Stock-Based Compensation Plans

We have a long-term incentive program whereby eligible employees may be granted restricted stock units, non-qualified stock options and performance stock units. The Executive Compensation Committee of the Board of Directors administers these plans. We settle stock awards with treasury shares. At December 31, 2017, there were 15,725,806 shares available for future grants under our long-term incentive program.

Restricted Stock Units

Restricted stock units (RSUs) entitle the holder to shares of common stock as the units vest, typically over a three year service period. The following table summarizes information about RSUs during 2017 and 2016:



	2017				2016
	Shares		Weighted average grant date fair value		Shares		Weighted average grant date fair value
Outstanding - beginning of the year	1,609,459		$	17.50	1,727,214		$	18.30
Granted	1,995,473		13.24		826,546		17.20
Vested	(784,295	)	19.42		(822,290	)	19.91
Forfeited	(169,584	)	14.76		(122,011	)	19.97
Outstanding - end of the year	2,651,053		$	14.16	1,609,459		$	17.50

The fair value of RSUs is determined based on the stock price on the grant date less the present value of expected dividends. At December 31, 2017, there was $15 million of unrecognized compensation cost related to RSUs that is expected to be recognized over a weighted-average period of 1.8 years. The intrinsic value of RSUs outstanding at December 31, 2017 was $28 million. The intrinsic value of RSUs vested during 2017, 2016 and 2015 was $26 million, $14 million and $18 million, respectively. The fair value of RSUs vested during 2017, 2016 and 2015 was $14 million, $21 million and $14 million, respectively. During 2015, we granted 809,436 RSUs at a weighted average fair value of $21.15.

Non-employee directors receive restricted stock units which are convertible into shares of common stock one year from date of grant. In 2017 and 2016, we granted 63,090 and 54,855 restricted stock units, respectively, to non-employee directors.

Performance Stock Units

Performance stock units (PSUs) are stock awards where the number of shares ultimately received by the employee is conditional upon the attainment of certain performance targets as well as total shareholder return relative to peer companies. PSUs vest at the end of a three-year service period and the actual number of shares awarded may range from 0% to 200% of the target award. However, the final determination of the number of shares to be issued is made by our Board of Directors, who may reduce, but not increase, the ultimate number of shares to be awarded (negative discretion). PSUs are accounted for as variable awards until the end of the service period when the grant date is established.

The following table summarizes share information about PSUs during 2017:



	Years Ended December 31,
	2017		2016
Outstanding - beginning of the year	379,898		1,107,515
Granted	1,073,934		889,599
Performance adjustments	(226,154	)	(1,400,425	)
Forfeited	(82,653	)	(216,791	)
Outstanding - end of the year	1,145,025		379,898

Total share-based compensation expense for PSUs is recognized ratably over the service based on the product of the number shares expected to be awarded and the fair value of an award, determined using a Monte Carlo simulation model. The fair value of an award and the number of shares expected to be awarded is updated each balance sheet date. Due to the variability of these awards, significant fluctuations in share-based compensation expense recognized from one period to the next are possible.

Stock Options

Stock options are granted at an exercise price equal to or greater than the stock price of our common stock on the grant date. Options vest ratably over three years and expire ten years from the date of grant. At December 31, 2017, there was $4 million of unrecognized compensation cost related to stock options that is expected to be recognized over a weighted-average period of 1.7 years. The intrinsic value of options outstanding and options exercisable at December 31, 2017 was not significant. No stock options were exercised in 2017 or 2016.

The following table summarizes information about stock option activity during 2017 and 2016:



	2017				2016
	Shares		Per share weighted average exercise prices		Shares		Per share weighted average exercise prices
Options outstanding - beginning of the year	9,122,762		$	27.13	8,771,600		$	31.26
Granted	2,553,510		13.16		1,758,760		16.87
Canceled	(63,517	)	20.34		(157,176	)	19.48
Expired	(1,117,716	)	46.88		(1,250,422	)	42.62
Options outstanding - end of the year	10,495,039		$	21.67	9,122,762		$	27.13
Options exercisable - end of the year	6,690,250		$	25.57	7,140,772		$	27.47

The following table provides additional information about stock options outstanding and exercisable at December 31, 2017:



	Options Outstanding					Options Exercisable
Range of per share exercise prices	Shares	Per share weighted-average exercise price		Weighted-average remaining contractual life		Shares	Per share weighted-average exercise price		Weighted-average remaining contractual life
$13.11 - $14.26	2,653,510	$	13.17	8.9	years	100,000	$	13.39	4.9	years
$14.27 - $21.89	2,347,595	17.07		7.2	years	1,296,316	17.22		6.4	years
$21.90 - $24.77	2,683,597	23.29		2.3	years	2,683,597	23.29		2.3	years
$24.78 - $36.96	2,810,337	31.98		1.8	years	2,610,337	32.53		1.3	years
	10,495,039	$	21.67	4.9	years	6,690,250	$	25.57	2.8	years

The fair value of stock options is determined using a Black-Scholes valuation model. Key assumptions used to estimate the fair value of stock options include the volatility of our stock price, a risk-free interest rate, the expected dividend yield and expected life of the award. The follow table lists the weighted average of assumptions used to calculate the fair value of stock options granted during 2016 and 2015:



	Years Ended December 31,
	2017		2016
Expected dividend yield	5.7	%	4.5	%
Expected stock price volatility	29.7	%	29.0	%
Risk-free interest rate	2.3	%	1.6	%
Expected life	7 years		7 years
Weighted-average fair value per option granted	$2.00		$2.85
Fair value of options granted	$5,107		$5,013

Employee Stock Purchase Plan

We maintain a non-compensatory Employee Stock Purchase Plan that enables substantially all U.S. and Canadian employees to purchase shares of our common stock at an offering price of 95% of the average market price on the offering date. At no time will the exercise price be less than the lowest price permitted under Section 423 of the Internal Revenue Code. Employees purchased 150,629 shares and 147,680 shares in 2017 and 2016, respectively. We have reserved 2,770,428 common shares for future purchase under the ESPP.