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Stockholders' Equity
 12 Months Ended
Dec. 31, 2014
Equity [Abstract]  
Stockholders' Equity
Stockholders’ Equity
Preferred Stock
Authorized preferred stock may be issued in one or more series, with designations, powers and preferences as shall be designated by the Board of Directors. At December 31, 2014, there were no shares of preferred stock issued.
Share-based Compensation
During 2007, the Company adopted the Allegheny Technologies Incorporated 2007 Incentive Plan (the “Incentive Plan”), which was amended and restated in 2010 and further amended in 2012. Awards earned under share-based incentive compensation programs are generally paid with shares held in treasury, if sufficient treasury shares are held, and any additional required share payments are made with newly issued shares. At December 31, 2014, approximately 1.6 million shares of common stock were available for future awards under the Incentive Plan. The general terms of each arrangement granted under the Incentive Plan, and predecessor plans, the method of estimating fair value for each arrangement, and award activity is reported below.
The Company sponsors two principal share-based incentive compensation programs, the Performance/Restricted Stock Program (PRSP) of nonvested stock awards, and the Long-Term Performance Plan (LTPP), which was adopted in 2014 and may include performance shares under the Total Shareholder Return (TSR) portion and nonvested stock awards under the Long-Term Shareholder Value (LTSV) portion. Prior periods include performance equity awards issued under the former Total Shareholder Return Program (TRSP), which has the same performance measurement criteria as the TSR.
Nonvested stock awards: Awards of nonvested stock are granted to employees, with either performance and/or service conditions. Awards of nonvested stock are also granted to non-employee directors, with service conditions. For nonvested stock awarded in 2014, 2013 and 2012, dividend equivalents, whether in stock or cash form, accumulate but are not paid until the underlying award vests. In 2014, 492,773 shares of nonvested stock were granted to employees under the PRSP.
In 2014, 113,827 shares of nonvested stock were also granted under the LTSV portion of the newly-adopted LTPP plan. The LTSV award vests at the end of a three-year measurement period subject to the achievement, in whole or in part, of specified Operational Goals. As of December 31, 2014, these Operational Goals were expected to be attained.
The fair value of nonvested stock awards is measured based on the stock price at the grant date, adjusted for non-participating dividends, as applicable, based on the current dividend rate. For nonvested stock awards to employees in 2014, 2013, and 2012, under the Company’s PRSP, one-half of the nonvested stock (“performance shares”) vests only on the attainment of an income target, measured over a cumulative three-year period. The remaining nonvested stock awarded to employees vests over a service period of five years, with accelerated vesting to three years if the performance shares’ vesting criterion is attained. Expense for each of these awards is recognized based on estimates of attaining the performance criterion, including estimated forfeitures. As of December 31, 2014, the income target for the 2012 PRSP award was not met, and 171,083 shares were forfeited. Vesting of the remaining half of the 2012 PRSP award continues over the five-year service period through February 2017. The income target for the 2013 PRSP awards is not expected to be attained for the performance shares, therefore, no expense was recognized on the performance shares and expense for the remaining nonvested stock was recognized on a straight line basis over the five-year service period. As of December 31, 2014, the income target for the 2014 PRSP nonvested stock award is expected to be attained for the performance shares, and expense for both portions of the award was recognized on a straight line basis based on a three-year vesting assumption.
Compensation expense in continuing operations related to all nonvested stock awards was $2.4 million in 2014, $11.3 million in 2013, and $14.0 million in 2012. Reduced compensation expense in 2014 is primarily the result of the forfeiture of the 2012 PRSP award performance shares. Approximately $18.9 million of unrecognized fair value compensation expense relating to nonvested stock awards is expected to be recognized through 2018 based on estimates of attaining performance vesting criteria, including estimated forfeitures. Activity under the Company’s nonvested stock awards for the years ended December 31, 2014, 2013, and 2012 was as follows:
(Shares in thousands, $ in millions)
 
2014
 
2013
 
2012
 
 
Number of
shares
 
Weighted
Average
Grant Date
Fair Value
 
Number of
shares
 
Weighted
Average Grant
Date Fair
Value
 
Number of
shares
 
Weighted
Average Grant
Date Fair
Value
Nonvested, beginning of year
 
927

 
$
36.9

 
727

 
$
38.6

 
677

 
$
36.4

Granted
 
675

 
20.3

 
576

 
16.4

 
394

 
16.4

Vested
 
(18
)
 
(1.0
)
 
(333
)
 
(16.4
)
 
(343
)
 
(14.1
)
Forfeited
 
(208
)
 
(8.4
)
 
(43
)
 
(1.7
)
 
(1
)
 
(0.1
)
Nonvested, end of year
 
1,376

 
$
47.8

 
927

 
$
36.9

 
727

 
$
38.6


Performance equity awards: Award opportunities under the TSR, and previously the TSRP, are determined at a target number of shares, and performance equity awards pay out based on the measured return of the Company’s stock price and dividend performance at the end of three-year periods as compared to the stock price and dividend performance of a group of industry peers. In 2014, the Company established a 2014-2016 TSR award, with 319,955 shares as the target award level. A maximum of 1.85 million shares have been reserved for issuance for award periods under the TSR and the TSRP. The actual number of shares awarded at the end of the performance measurement period may range from a minimum of zero to a maximum of two times target. Fair values for these performance awards were estimated using Monte Carlo simulations of stock price correlation, projected dividend yields and other variables over three-year time horizons matching the total shareholder return performance measurement periods. Compensation expense from continuing operations was $9.8 million in 2014, $12.3 million in 2013, and $19.2 million in 2012 for the fair value of TSR and TSRP awards.
The estimated fair value of each performance equity award, the projected shares to be awarded and future compensation expense to be recognized for these awards, including actual and estimated forfeitures, was as follows:
(Shares in thousands, $ in millions)
TSR / TSRP Award Performance Period
 
Award
Fair Value
 
December 31, 2014
Unrecognized
Compensation
Expense
 
Minimum
Shares
 
Target
Shares
 
Maximum
Shares
2012 - 2014
 
$
8.8

 
$
—

 
—

 
186

 
373

2013 - 2015
 
$
11.0

 
3.7

 
—

 
309

 
618

2014 - 2016
 
$
9.9

 
6.6

 
—

 
294

 
589

Total
 
 
 
$
10.3

 
—

 
789

 
1,580


An award was earned for the 2012-2014 TSRP performance period based on the Company’s stock price and dividend performance for the three-year period ended December 31, 2014 relative to the peer group, which resulted in the issuance of 137,843 shares of stock to participants in the 2015 first quarter.
Undistributed Earnings of Investees
Stockholders’ equity includes undistributed earnings of investees accounted for under the equity method of accounting of approximately $12 million at December 31, 2014.