Stock-Based Compensation Plans

The Company has grants outstanding under various equity compensation plans, only one of which, the Equity Incentive Plan (EQIP), is currently available for future grants of equity compensation awards to employees and non-employee directors. Options granted under the Company’s equity compensation plans had an exercise price equal to the market value of the underlying common stock on the date of grant and all terms were fixed.

Stock-based compensation expense recognized was as follows:



	Year Ended December 31,
(dollars in millions)	2015		2014		2013

Outstanding restricted and deferred stock units and awards	$	40	$	44	$	40
Unvested outstanding stock options	9		10		14
Total stock-based compensation expense	$	49	$	54	$	54

The total income statement tax benefit recognized from stock-based compensation arrangements during the years ended December 31, 2015, 2014 and 2013 totaled approximately $18 million, $20 million and $20 million, respectively.

Stock options

Options with terms of seven or ten years have been granted to officers and other key employees of the Company under the EQIP plan at a fixed exercise price equal to the fair value of the Company’s common stock on the date of grant. The options generally vest in one-third increments each year on the anniversary date following the date of grant, based on continued employment.

A summary of option activity under the Company’s stock compensation plans as of and for the year ended December 31, 2015 is presented below:



Options	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (dollars in millions)

Outstanding at January 1, 2015	3,912,488		$	51.89
Granted	620,968		65.20
Exercised	(771,707	)	40.39
Forfeited and expired	(37,603	)	59.09
Outstanding at December 31, 2015	3,724,146		$	56.42	6.77	$	28

Vested at December 31, 2015 or expected to vest in the future	3,710,191		$	56.40	6.76	$	28

Exercisable at December 31, 2015	2,377,609		$	53.07	5.49	$	25



	At December 31, 2015

Stock-based compensation cost not yet recognized under the straight-line method (dollars in millions)	$	15

Weighted-average remaining expense recognition period (in years)	2.21

The fair values per share of option grants for the years ended December 31, 2015, 2014 and 2013 were estimated using the Black-Scholes-Merton option pricing formula with the following weighted-average assumptions:



	Year Ended December 31,
	2015		2014		2013

Expected life (in years)	3.5		3.3		3.2
Risk-free interest rate	0.95	%	0.86	%	0.67	%
Volatility	27.9	%	33.8	%	34.3	%
Expected dividend yield	0.0	%	0.0	%	0.0	%

The Company determined the assumptions involving the expected life of its options and volatility rates based primarily on historical data and consideration of expectations for the future.

The above assumptions and market prices of the Company’s common stock at the date of option exercises resulted in the following values:



	Year Ended December 31,
	2015		2014		2013

Grant-date fair value per option	$	14.47	$	14.51	$	16.19
Intrinsic value of options exercised (dollars in millions)	$	16	$	26	$	31
Average intrinsic value per share of options exercised	$	21.31	$	24.17	$	26.30

Restricted and deferred stock units and awards

Grants of restricted stock units are made to officers and other key employees. Restricted stock grants are made in two different forms: performance units and time-based units. The performance restricted stock units must be earned by performance against established return on invested capital and total shareholder return goals. Time-based restricted stock units require continued employment for three years. Both types of restricted stock units granted generally provide for vesting in one-third increments each year or three-year 100% cliff vesting on the third anniversary of the date of grant, based on continued employment.

Non-employee directors are entitled to receive an annual number of deferred stock units equal to a value of $250,000 determined on the day following the Company’s annual meeting of stockholders or, if a director’s election to the Board occurs between annual meetings of stockholders, the initial grant of deferred stock units is based on a pro-rata portion of the annual grant amount equal to the remaining number of months in the board year until the next annual meeting of stockholders. These units, which have no exercise price and no expiration date, vest in one-fourth increments quarterly over the following year but cannot be converted into common stock until the earlier of termination of Board service or three years, although Board members have the ability to voluntarily defer conversion for a longer period of time.

A summary of restricted and deferred stock unit award activity under the Company’s stock compensation plans as of and for the year ended December 31, 2015 is presented below:



Restricted and Deferred Stock Units	Number		Weighted-Average Grant Date Fair Value

Nonvested at January 1, 2015	1,848,682		$	56.85
Granted	1,183,828		54.95
Vested	(780,163	)	54.79
Forfeited	(86,910	)	54.25
Nonvested at December 31, 2015	2,165,437		$	56.66



	At December 31, 2015

Stock-based compensation cost not yet recognized under the straight-line method (dollars in millions)	$	64

Weighted-average remaining expense recognition period (in years)	1.80

Information on restricted and deferred stock units granted and vesting during the three years ended December 31, 2015 follows:



	Year Ended December 31,
	2015		2014		2013

Number of units granted with performance conditions	214,072		174,697		185,992
Intrinsic value of units vesting (dollars in millions)	$	39	$	34	$	46
Total number of units granted	1,183,828		826,329		838,207
Weighted average grant date fair value per unit	$	54.95	$	59.63	$	57.95

The fair value of restricted and deferred stock units is determined based on the closing trading price of the Company’s common stock on the grant date.

At December 31, 2015, 9,236,764 shares were reserved for future grants of options, deferred stock units, restricted stock units and other awards. The Company may issue either treasury shares or newly issued shares of its common stock in satisfaction of these awards.