rate

      1.51 %      1.06 %      2.39 % 

Expected life (in years)

      6.5        6.5        6.5   

Compensation expense for stock options was $8.6 million in 2013 ($9.9 million in 2012 and $9.9 million in 2011). As of December 31, 2013, all expense related to options had been recognized as all options had vested as of December 31, 2013.

Restricted Stock Units

Nucor annually grants restricted stock units (RSUs) to key employees, officers and non-employee directors. The RSUs typically vest and are converted to common stock in three equal installments on each of the first three anniversaries of the grant date. A portion of the RSUs awarded to senior officers vest upon the officer’s retirement. Retirement, for purposes of vesting in these units only, means termination of employment with approval of the Compensation and Executive Development Committee of the Board of Directors after satisfying age and years of service requirements. RSUs granted to non-employee directors are fully vested on the grant date and are payable to the non-employee director in the form of common stock after the termination of the director’s service on the board of directors.

RSUs granted to employees who are eligible for retirement on the date of grant are expensed immediately, and RSUs granted to employees who will become retirement-eligible prior to the end of the vesting term are expensed over the period through which the employee will become retirement-eligible since these awards vest upon retirement from the Company. Compensation expense for RSUs granted to employees who are not retirement-eligible is recognized on a straight-line basis over the vesting period.

 

Cash dividend equivalents are paid to participants each quarter. Dividend equivalents paid on units expected to vest are recognized as a reduction in retained earnings.

The fair value of the RSUs is determined based on the closing stock price of Nucor’s common stock on the day before the grant. A summary of Nucor’s restricted stock unit activity is as follows:

 

    

(shares in thousands)

  
     2013      2012      2011  
     Shares     Grant Date
Fair Value		      Shares     Grant Date
Fair Value		      Shares     Grant Date
Fair Value		  

Restricted stock units:

               

Unvested at beginning of year

      1,106      $ 40.80         962      $ 46.09         1,203      $ 49.96   

Granted

      789      $ 44.51         1,101      $ 35.76         490      $ 42.34   

Vested

      (762 )    $ 42.15         (915 )    $ 40.36         (713 )    $ 50.04   

Canceled

      (11 )    $ 39.08         (42 )    $ 39.41         (18 )    $ 46.06   
  

 

 

       

 

 

       

 

 

    

Unvested at end of year

      1,122      $ 42.51         1,106      $ 40.80         962      $ 46.09   
  

 

 

       

 

 

       

 

 

    

Shares reserved for future grants
(stock options and RSUs)

      10,486           11,839           13,695     
  

 

 

       

 

 

       

 

 

    

Compensation expense for RSUs was $32.6 million in 2013 ($34.2 million in 2012 and $31.6 million in 2011). The total fair value of shares vested during 2013 was $34.1 million ($33.1 million in 2012 and $29.3 million in 2011). As of December 31, 2013, unrecognized compensation expense related to unvested RSUs was $29.4 million, which is expected to be recognized over a weighted-average period of two years.

Restricted Stock Awards

Nucor’s Senior Officers Long-Term Incentive Plan (the LTIP) and Annual Incentive Plan (the AIP) authorize the award of shares of common stock to officers subject to certain conditions and restrictions.

The LTIP provides for the award of shares of restricted common stock at the end of each LTIP performance measurement period at no cost to officers if certain financial performance goals are met during the period. One-third of the LTIP restricted stock award vests upon each of the first three anniversaries of the award date or, if earlier, upon the officer’s attainment of age 55 while employed by Nucor. Although participants are entitled to cash dividends and may vote such awarded shares, the sale or transfer of such shares is limited during the restricted period.

The AIP provides for the payment of annual cash incentive awards. An AIP participant may elect, however, to defer payment of up to one-half of an annual incentive award. In such event, the deferred AIP award is converted into common stock units and credited with a deferral incentive, in the form of additional common stock units, equal to 25% of the number of common stock units attributable to the deferred AIP award. Common stock units attributable to deferred AIP awards are fully vested. Common stock units credited as a deferral incentive vest upon the AIP participant’s attainment of age 55 while employed by Nucor. Vested common stock units are paid to AIP participants in the form of shares of common stock following their termination of employment with Nucor.

 

A summary of Nucor’s restricted stock activity under the AIP and LTIP is as follows:

 

    

(shares in thousands)

  
     2013      2012      2011  
     Shares     Grant Date
Fair Value		      Shares     Grant Date
Fair Value		      Shares     Grant Date
Fair Value		  

Restricted stock awards and units:

               

Unvested at beginning of year

      72      $ 43.72         94      $ 42.46         141      $ 44.62   

Granted

      122      $ 47.36         122      $ 42.20         118      $ 46.41   

Vested

      (121 )    $ 46.32         (144 )    $ 41.62         (165 )    $ 47.13   

Canceled

      —          —           —          —           —          —     
  

 

 

       

 

 

       

 

 

    

Unvested at end of year

      73      $ 45.49         72      $ 43.72         94      $ 42.46   
  

 

 

       

 

 

       

 

 

    

Shares reserved for future grants

      1,238           1,360           1,482     
  

 

 

       

 

 

       

 

 

    

Compensation expense for common stock and common stock units awarded under the AIP and LTIP is recorded over the performance measurement and vesting periods based on the anticipated number and market value of shares of common stock and common stock units to be awarded. Compensation expense for anticipated awards based upon Nucor’s financial performance, exclusive of amounts payable in cash, was $6.3 million in 2013 ($6.6 million in 2012 and $7.4 million in 2011). The total fair value of shares vested during 2013 was $5.7 million ($6.0 million in 2012 and $7.3 million in 2011). As of December 31, 2013, unrecognized compensation expense related to unvested restricted stock awards was $0.6 million, which is expected to be recognized over a weighted-average period of 1.7 years.