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Stock Compensation | 12 Months Ended
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Dec. 31, 2016
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
Stock compensation | 4. Stock compensation We have stock options outstanding to participants under long-term incentive plans. We also have assumed stock options that were granted by companies that we later acquired. Unless the options are acquisition-related replacement options, the option price per share may not be less than the fair market value of our common stock on the date of the grant. The options have a 10-year term and generally vest ratably over four years. Our options continue to vest after the option recipient retires. We also have RSUs outstanding under long-term incentive plans. Each RSU represents the right to receive one share of TI common stock on the vesting date, which is generally four years after the date of grant. Upon vesting, the shares are issued without payment by the grantee. Our RSUs continue to vest after the recipient retires. Holders of RSUs receive an annual cash payment equivalent to the dividends paid on our common stock. We have options and RSUs outstanding to non-employee directors under director compensation plans. The plans generally provide for annual grants of stock options and RSUs, a one-time grant of RSUs to each new non-employee director and the issuance of TI common stock upon the distribution of stock units credited to deferred compensation accounts established for such directors. We also have an employee stock purchase plan under which options are offered to all eligible employees in amounts based on a percentage of the employee’s compensation, subject to a cap. Under the plan, the option price per share is 85 percent of the fair market value on the exercise date, and options have a three-month term. Total stock compensation expense recognized is as follows:
| For Years Ended December 31, |
| 2016 |  |  | 2015 |  |  | 2014 |
COR | $ |  | 40 |  |  | $ |  | 47 |  |  | $ |  | 48 |
R&D |  |  | 60 |  |  |  |  | 60 |  |  |  |  | 62 |
SG&A |  |  | 152 |  |  |  |  | 169 |  |  |  |  | 156 |
Acquisition charges |  |  | — |  |  |  |  | 10 |  |  |  |  | 11 |
Total | $ |  | 252 |  |  | $ |  | 286 |  |  | $ |  | 277 |
These amounts include expenses related to non-qualified stock options, RSUs and stock options offered under our employee stock purchase plan and are net of expected forfeitures. We issue awards of non-qualified stock options with graded vesting provisions (e.g., 25 percent per year for four years). We recognize the related compensation expense on a straight-line basis over the minimum service period required for vesting of the award, adjusting for expected forfeiture activity. Awards issued to employees who are retirement eligible or nearing retirement eligibility are expensed on an accelerated basis. Our RSUs generally vest four years after the date of grant. We recognize the related compensation expense on a straight-line basis over the vesting period, adjusting for expected forfeiture activity. RSUs issued to employees who are retirement eligible or nearing retirement eligibility are expensed on an accelerated basis. Fair-value methods and assumptions We account for all awards granted under our various stock compensation plans at fair value. We estimate the fair values for non-qualified stock options using the Black-Scholes-Merton option-pricing model with the following weighted average assumptions:
| For Years Ended December 31, |
| 2016 |  |  | 2015 |  |  | 2014 |
Weighted average grant date fair value, per share | $ |  | 10.03 |  |  | $ |  | 9.49 |  |  | $ |  | 8.13 |
Weighted average assumptions used: |  |  |  |  |  |  |  |  |  |  |  |  |  |
Expected volatility |  |  | 25 | % |  |  |  | 22 | % |  |  |  | 22 | %
Expected lives (in years) |  |  | 7.3 |  |  |  |  | 7.3 |  |  |  |  | 7.3 |
Risk-free interest rates |  |  | 1.72 | % |  |  |  | 1.64 | % |  |  |  | 2.45 | %
Expected dividend yields |  |  | 2.87 | % |  |  |  | 2.52 | % |  |  |  | 2.72 | %
We determine expected volatility on all options granted using available implied volatility rates. We believe that market-based measures of implied volatility are currently the best available indicators of the expected volatility used in these estimates. We determine expected lives of options based on the historical option exercise experience of our optionees using a rolling 10-year average. We believe the historical experience method is the best estimate of future exercise patterns currently available. Risk-free interest rates are determined using the implied yield currently available for zero-coupon U.S. government issues with a remaining term equal to the expected life of the options. Expected dividend yields are based on the annualized approved quarterly dividend rate and the current market price of our common stock at the time of grant. No assumption for a future dividend rate change is included unless there is an approved plan to change the dividend in the near term. The fair value per share of RSUs is determined based on the closing price of our common stock on the date of grant. Our employee stock purchase plan is a discount-purchase plan and consequently the Black-Scholes-Merton option-pricing model is not used to determine the fair value per share of these awards. The fair value per share under this plan equals the amount of the discount. Long-term incentive and director compensation plans Stock option and RSU transactions under our long-term incentive and director compensation plans are as follows:
| Stock Options |  |  | RSUs |
|  |  |  |  | Weighted Average |  |  |  |  |  |  | Weighted Average |
|  |  |  |  | Exercise Price |  |  |  |  |  |  | Grant Date Fair |
| Shares |  |  | per Share |  |  | Shares |  |  | Value per Share |
Outstanding grants, December 31, 2015 |  | 56,773,983 |  |  | $ |  | 37.45 |  |  |  | 16,055,542 |  |  | $ |  | 38.51 |
Granted |  | 10,974,304 |  |  |  |  | 53.02 |  |  |  | 2,337,976 |  |  |  |  | 53.98 |
Vested RSUs |  | — |  |  |  |  | — |  |  |  | (5,639,666 | ) |  |  |  | 31.64 |
Forfeited and expired |  | (965,893 | ) |  |  |  | 48.12 |  |  |  | (421,473 | ) |  |  |  | 42.63 |
Exercised |  | (14,516,606 | ) |  |  |  | 32.51 |  |  |  | — |  |  |  |  | — |
Outstanding grants, December 31, 2016 |  | 52,265,788 |  |  |  |  | 41.89 |  |  |  | 12,332,379 |  |  |  |  | 44.44 |
The weighted average grant date fair values per share of RSUs granted in 2016, 2015 and 2014 were $53.98, $53.22 and $44.71, respectively. In 2016, 2015 and 2014, the total grant date fair values of shares vested from RSU grants were $178 million, $114 million and $133 million, respectively. Summarized information about stock options outstanding as of December 31, 2016, is as follows:
|  |  | Stock Options Outstanding |  |  | Options Exercisable |
|  | Number |  |  | Weighted Average |  |  | Weighted Average |  |  | Number |  |  | Weighted Average |
Exercise Price |  | Outstanding |  |  | Remaining Contractual |  |  | Exercise Price |  |  | Exercisable |  |  | Exercise Price |
Range |  | (Shares) |  |  | Life (Years) |  |  | per Share |  |  | (Shares) |  |  | per Share |
$ | 14.47 to 20.00 |  |  | 1,996,801 |  |  |  | 2.1 |  |  | $ |  | 14.96 |  |  |  | 1,996,801 |  |  | $ |  | 14.96 |
| 20.01 to 30.00 |  |  | 5,130,177 |  |  |  | 2.6 |  |  |  |  | 24.59 |  |  |  | 5,130,177 |  |  |  |  | 24.59 |
| 30.01 to 40.00 |  |  | 14,126,454 |  |  |  | 5.3 |  |  |  |  | 33.06 |  |  |  | 11,328,597 |  |  |  |  | 33.12 |
| 40.01 to 50.00 |  |  | 9,854,196 |  |  |  | 7.1 |  |  |  |  | 44.10 |  |  |  | 3,544,639 |  |  |  |  | 44.10 |
| 50.01 to 60.00 |  |  | 21,103,396 |  |  |  | 8.6 |  |  |  |  | 53.44 |  |  |  | 2,017,172 |  |  |  |  | 53.96 |
| 60.01 to 71.27 |  |  | 54,764 |  |  |  | 9.7 |  |  |  |  | 71.00 |  |  |  | — |  |  |  |  | — |
| 14.47 to 71.27 |  |  | 52,265,788 |  |  |  | 6.6 |  |  |  |  | 41.89 |  |  |  | 24,017,386 |  |  |  |  | 33.16 |
In 2016, 2015 and 2014, the aggregate intrinsic values (i.e., the difference in the closing market price on the date of exercise and the exercise price paid by the optionee) of options exercised were $424 million, $290 million and $367 million, respectively. Summarized information as of December 31, 2016, about outstanding stock options that are vested and expected to vest, as well as stock options that are currently exercisable, is as follows:
| Outstanding Stock Options |  |  |  |
| (Fully Vested and |  |  | Options |
| Expected to Vest) (a) |  |  | Exercisable |
Number of outstanding (shares) |  |  | 50,994,139 |  |  |  |  | 24,017,386 |
Weighted average remaining contractual life (in years) |  |  | 6.5 |  |  |  |  | 4.9 |
Weighted average exercise price per share | $ |  | 41.63 |  |  | $ |  | 33.16 |
Intrinsic value (millions of dollars) | $ |  | 1,598 |  |  | $ |  | 956 |
(a) | Includes effects of expected forfeitures of approximately 1 million shares. Excluding the effects of expected forfeitures, the aggregate intrinsic value of stock options outstanding was $1,624 million.
As of December 31, 2016, the total future compensation cost related to equity awards not yet recognized in our Consolidated Statements of Income was $250 million, consisting of $111 million related to unvested stock options and $139 million related to unvested RSUs. The $250 million is expected to be recognized as follows: $129 million in 2017, $80 million in 2018, $37 million in 2019 and $4 million in 2020. Director deferred compensation Directors who retire or resign from the board may receive stock distributions for compensation they elected to defer. Director deferred stock activity is as follows:
| Director Deferred Stock |
| (Shares) |
Outstanding, December 31, 2015 |  | 142,913 |
New shares deferred |  | 14,319 |
Issued |  | (13,587 | )
Outstanding, December 31, 2016 |  | 143,645 |
Employee stock purchase plan Options outstanding under the employee stock purchase plan as of December 31, 2016, had an exercise price equal to 85 percent of the fair market value of TI common stock on the date of automatic exercise. The automatic exercise occurred on January 3, 2017, resulting in an exercise price of $62.55 per share. Of the total outstanding options, none were exercisable as of December 31, 2016. Employee stock purchase plan transactions are as follows:
| Employee Stock |  |  |  |
| Purchase Plan |  |  |  |
| (Shares) |  |  | Exercise Price |
Outstanding grants, December 31, 2015 |  | 372,566 |  |  | $ |  | 46.19 |
Granted |  | 1,273,036 |  |  |  |  | 55.51 |
Exercised |  | (1,362,202 | ) |  |  |  | 51.50 |
Outstanding grants, December 31, 2016 |  | 283,400 |  |  |  |  | 62.55 |
The weighted average grant date fair values per share of options granted under the employee stock purchase plans in 2016, 2015 and 2014 were $9.79, $7.89 and $7.34, respectively. In 2016, 2015 and 2014, the total intrinsic value of options exercised under these plans was $12 million per year. Effect on shares outstanding and treasury shares Treasury shares were acquired in connection with the board-authorized stock repurchase program. As of December 31, 2016, $5.80 billion of stock repurchase authorizations remain, and no expiration date has been specified. Our current practice is to issue shares of common stock from treasury shares upon exercise of stock options, distribution of director deferred compensation and vesting of RSUs. The following table reflects the changes in our treasury shares:
| Stock Options |  |  | RSUs |  |  | Treasury Shares |
Balance, December 31, 2013 |  |  |  |  |  |  |  |  |  | 658,012,970 |
Repurchases |  |  |  |  |  |  |  |  |  | 61,665,209 |
Shares used for: |  |  |  |  |  |  |  |  |  |  |
Stock options/RSUs |  | (19,503,382 | ) |  |  | (5,609,627 | ) |  |  |  |
Stock applied to exercises or taxes |  | 6,618 |  |  |  | 1,408,701 |  |  |  |  |
ESPP |  | (1,784,184 | ) |  |  | — |  |  |  |  |
Director deferred stock |  | — |  |  |  | — |  |  |  | (7,178 | )
Total issued |  | (21,280,948 | ) |  |  | (4,200,926 | ) |  |  | (25,481,874 | )
Balance, December 31, 2014 |  |  |  |  |  |  |  |  |  | 694,189,127 |
Repurchases |  |  |  |  |  |  |  |  |  | 51,384,339 |
Shares used for: |  |  |  |  |  |  |  |  |  |  |
Stock options/RSUs |  | (11,953,455 | ) |  |  | (3,386,415 | ) |  |  |  |
Stock applied to exercises or taxes |  | 8,562 |  |  |  | 845,164 |  |  |  |  |
ESPP |  | (1,532,264 | ) |  |  | — |  |  |  |  |
Director deferred stock |  | — |  |  |  | — |  |  |  | (7,531 | )
Total issued |  | (13,477,157 | ) |  |  | (2,541,251 | ) |  |  | (16,018,408 | )
Balance, December 31, 2015 |  |  |  |  |  |  |  |  |  | 729,547,527 |
Repurchases |  |  |  |  |  |  |  |  |  | 35,480,036 |
Shares used for: |  |  |  |  |  |  |  |  |  |  |
Stock options/RSUs |  | (14,516,606 | ) |  |  | (5,639,666 | ) |  |  |  |
Stock applied to exercises or taxes |  | — |  |  |  | 1,336,476 |  |  |  |  |
ESPP |  | (1,362,202 | ) |  |  | — |  |  |  |  |
Director deferred stock |  | — |  |  |  | — |  |  |  | (13,587 | )
Total issued |  | (15,878,808 | ) |  |  | (4,303,190 | ) |  |  | (20,181,998 | )
Balance, December 31, 2016 |  |  |  |  |  |  |  |  |  | 744,831,978 |
Shares available for future grants and reserved for issuance are as follows:
|  | December 31, 2016 |
|  | Long-Term |  |  | Director |  |  | Employee Stock |  |  |  |  |
Shares |  | Incentive Plans |  |  | Compensation Plans (a) |  |  | Purchase Plan |  |  | Total |
Reserved for issuance |  |  | 123,296,771 |  |  |  | 2,341,272 |  |  |  | 36,670,572 |  |  |  | 162,308,615 |
Shares to be issued upon exercise of outstanding options and RSUs |  |  | (63,715,186 | ) |  |  | (1,026,626 | ) |  |  | (283,400 | ) |  |  | (65,025,212 | )
Available for future grants |  |  | 59,581,585 |  |  |  | 1,314,646 |  |  |  | 36,387,172 |  |  |  | 97,283,403 |
(a) | Includes 143,645 shares credited to directors’ deferred stock accounts that settle in shares of TI common stock. These shares are not included as grants outstanding as of December 31, 2016.
The effects on cash flows are as follows:
| For Years Ended December 31, |
| 2016 |  |  | 2015 |  |  | 2014 |
Proceeds from common stock transactions (a) | $ |  | 472 |  |  | $ |  | 396 |  |  | $ |  | 554 |
Tax benefit realized from stock compensation | $ |  | 255 |  |  | $ |  | 171 |  |  | $ |  | 218 |
Reduction to deferred income tax asset |  |  | (105 | ) |  |  |  | (81 | ) |  |  |  | (108 | )
Excess tax benefit for stock compensation | $ |  | 150 |  |  | $ |  | 90 |  |  | $ |  | 110 |
(a) | Net of taxes paid for employee shares withheld of $70 million in 2016, $46 million in 2015 and $62 million in 2014.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=65895303&loc=d3e17540-113929 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=68057994&loc=d3e25284-112666 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB Topic 14) -URI http://asc.fasb.org/extlink&oid=27013229&loc=d3e301413-122809 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 + Details
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