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Stock Plans | 12 Months Ended
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Dec. 31, 2019
Share-based Payment Arrangement [Abstract] |
Stock Plans | Note 12. Stock Plans Under our Amended and Restated 2005 Performance Incentive Plan (the “Plan”), we are authorized through May 21, 2024 to issue a maximum of 243.7 million shares of our Common Stock to employees and non-employee directors. As of December 31, 2019, there were 56.2 million shares available to be granted under the Plan. Stock Options: Stock options (including stock appreciation rights) are granted at an exercise price equal to the market value of the underlying stock on the grant date, generally become exercisable in three annual installments beginning on the first anniversary of the grant date and have a maximum term of ten years. We account for our employee stock options under the fair value method of accounting using a Black-Scholes methodology or a Lattice Model to measure stock option expense at the date of grant. The fair value of the stock options at the date of grant is amortized to expense over the vesting period. We recorded compensation expense related to stock options held by our employees of $38 million in 2019, $43 million in 2018 and $50 million in 2017 in our results from continuing operations. The deferred tax benefit recorded related to this compensation expense was $8 million in 2019, $7 million in 2018 and $12 million in 2017. The unamortized compensation expense related to our employee stock options was $35 million at December 31, 2019 and is expected to be recognized over a weighted-average period of 1.2 years. Our weighted-average Black-Scholes and Lattice Model fair value assumptions were:
| Risk-Free Interest Rate |  | Expected Life |  | Expected Volatility |  | Expected Dividend Yield |  | Fair Value at Grant Date
2019 | 2.46 | % |  | 5 years |  | 19.96 | % |  | 2.37 | % |  | $ | 7.83 |
2018 | 2.68 | % |  | 5 years |  | 20.96 | % |  | 2.02 | % |  | $ | 8.30 |
2017 | 2.04 | % |  | 6 years |  | 22.75 | % |  | 1.74 | % |  | $ | 8.57 |
The risk-free interest rate represents the constant maturity U.S. government treasuries rate with a remaining term equal to the expected life of the options. The expected life is the period over which our employees are expected to hold their options. Volatility reflects historical movements in our stock price for a period commensurate with the expected life of the options. The dividend yield reflects the dividend yield in place at the time of the historical grants. Stock option activity is reflected below:
| Shares Subject to Option |  | Weighted- Average Exercise or Grant Price Per Share |  | Average Remaining Contractual Term |  | Aggregate Intrinsic Value
Balance at January 1, 2017 | 53,601,612 |  |  | $ | 28.02 |  |  |  |  | $ | 874 | million
Annual grant to eligible employees | 6,012,140 |  |  | 43.20 |  |  |  |  |
Additional options issued | 162,880 |  |  | 42.54 |  |  |  |  |
Total options granted | 6,175,020 |  |  | 43.18 |  |  |  |  |
Options exercised (1) | (9,431,009 | ) |  | 26.17 |  |  |  |  | $ | 170 | million
Options cancelled | (1,910,968 | ) |  | 38.10 |  |  |  |  |
Balance at December 31, 2017 | 48,434,655 |  |  | 29.92 |  |  |  |  | $ | 626 | million
Annual grant to eligible employees | 5,666,530 |  |  | 43.51 |  |  |  |  |
Additional options issued | 168,306 |  |  | 31.40 |  |  |  |  |
Total options granted | 5,834,836 |  |  | 43.16 |  |  |  |  |
Options exercised (1) | (9,333,271 | ) |  | 25.16 |  |  |  |  | $ | 170 | million
Options cancelled | (1,117,390 | ) |  | 42.93 |  |  |  |  |
Balance at December 31, 2018 | 43,818,830 |  |  | 32.36 |  |  |  |  | $ | 371 | million
Annual grant to eligible employees | 4,793,570 |  |  | 47.72 |  |  |  |  |
Additional options issued | 68,420 |  |  | 50.82 |  |  |  |  |
Total options granted | 4,861,990 |  |  | 47.76 |  |  |  |  |
Options exercised (1) | (13,668,354 | ) |  | 27.53 |  |  |  |  | $ | 306 | million
Options cancelled | (1,156,518 | ) |  | 42.22 |  |  |  |  |
Balance at December 31, 2019 | 33,855,948 |  |  | 36.19 |  |  | 5 years |  | $ | 640 | million
Exercisable at December 31, 2019 | 25,121,711 |  |  | 32.89 |  |  | 4 years |  | $ | 557 | million
(1) | Cash received from options exercised was $369 million in 2019, $231 million in 2018 and $257 million in 2017. The actual tax benefit realized and recorded in the provision for income taxes for the tax deductions from the option exercises totaled $40 million in 2019, $21 million in 2018 and $31 million in 2017.
Deferred Stock Units, Performance Share Units and Restricted Stock: Historically we have made grants of deferred stock units, performance share units and restricted stock. Beginning in 2016, we only grant deferred stock units and performance share units and no longer grant restricted stock. Deferred stock units granted to eligible employees have most shareholder rights, except that they may not sell, assign, pledge or otherwise encumber the shares and our deferred stock units do not have voting rights until vested. Shares of deferred stock units are subject to forfeiture if certain employment conditions are not met. Deferred stock units generally vest on the third anniversary of the grant date. Performance share units granted under our 2005 Plan vest based on varying performance, market and service conditions. The unvested performance share units have no voting rights and do not pay dividends. Dividend equivalents accumulated over the vesting period are paid only after the performance share units vest. The fair value of the deferred stock units, performance share units and restricted stock at the date of grant is amortized to earnings over the vesting period. The fair value of our deferred stock units and restricted stock is measured at the market price of our Common Stock on the grant date. Performance share unit awards generally have targets tied to both performance and market-based conditions. For market condition components, market volatility and other factors are taken into consideration in determining the grant date fair value and the related compensation expense is recognized regardless of whether the market condition is satisfied, provided that the requisite service has been provided. For performance condition components, we estimate the probability that the performance conditions will be achieved each quarter and adjust compensation expenses accordingly. The grant date fair value of performance share units is determined based on the Monte Carlo simulation model for the market-based total shareholder return component and the market price of our Common Stock on the grant date for performance-based components. The number of performance share units that ultimately vest ranges from 0-200 percent of the number granted, based on the achievement of the performance and market-based components. We recorded compensation expense related to deferred stock units, performance share units and restricted stock of $97 million in 2019, $85 million in 2018 and $87 million in 2017 in our results from continuing operations. The deferred tax benefit recorded related to this compensation expense was $16 million in 2019, $12 million in 2018 and $23 million in 2017. The unamortized compensation expense related to our deferred stock units, performance share units and restricted stock was $106 million at December 31, 2019 and is expected to be recognized over a weighted-average period of 1.5 years. Our performance share unit, deferred stock unit and restricted stock activity is reflected below:
| Number of Shares |  | Grant Date |  | Weighted-Average Fair Value Per Share (4) |  | Weighted-Average Aggregate Fair Value (3)
Balance at January 1, 2017 | 7,593,627 |  |  |  |  | $ | 36.90 |  |  |
Annual grant to eligible employees: |  |  | Feb. 16, 2017 |  |  |  |
Performance share units | 1,087,010 |  |  |  |  | 43.14 |  |  |
Deferred stock units | 845,550 |  |  |  |  | 43.20 |  |  |
Additional shares granted (1) | 1,537,763 |  |  | Various |  | 42.22 |  |  |
Total shares granted | 3,470,323 |  |  |  |  | 42.75 |  |  | $ | 148 | million
Vested (2) (3) | (2,622,807 | ) |  |  |  | 35.78 |  |  | $ | 94 | million
Forfeited (2) | (771,438 | ) |  |  |  | 38.69 |  |  |
Balance at December 31, 2017 | 7,669,705 |  |  |  |  | 39.74 |  |  |
Annual grant to eligible employees: |  |  | Feb. 22, 2018 |  |  |  |
Performance share units | 1,048,770 |  |  |  |  | 51.23 |  |  |
Deferred stock units | 788,310 |  |  |  |  | 43.51 |  |  |
Additional shares granted (1) | 446,752 |  |  | Various |  | 41.78 |  |  |
Total shares granted | 2,283,832 |  |  |  |  | 46.72 |  |  | $ | 107 | million
Vested (2) (3) | (2,511,992 | ) |  |  |  | 38.91 |  |  | $ | 98 | million
Forfeited (2) | (882,535 | ) |  |  |  | 42.00 |  |  |
Balance at December 31, 2018 | 6,559,010 |  |  |  |  | 42.19 |  |  |
Annual grant to eligible employees: |  |  | Feb. 22, 2019 |  |  |  |
Performance share units | 891,210 |  |  |  |  | 57.91 |  |  |
Deferred stock units | 666,880 |  |  |  |  | 47.72 |  |  |
Additional shares granted (1) | 205,073 |  |  | Various |  | 54.81 |  |  |
Total shares granted | 1,763,163 |  |  |  |  | 53.69 |  |  | $ | 95 | million
Vested (3) | (2,007,848 | ) |  |  |  | 37.81 |  |  | $ | 76 | million
Forfeited | (652,380 | ) |  |  |  | 45.88 |  |  |
Balance at December 31, 2019 | 5,661,945 |  |  |  |  | 46.90 |  |  |
(1) | Includes performance share units and deferred stock units.
(2) | Includes performance share units, deferred stock units and historically granted restricted stock.
(3) | The actual tax benefit/(expense) realized and recorded in the provision for income taxes for the tax deductions from the shares vested totaled $2 million in 2019, $3 million in 2018 and $7 million in 2017.
(4) | The grant date fair value of performance share units is determined based on the Monte Carlo simulation model for the market-based total shareholder return component and the closing market price of the Company’s stock on the grant date for performance-based components. The Monte Carlo simulation model incorporates the probability of achieving the total shareholder return market condition. Compensation expense is recognized using the grant date fair values regardless of whether the market condition is achieved, so long as the requisite service has been provided.

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