Stock-Based Compensation

9 Months Ended

Sep. 30, 2013

The Company measures compensation cost for all stock awards at fair value on the date of grant and recognition of compensation, net of estimated forfeitures, over the requisite service period for awards expected to vest. The Company recognized $8.0 million and $8.1 million of pretax stock-based compensation expense during the three months ended September 30, 2013 and 2012, respectively, and $27.7 million and $26.3 million during the nine months ended September 30, 2013 and 2012, respectively.

The following table summarizes the changes in the number of shares of common stock under option for the nine months ended September 30, 2013 (in millions, except per share value):



	Shares		Weighted-Average Exercise Price		Exercisable at Period End	Aggregate Intrinsic Value Exercisable
Outstanding at December 31, 2012	11.1		$	22	9.0	$	27.8
Exercised	(3.2	)	20
Forfeited / expired	(1.1	)	29
Outstanding at September 30, 2013	6.8		$	22	6.2	$	35.4

The following table summarizes the changes in the number of restricted stock units for the nine months ended September 30, 2013 (shares in millions):



	Restricted Stock Units		Weighted- Average Grant Date Fair Value
Outstanding at December 31, 2012	5.5		$	17
Granted	2.2		25
Vested	(2.5	)	15
Forfeited	(0.8	)	21
Outstanding at September 30, 2013	4.4		$	22

During the nine months ended September 30, 2013, the Company awarded 0.9 million performance stock units which entitle recipients to shares of the Company’s stock at the end of a three-year vesting period, if specified market conditions are achieved (“PSUs”). The PSUs entitle recipients to shares of common stock equal to 0% up to 200% of the number of units granted at the vesting date depending on the level of achievement of the specified market and service conditions. As of September 30, 2013, 1.8 million PSUs were outstanding, and based on performance through September 30, 2013, recipients of PSUs would be entitled to 2.5 million shares at the vesting date. The PSUs are included in the preceding table as if the participants earn shares equal to 100% of the units granted.

During the nine months ended September 30, 2013, the Company granted 0.2 million performance-based restricted stock units which entitle the recipient to shares of the Company’s stock if specified market and service conditions are achieved, and the awards vest no earlier than one year to two years from the grant date. During 2012, the Company granted 0.1 million performance-based restricted stock units with similar terms. The 0.3 million of outstanding performance-based restricted stock units vest no earlier than one year from the date of grant and no later than seven years from the date of grant. Based on performance through September 30, 2013, the market conditions have been achieved for substantially all of the 0.3 million of outstanding performance-based restricted stock units. Accordingly, these performance-based restricted stock units will vest when the service conditions are achieved. The 0.3 million performance-based restricted stock units are included in the preceding table as outstanding as of September 30, 2013.

During the nine months ended September 30, 2013, 0.7 million performance-based restricted stock units granted to the Company’s Chief Executive Officer vested as the specified market and service conditions were achieved.

- Definition

Tabular disclosure of components of a stock option or other award plan under which equity-based compensation is awarded to employees, typically comprised of the amount of unearned compensation (deferred compensation cost), compensation expense, and changes in the quantity and fair value of the shares (or other type of equity) granted, exercised, forfeited, and issued and outstanding pertaining to that plan. Disclosure may also include nature and general terms of such arrangements that existed during the period and potential effects of those arrangements on shareholders, effect of compensation cost arising from equity-based payment arrangements on the income statement, method of estimating the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period, cash flow effects resulting from equity-based payment arrangements and, for registrants that accelerate vesting of out of the money share options, reasons for the decision to accelerate.

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