Stock-Based Compensation

9 Months Ended

Sep. 30, 2019

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION

Our 2014 Long Term Stock Incentive Plan provides for the issuance of stock-based incentives in various forms to our employees and non-employee Directors. At September 30, 2019, outstanding stock-based incentives were in the form of long-term stock awards, stock options, restricted stock units, and phantom stock awards.

Pre-tax compensation expense included in income from continuing operations for these stock-based incentives was as follows, in millions:



	Three Months Ended September 30,				Nine Months Ended September 30,
	2019		2018		2019		2018
Long-term stock awards	$	5	$	5	$	16	$	16
Stock options	1		1		3		3
Restricted stock units	—		1		2		3
Phantom stock awards and stock appreciation rights	1		1		3		—
Total	$	7	$	8	$	24	$	22

Long-Term Stock Awards. Long-term stock awards are granted to our key employees and non-employee Directors and do not cause net share dilution inasmuch as we continue the practice of repurchasing and retiring an equal number of shares in the open market. We granted 636,030 shares of long-term stock awards in the nine-month period ended September 30, 2019.

J. STOCK-BASED COMPENSATION (Continued)

Our long-term stock award activity was as follows, shares in millions:



	Nine Months Ended September 30,
	2019		2018
Unvested stock award shares at January 1	2		3
Weighted average grant date fair value	$	30	$	24

Stock award shares granted	1		1
Weighted average grant date fair value	$	36	$	42

Stock award shares vested	1		2
Weighted average grant date fair value	$	25	$	21

Stock award shares forfeited	—		—
Weighted average grant date fair value	$	32	$	31

Unvested stock award shares at September 30	2		2
Weighted average grant date fair value	$	34	$	30

At September 30, 2019 and 2018, there was $49 million and $50 million, respectively, of total unrecognized compensation expense related to unvested stock awards; such awards had a weighted average remaining vesting period of three years at both September 30, 2019 and 2018.

The total market value (at the vesting date) of stock award shares which vested during the nine-month periods ended September 30, 2019 and 2018 was $31 million and $56 million, respectively.

Stock Options. Stock options are granted to certain key employees. The exercise price equals the market price of our 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.

We granted 561,280 shares of stock options in the nine-month period ended September 30, 2019 with a grant date weighted average exercise price of approximately $36 per share. In the nine-month period ended September 30, 2019, 108,086 stock options were forfeited (including options that expired unexercised).

J. STOCK-BASED COMPENSATION (Continued)

Our stock option activity was as follows, shares in millions:



		Nine Months Ended September 30,
		2019		2018
Option shares outstanding, January 1		4		5
Weighted average exercise price	$	21	$	16

Option shares granted		1		—
Weighted average exercise price	$	36	$	42

Option shares exercised		2		1
Aggregate intrinsic value on date of exercise (A)	$	29 million	$	47 million
Weighted average exercise price	$	12	$	11

Option shares forfeited		—		—
Weighted average exercise price	$	34	$	31

Option shares outstanding, September 30		3		4
Weighted average exercise price	$	26	$	20
Weighted average remaining option term (in years)		6		5

Option shares vested and expected to vest, September 30		3		4
Weighted average exercise price	$	26	$	20
Aggregate intrinsic value (A)	$	48 million	$	69 million
Weighted average remaining option term (in years)		6		5

Option shares exercisable (vested), September 30		2		3
Weighted average exercise price	$	21	$	15
Aggregate intrinsic value (A)	$	39 million	$	62 million
Weighted average remaining option term (in years)		4		3


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

At both September 30, 2019 and 2018, there was $9 million of unrecognized compensation expense (using the Black-Scholes option pricing model at the grant date) related to unvested stock options; such options had a weighted average remaining vesting period of three years at both September 30, 2019 and 2018.

J. STOCK-BASED COMPENSATION (Concluded)

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:



	Nine Months Ended September 30,
	2019			2018
Weighted average grant date fair value	$	8.81		$	12.52
Risk-free interest rate	2.57		%	2.71		%
Dividend yield	1.35		%	1.00		%
Volatility factor	25.00		%	29.00		%
Expected option life	6 years			6 years

Restricted Stock Units. Under our Long Term Incentive Program, we grant restricted stock units to certain senior executives. These restricted stock units will vest and share awards will be issued at no cost to the employees, subject to our achievement of specified return on invested capital performance goals over a three-year period that have been established by our Organization and Compensation Committee of the Board of Directors for the performance period and the recipient's continued employment through the share award date. During the nine-month period ended September 30, 2019, we granted 126,680 restricted stock units with a grant date fair value of approximately $39 per share and 15,600 restricted stock units were forfeited. During the nine-month period ended September 30, 2018, we granted 113,260 restricted stock units with a grant date fair value of approximately $42 per share and 11,600 restricted stock units were forfeited.