Stock-Based Compensation

We have a stock-based Equity Participation Plan and an Outside Directors' Compensation Plan (the "Plans"), under which we can grant stock options, restricted shares and restricted share units to employees and outside directors. As of December 31, 2017, the number of shares of common stock available for grants under the Plans aggregated 16 million shares.

Stock options are granted at an exercise price equal to the fair market value of our common stock on the date of grant, and they have a term of 10 years. Stock options are subject to graded vesting whereby options vest 30 percent at the end of each of the first two 12-month periods following the grant and 40 percent at the end of the third 12-month period.

Restricted shares, time-vested restricted share units and performance-based restricted share units granted to employees are valued at the closing market price of our common stock on the grant date and vest generally at the end of three years. The number of performance-based share units that ultimately vest ranges from zero to 200 percent of the number granted, based on performance tied to return on invested capital ("ROIC") and net sales during the three-year performance period. ROIC and net sales targets are set at the beginning of the performance period. Restricted share units granted to outside directors are valued at the closing market price of our common stock on the grant date and vest when they are granted. The restricted period begins on the date of grant and expires on the date the outside director retires from or otherwise terminates service on our Board.

At the time stock options are exercised or restricted shares and restricted share units become payable, common stock is issued from our accumulated treasury shares. Dividend equivalents are credited on restricted share units on the same date and at the same rate as dividends are paid on Kimberly-Clark's common stock. These dividend equivalents, net of estimated forfeitures, are charged to retained earnings.

Stock-based compensation costs of $76, $77 and $75 and related deferred income tax benefits of $26, $28 and $29 were recognized for 2017, 2016 and 2015, respectively.

The fair value of stock option awards was determined using a Black-Scholes-Merton option-pricing model utilizing a range of assumptions related to dividend yield, volatility, risk-free interest rate, and employee exercise behavior. Dividend yield is based on historical experience and expected future dividend actions. Expected volatility is based on a blend of historical volatility and implied volatility from traded options on Kimberly-Clark's common stock. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant. We estimate forfeitures based on historical data.

The weighted-average fair value of options granted was estimated at $12.21, $10.95 and $7.39, in 2017, 2016 and 2015, respectively, per option on the date of grant based on the following assumptions:



	Year Ended December 31
	2017		2016		2015
Dividend yield	3.2	%	3.1	%	3.5	%
Volatility	15.6	%	16.0	%	13.4	%
Risk-free interest rate	1.8	%	1.2	%	1.5	%
Expected life - years	4.6		4.6		4.8

Total remaining unrecognized compensation costs and amortization period are as follows:



	December 31, 2017		Weighted-Average Service Years
Nonvested stock options	$	12	1.3
Restricted shares and time-vested restricted share units	6		1.8
Nonvested performance-based restricted share units	45		1.8

A summary of stock-based compensation is presented below:



Stock Options	Shares (in thousands)		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at January 1, 2017	6,793		$	101.16
Granted	1,605		132.77
Exercised	(1,323	)	91.04
Forfeited or expired	(387	)	119.49
Outstanding at December 31, 2017	6,688		109.69		7.61	$	100
Exercisable at December 31, 2017	3,711		95.93		5.97	$	94

The total intrinsic value of options exercised during 2017, 2016 and 2015 was $48, $55 and $83, respectively.



	Time-Vested Restricted Share Units				Performance-Based Restricted Share Units
Other Stock-Based Awards	Shares (in thousands)		Weighted- Average Grant-Date Fair Value		Shares (in thousands)		Weighted- Average Grant-Date Fair Value
Nonvested at January 1, 2017	111		$	117.63	1,642		$	116.53
Granted	73		116.98		628		131.68
Vested	(72	)	108.86		(544	)	112.16
Forfeited	(10	)	119.08		(164	)	119.84
Nonvested at December 31, 2017	102		123.19		1,562		123.97

The total fair value of restricted share units that were distributed to participants during 2017, 2016 and 2015 was $80, $83 and $99, respectively.