STOCK PLANS

Share-based Compensation

The Company accounts for share-based compensation utilizing fair value, which is determined on the date of grant for all instruments. The Consolidated Statement of Income for the years ended December 31, 2018, 2017, and 2016, reflects share-based compensation expense of $46 million, $37 million, and $33 million, respectively. The total tax benefit recognized in earnings from share-based compensation arrangements for the years ended December 31, 2018, 2017, and 2016, was not material. As of December 31, 2018, there was $51 million of total unrecognized compensation cost related to share-based compensation arrangements, which is expected to be recognized over a weighted-average period of 1.9 years. The Company expects substantially all unvested awards to vest.

Restricted Stock Units and Stock Grants

Under the Company’s Amended and Restated 2007 Equity Incentive Plan ("2007 Equity Plan"), which has been approved by Shareholders, the Company granted restricted stock units ("RSUs") and performance-based restricted stock units ("PBRSUs") to certain Employees during 2018, 2017, and 2016. Outstanding RSUs vest over three years, subject generally to the individual’s continued employment or service. The PBRSUs granted in January 2016 and February 2017 are subject to the Company’s performance with respect to a three-year simple average of Return on Invested Capital, before taxes and excluding special items, for the defined performance period and the individual’s continued employment or service. The PBRSUs granted in January 2018 are subject to the Company’s performance with respect to a three-year simple average of Return on Invested Capital, after taxes and excluding special items, for the defined performance period and the individual’s continued employment or service. The number of PBRSUs vesting on the vesting date will be interpolated based on the Company's Return on Invested Capital performance and ranges from zero PBRSUs to 200 percent of granted PBRSUs. Forfeiture rates are estimated at the time of grant based on historical actuals for similar grants, and are trued-up to actuals over the vesting period. The Company recognizes all expense on a straight-line basis over the vesting period, with any changes in expense due to the number of PBRSUs expected to vest being modified on a prospective basis.

Aggregated information regarding the Company’s RSUs and PBRSUs is summarized below:



	All Restricted Stock Units
	Units (000)			Wtd. Average Fair Value (per share)
Outstanding December 31, 2015	1,485			$	30.17
Granted	675		(a)	37.29
Vested	(665	)		23.29
Surrendered	(56	)		36.29
Outstanding December 31, 2016	1,439			36.52
Granted	717		(b)	52.73
Vested	(806	)		30.23
Surrendered	(56	)		43.86
Outstanding December 31, 2017, Unvested	1,294			45.32
Granted	782		(c)	60.80
Vested	(670	)		45.11
Surrendered	(64	)		47.05
Outstanding December 31, 2018, Unvested	1,342			52.56

(a) Includes 247 thousand PBRSUs

(b) Includes 235 thousand PBRSUs

In addition, the Company granted approximately 28 thousand shares of unrestricted stock at a weighted average grant price of $53.01 in 2018, approximately 26 thousand shares at a weighted average grant price of $57.04 in 2017, and approximately 27 thousand shares at a weighted average grant price of $42.90 in 2016, to members of its Board of Directors.

A remaining balance of up to 21 million shares of the Company’s common stock may be issued pursuant to grants under the 2007 Equity Plan.

Employee Stock Purchase Plan

Under the Amended and Restated 1991 Employee Stock Purchase Plan ("ESPP"), which has been approved by Shareholders, the Company is authorized to issue up to a remaining balance of 8 million shares of the Company’s common stock to Employees of the Company. These shares may be issued at a price equal to 90 percent of the market value at the end of each monthly purchase period. Common stock purchases are paid for through periodic payroll deductions.

The following table provides information about the Company’s ESPP activity during 2018, 2017, and 2016:



Employee Stock Purchase Plan
				(a)
	Total number			Weighted-average
	of shares	Average		fair value of each
	purchased	price paid		purchase right
Period	(in thousands)	per share		under the ESPP
As of December 31, 2016	622	$	36.57	$	4.06
As of December 31, 2017	544	$	50.13	$	5.57
As of December 31, 2018	661	$	50.73	$	5.64

(a) The weighted-average fair value of each purchase right under the ESPP granted is equal to ten percent discount from the market value of the Common Stock at the end of each monthly purchase period.

Taxes

Grants of RSUs result in the creation of a deferred tax asset, which is a temporary difference, until the time the RSU vests. All excess tax benefits and tax deficiencies are recorded through the income statement. Due to the treatment of RSUs for tax purposes, the Company’s effective tax rate from year to year is subject to variability.