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Stock-Based Compensation
 3 Months Ended
Mar. 31, 2012
Stock-Based Compensation [Abstract]  
Stock-Based Compensation Note I: Stock-Based Compensation
I. The Company’s 2005 Long Term Stock Incentive Plan (the “2005 Plan”) provides for the issuance of stock-based incentives in various forms to employees and non-employee Directors of the Company. At March 31, 2012, outstanding stock-based incentives were in the form of long-term stock awards, stock options, phantom stock awards and stock appreciation rights. Pre-tax compensation expense and the related income tax benefit for these stock-based incentives were as follows, in millions:

 

                 
    Three Months Ended
March  31,		  
    2012     2011  
     

Long-term stock awards

   $ 8     $ 10  

Stock options

     5       5  

Phantom stock awards and stock appreciation rights

     5       3  
   

 

 

    

 

 

  
     

Total

   $ 18     $ 18  
   

 

 

    

 

 

  
     

Income tax benefit (before valuation allowance)

   $ 7     $ 7  
   

 

 

    

 

 

  

Long-Term Stock Awards. Long-term stock awards are granted to key employees and non-employee Directors of the Company and do not cause net share dilution inasmuch as the Company continues the practice of repurchasing and retiring an equal number of shares in the open market. The Company granted 675,110 shares of long-term stock awards in the three months ended March 31, 2012.

The Company’s long-term stock award activity was as follows, shares in millions:

 

                 
    Three Months Ended
March  31,		  
    2012     2011  
     

Unvested stock award shares at January 1

     10       10  

Weighted average grant date fair value

   $ 17     $ 19  
     

Stock award shares granted

     1       2  

Weighted average grant date fair value

   $ 12     $ 13  
     

Stock award shares vested

     2       1  

Weighted average grant date fair value

   $ 17     $ 19  
     

Stock award shares forfeited

     —         —    

Weighted average grant date fair value

   $ 18     $ 18  
     

Unvested stock award shares at March 31

     9       11  

Weighted average grant date fair value

   $ 16     $ 17  

At March 31, 2012 and 2011, there was $103 million and $145 million, respectively, of total unrecognized compensation expense related to unvested stock awards; such awards had a weighted average remaining vesting period of four years and five years, respectively.

The total market value (at the vesting date) of stock award shares which vested during the three months ended March 31, 2012 and 2011 was $23 million and $23 million, respectively.

Stock Options. Stock options are granted to key employees of the Company. The exercise price equals the market price of the Company’s common stock at the grant date. These options generally become exercisable (vest ratably) over five years beginning on the first anniversary from the date of grant and expire no later than 10 years after the grant date.

The Company granted 1,050,750 of stock option shares in the three months ended March 31, 2012 with a grant date exercise price approximating $12 per share. In the first three months of 2012, 2,238,640 stock option shares were forfeited (including options that expired unexercised).

The Company’s stock option activity was as follows, shares in millions:

 

                 
    Three Months Ended
March  31,		  
    2012     2011  
     

Option shares outstanding, January 1

     36       37  

Weighted average exercise price

   $ 21     $ 21  
     

Option shares granted

     1       2  

Weighted average exercise price

   $ 12     $ 13  
     

Option shares exercised

     —         —    

Aggregate intrinsic value on date of exercise (A)

   $ 1 million     $ 1 million  

Weighted average exercise price

   $ 8     $ 8  
     

Option shares forfeited

     2       —    

Weighted average exercise price

   $ 18     $ 23  
     

Option shares outstanding, March 31

     35       39  

Weighted average exercise price

   $ 21     $ 21  

Weighted average remaining option term (in years)

     5       6  
     

Option shares vested and expected to vest, March 31

     35       39  

Weighted average exercise price

   $ 21     $ 21  

Aggregate intrinsic value (A)

   $ 26 million     $ 33 million  

Weighted average remaining option term (in years)

     5       6  
     

Option shares exercisable (vested), March 31

     25       24  

Weighted average exercise price

   $ 23     $ 24  

Aggregate intrinsic value (A)

   $ 14 million     $ 11 million  

Weighted average remaining option term (in years)

     4       4  

 

(A) Aggregate intrinsic value is calculated using the Company’s stock price at each respective date, less the exercise price (grant date price) multiplied by the number of shares.

At March 31, 2012 and 2011, there was $29 million and $51 million, respectively, of unrecognized compensation expense (using the Black-Scholes option pricing model) related to unvested stock options; such options had a weighted average vesting period of three years in both 2012 and 2011.

 

The weighted average grant date fair value of option shares granted and the assumptions used to estimate those values using a Black-Scholes option pricing model, were as follows:

 

                 
    Three Months Ended
March 31,		  
    2012     2011  
     

Weighted average grant date fair value

   $ 4.44     $ 5.10  

Risk-free interest rate

     1.10 %      2.72 % 

Dividend yield

     2.57 %      2.34 % 

Volatility factor

     51.00 %      49.00 % 

Expected option life

     6 years       6 years