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Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] |
STOCK-BASED COMPENSATION |
15. | STOCK-BASED COMPENSATION
We have various fixed and performance-based stock compensation plans under which awards have been granted, which are summarized as follows:
• | The 2011 Omnibus Stock Incentive Plan (the OSIP) authorizes the grant of various stock and stock-based awards to our employees and our non-employee directors. Awards available under the OSIP include options to purchase shares of common stock, performance awards that vest upon the achievement of an objective performance goal, stock appreciation rights, and restricted stock that vests over a period determined by our compensation committee. The OSIP was approved by our stockholders on April 28, 2011. As of December 31, 2012, 17,178,084 shares of our common stock remained available to be awarded under the OSIP.
• | Prior to the approval of the OSIP by our stockholders, most of the equity awards granted to our employees and non-employee directors were made under our 2005 Omnibus Stock Incentive Plan. Prior awards granted under this plan included options to purchase shares of common stock, performance awards that vest upon the achievement of an objective performance goal, and restricted stock that vests over a period determined by our compensation committee. No additional grants may be awarded under this plan.
• | The Restricted Stock Plan for Non-Employee Directors authorized an annual grant of our common stock valued at $160,000 to each non-employee director. Vesting generally occurred based on the number of grants received as follows: (i) initial grants to vest in three equal annual installments, (ii) second grants to vest one-third on the first anniversary of the grant date and the remaining two-thirds on the second anniversary of the grant date, and (iii) all grants thereafter to vest 100 percent on the first anniversary of the grant date. During 2012, the final grants of available shares under this plan were awarded and no additional grants may be awarded under this plan. Prospective grants to our non-employee directors will be made under the OSIP, with vesting to occur in annual one-third increments over three years.
• | The 2003 Employee Stock Incentive Plan authorizes the grant of various stock and stock-related awards to employees and prospective employees. Awards include options to purchase shares of common stock, performance awards that vest upon the achievement of an objective performance goal, stock appreciation rights, and restricted stock that vests over a period determined by our compensation committee. As of December 31, 2012, 1,914,877 shares of our common stock remained available to be awarded under this plan.
• | In addition, we maintained other stock option and incentive plans under which previously granted equity awards remain outstanding. No additional grants may be awarded under these plans.
Each of our stock-based compensation arrangements is discussed below. The following table reflects activity related to our stock-based compensation arrangements (in millions):
| Year Ended December 31,
| 2012 |  | 2011 |  | 2010
Stock-based compensation expense | $ | 58 |  |  | $ | 58 |  |  | $ | 54 |
Tax benefit recognized on stock-based compensation expense | 20 |  |  | 20 |  |  | 19 |
Tax benefit realized for tax deductions resulting from exercises and vestings | 45 |  |  | 35 |  |  | 23 |
Effect of tax deductions in excess of recognized stock-based compensation expense reported as a financing cash flow | 27 |  |  | 23 |  |  | 11 |
Stock Options Under the terms of our various stock-based compensation plans, the exercise price of options granted is not less than the fair market value of our common stock on the date of grant. Stock options become exercisable pursuant to the individual written agreements between the participants and us, usually in three or five equal annual installments beginning one year after the date of grant, with unexercised options generally expiring seven or ten years from the date of grant. The fair value of stock options granted during 2012 was estimated using the Monte Carlo simulation model, as these options contain both a service condition and a market condition in order to be exercised. Prior to 2012, the fair value of each stock option grant was estimated on the grant date using the Black-Scholes option-pricing model. The expected life of options granted is the period of time from the grant date to the date of expected exercise or other expected settlement. The expected life for each of the years in the table below was calculated using the safe harbor provisions of SEC Staff Accounting Bulletin No. 107 and No. 110 related to share-based payments. Because the vesting period for all of the stock options granted during the years ended December 31, 2012, 2011, and 2010 was three rather than five years as in prior years and the 2012 stock options grants contain a market condition, historical exercise patterns did not provide a reasonable basis for estimating the expected life. Expected volatility is based on closing prices of our common stock for periods corresponding to the expected life of options granted. Expected dividend yield is based on annualized dividends at the date of grant. The risk-free interest rate used is the implied yield currently available from the U.S. Treasury zero-coupon issues with a remaining term equal to the expected life of the options at the grant date. A summary of the weighted-average assumptions used in our fair value measurements is presented in the table below.
| Year Ended December 31,
| 2012 |  | 2011 |  | 2010
Expected life in years | 6.0 |  |  | 6.0 |  |  | 6.0 |
Expected volatility | 49.11 | % |  | 49.30 | % |  | 48.21 | %
Expected dividend yield | 2.39 | % |  | 2.28 | % |  | 1.05 | %
Risk-free interest rate | 0.85 | % |  | 1.44 | % |  | 1.83 | %
A summary of the status of our stock option awards is presented in the table below.
| Number of Stock Options |  | Weighted- Average Exercise Price Per Share |  | Weighted- Average Remaining Contractual Term |  | Aggregate Intrinsic Value
|  |  |  |  | (in years) |  | (in millions)
Outstanding as of January 1, 2012 | 19,906,586 |  |  | $ | 27.11 |  |  |  |  |
Granted | 262,170 |  |  | 29.23 |  |  |  |  |
Exercised | (4,738,312 | ) |  | 13.67 |  |  |  |  |
Expired | (2,196,876 | ) |  | 47.72 |  |  |  |  |
Forfeited | (18,840 | ) |  | 32.29 |  |  |  |  |
Outstanding as of December 31, 2012 | 13,214,728 |  |  | 28.54 |  |  | 3.3 |  | $ | 157 |
Exercisable as of December 31, 2012 | 12,594,488 |  |  | 28.65 |  |  | 3.0 |  | 152 |
The weighted-average grant-date fair value of stock options granted during the years ended December 31, 2012, 2011, and 2010 was $10.98, $10.10, and $8.17 per stock option, respectively. The total intrinsic value of stock options exercised during the years ended December 31, 2012, 2011, and 2010 was $78 million, $63 million, and $25 million, respectively. Cash received from stock option exercises for the years ended December 31, 2012, 2011, and 2010 was $59 million, $49 million, and $20 million, respectively. As of December 31, 2012, there was $1 million of unrecognized compensation cost related to outstanding unvested stock option awards, which is expected to be recognized over a weighted-average period of approximately two years. Restricted Stock Restricted stock is granted to employees and non-employee directors. Restricted stock granted to employees vests in accordance with individual written agreements between the participants and us, usually in equal annual installments over a period of three to five years beginning one year after the date of grant. Restricted stock granted to our non-employee directors vests from one to three years following the date of grant. A summary of the status of our restricted stock awards is presented in the table below.
| Number of Shares |  | Weighted- Average Grant-Date Fair Value Per Share
Nonvested shares as of January 1, 2012 | 3,249,090 |  |  | $ | 22.28 |
Granted | 1,459,317 |  |  | 28.90 |
Vested | (1,736,379 | ) |  | 23.67 |
Forfeited | (51,740 | ) |  | 22.07 |
Nonvested shares as of December 31, 2012 | 2,920,288 |  |  | 24.76 |
As of December 31, 2012, there was $40 million of unrecognized compensation cost related to outstanding unvested restricted stock awards, which is expected to be recognized over a weighted-average period of approximately two years. The total fair value of restricted stock that vested during the years ended December 31, 2012, 2011, and 2010 was $47 million, $32 million, and $25 million, respectively. Performance Awards Performance awards are issued to certain of our key employees and represent rights to receive shares of our common stock upon the achievement by us of an objective performance measure. The objective performance measure is our total shareholder return, which is ranked among the total shareholder returns of a defined peer group of companies. Our ranking determines the rate at which the performance awards convert into our common shares. Conversion rates can range from zero to 200 percent. Performance awards vest in equal one-third increments (tranches) on an annual basis. Our compensation committee establishes the peer group of companies for each tranche of awards at the beginning of the one-year vesting period for that tranche. Therefore, performance awards are not considered to be granted for accounting purposes until our compensation committee establishes the peer group of companies for each tranche of awards. The fair value of each tranche of awards is determined at the time the awards are considered to be granted and is based on the expected conversion rate for those awards and the fair value per share. Fair value per share is equal to the market price of our common stock on the grant date reduced by expected dividends over that tranche’s vesting period. If a tranche of the performance awards awarded in 2010 fails to meet the minimum performance measure at the end of its vesting period as established by our compensation committee, that tranche of awards remains outstanding for an additional year and may convert into our common shares that following year. If such tranche of awards does not convert to our common shares the following year, those awards are forfeited. Performance awards awarded in 2012 and 2011 do not have carry-forward features. A summary of the status of our performance awards considered granted is presented below.
| Nonvested Awards |  | Vested Awards
Awards outstanding as of January 1, 2012 | 691,191 |  |  | 24,635 |
Granted | 547,140 |  |  | — |
Vested | (222,250 | ) |  | 222,250 |
Forfeited | (26,667 | ) |  | (37,969 | )
Awards outstanding as of December 31, 2012 | 989,414 |  |  | 208,916 |
There were three tranches of performance awards granted during the year ended December 31, 2012 as follows:
| Awards Granted |  | Expected Conversion Rate |  | Fair Value Per Share
Third tranche of 2010 awards | 208,917 |  |  | 100% |  | $ | 28.53 |
Second tranche of 2011 awards | 233,350 |  |  | 50% |  | 28.53 |
First tranche of 2012 awards | 104,873 |  |  | 75% |  | 28.53 |
Total | 547,140 |  |  |  |  |
The 222,250 performance awards that vested in January 2012 did not convert into our common shares at that time because the performance measure was not achieved, but they were carried forward for one year. In January 2013, these awards, net of 13,334 awards that were forfeited during 2012, converted into 208,916 shares of our common stock. As of December 31, 2012, there was $12 million of unrecognized compensation cost related to outstanding unvested performance awards, which will be recognized during 2013. The total fair value of performance awards that vested during the years ended December 31, 2012 and 2011 was $3 million and $4 million, respectively. There were no performance awards that vested during 2010.

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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 SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 Reference 2: 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 3: 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=6406099&loc=d3e25284-112666 Reference 4: 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 5: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Statement of Position (SOP) -Number 93-6 -Paragraph 53 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: 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=6418621&loc=d3e17540-113929 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 64, 65, A240 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: 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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