Stockholders' Equity and Share-Based Awards

12 Months Ended

Dec. 31, 2013

Stockholders' Equity and Share-Based Awards

13. Stockholders’ Equity and Share-Based Awards

The Company maintains the 2013 Stock Incentive Plan, which allows for grants of stock options, restricted stock and short-term cash awards. At December 31, 2013, there were approximately 6.3 million share-based awards collectively available for grant under this stock plan.

Stock Options

A summary of the Company’s stock option activity in 2013 is as follows:

	Shares (in thousands)			Weighted Average Exercise Price		Weighted Average Remaining Life (years)		Total Intrinsic Value (in millions)
Options outstanding, beginning of year		585.3		$	14.62
Granted		—			—
Exercised		(229.6	)		14.85
Cancelled		—			—
Options outstanding, end of year (a)		355.7		$	14.47		2.1	$	16.7

(a) All options outstanding are exercisable

The Company does not use cash to settle any of its options or restricted stock awards and when available issues shares from its treasury stock instead of issuing new shares. Common stock options vest ratably over an explicit service period of typically 3 to 4 years and generally have a contractual term of 7 years. The total intrinsic value of options exercised was $6.8, $16.5 and $18.4 for 2013, 2012 and 2011, respectively. There were no options granted in 2013, 2012 and 2011.

Restricted Shares of Common Stock

The Company issues restricted stock awards whose restrictions lapse upon either the passage of time (service vesting), achieving performance targets, attaining Company common stock price thresholds or some combination of these restrictions. The contractual life is generally 7 years for those restricted stocks with performance targets, common stock price thresholds or some combination thereof. For those restricted stock awards with common stock price thresholds, the fair values were determined using a Monte Carlo simulation embedded in a lattice model. The fair value for all other restricted stock awards were based on the closing price of the Company’s common stock on the dates of grant.

A summary of the Company’s restricted stock activity for 2013 is as follows:

	Shares (in thousands)
Outstanding as of December 31, 2012		4,985.1
Granted		1,687.1
Released/Vested		(2,407.0	)
Cancelled		(258.6	)
Outstanding as of December 31, 2013		4,006.6

The total fair value of restricted shares granted and total fair value of restricted shares vested for 2013, 2012 and 2011 is as follows:

(in millions)	2013		2012		2011
Total fair value of restricted shares granted	$	75.0	$	43.2	$	36.0
Total fair value of restricted shares vested		85.7		49.6		14.5

For those restricted stock awards with common stock price thresholds, the weighted average grant date fair values of these awards were $33.80, $18.98 and $19.67 for 2013, 2012 and 2011, respectively, based on the following assumptions:

	2013			2012			2011
Expected volatility		40.7	%		45.8	%		44.0	%
Risk-free interest rates		0.8	%		0.9	%		2.2	%
Derived service periods (in years)		0.1			0.2			0.2

For all other restricted stock awards, the weighted average grant date fair values were $55.38, $32.61 and $19.03 for the years ended December 31, 2013, 2012 and 2011, respectively.

As part of the restricted stock awards granted in 2013, in January 2013, the Board authorized an annual grant of approximately 0.8 million restricted stock awards to certain executive officers. These awards had an aggregate grant date fair value of $28.9 and vested during 2013 when the Company’s weighted average share price exceeded certain thresholds. Additionally, during 2013, the Board authorized a grant of approximately 0.7 million shares of the Company’s common stock to certain executive officers in consideration and exchange for; the executive officers’ agreeing to a reduction in future stock awards that the executive officers would have been entitled to be granted pursuant to their respective employment agreements; and certain restrictions on transfer of the shares of common stock for a period of three years. These awards had an aggregate grant date fair value of $38.7 and vested immediately. In 2013, the Company also granted approximately 0.2 million restricted stock awards with an aggregate grant date fair value of $7.4 that vest upon the achievement of an explicit service requirement.

As of December 31, 2013, there was $24.1 of unrecognized compensation cost related to non-vested share-based awards whose costs are expected to be recognized through 2014 over a weighted-average period of approximately 10 months.

During the fourth quarter of 2012, the Company recognized $33.6 of cumulative stock-based compensation related to certain restricted stock awards granted in 2010 where compensation expense was not previously recognized as the achievement of the performance targets was not deemed probable.

Stockholders’ Equity

In September 2013, pursuant to a public offering of its common stock, the Company completed an equity offering of 16.5 million newly-issued shares of common stock at $47.00 per share. The net proceeds to the Company, after the payment of underwriting discounts and other expenses of the offering, were approximately $745. The proceeds were used to fund a portion of the YCC Acquisition.

In February 2013, the Company’s Board authorized an increase in the then available amount under the Company’s existing stock repurchase program (the “Stock Repurchase Program”) to allow for the repurchase of up to $500 in the aggregate of the Company’s common stock.

On February 28, 2013, in conjunction with such increase and pursuant to the Stock Repurchase Program, the Company entered into accelerated stock repurchase agreements (collectively, the “ASR Agreement”) to repurchase an aggregate of $250 of its common stock. Pursuant to the ASR Agreement, the Company paid $250 for the repurchase of its common stock. During the third quarter of 2013, the ASR was finalized in accordance with its settlement provisions. During 2013, a total of approximately 5.6 million shares valued at $250 were delivered under the ASR Agreement and are included in treasury stock.

In September 2012, pursuant to the Stock Repurchase Program, the Company used approximately $100 of the net proceeds from the 2018 Convertible Notes offering to repurchase approximately 2.8 million shares of its common stock at a per share price of $35.25 through privately negotiated transactions.

In January 2012, the Company commenced a “modified Dutch auction” self-tender offer (the “Offer”) to purchase up to $500 in value of its common stock. In March 2012, pursuant to the terms of the Offer, the Company repurchased approximately 18.1 million shares of its common stock for a total purchase price of approximately $435 or $24.00 per share. The repurchase of shares of common stock under the Offer was made pursuant to the Company’s existing stock repurchase program, pursuant to which the Company was then authorized to repurchase up to $500 aggregate amount of outstanding shares of common stock at prevailing market prices or in privately-negotiated transactions.

Cash dividends paid to stockholders in 2012 and 2011 were $7.5 and $30.1, respectively. In January 2012, the Company announced that the Board had decided to suspend the Company’s dividend program following the dividend paid on January 31, 2012.