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Employee Stock-based Compensation Plans (Tables)
12 Months Ended
Dec. 31, 2012
Stock-Based Compensation Expense

The Company recorded stock-based compensation expense for the years ended December 31 as follows:

 

In millions    2012     2011     2010  

Stock options

   $ 15      $ 14      $ 12   

Restricted stock

     28        21        14   
  

 

 

   

 

 

   

 

 

 

Total stock-based compensation before income taxes

     43        35        26   

Tax benefit

     (14     (13     (10
  

 

 

   

 

 

   

 

 

 

Total stock-based compensation, net of tax

   $ 29      $ 22      $ 16   
  

 

 

   

 

 

   

 

 

 
Fair Value of Each Option Award on the Grant Date Using the Black-Scholes Option-Pricing Model

The fair value of each option award on the grant date was estimated using the Black-Scholes option-pricing model with the following assumptions:

 

     2012     2011     2010  

Dividend yield

     0        0        0   

Risk-free interest rate

     0.87     1.63     1.88

Expected volatility

     35.7     39.5     31.4

Expected term (years)

     6.3        6.3        6.3   
The Company's Stock Option Activity

The following table summarizes the Company’s stock option activity for the year ended December 31, 2012:

 

Shares in thousands    Shares
Under
Option
    Weighted-
Average
Exercise
Price per
Share
     Weighted-
Average
Remaining
Contractual
Term (in
years)
     Aggregate
Intrinsic
Value (in
millions)
 

Outstanding at January 1, 2012

     8,282      $ 24.71         6.8       $ 199   

Granted

     702      $ 61.54         

Exercised

     (2,304   $ 18.64         

Canceled

     (11   $ 9.94         

Forfeited

     (31   $ 35.10         
  

 

 

         

Outstanding at December 31, 2012

     6,638      $ 30.69         6.7       $ 207   

Fully vested and expected to vest at December 31, 2012

     6,605      $ 30.57         6.7       $ 207   

Exercisable at December 31, 2012

     4,603      $ 22.69         5.8       $ 180   
Restricted Stock and Restricted Stock Unit Activity

The following table reports restricted stock and restricted stock unit activity during the year ended December 31, 2012:

 

Shares in thousands    Number of
Shares
    Weighted-
Average Grant
Date Fair Value
per Share
 

Unvested shares at January 1, 2012

     1,836      $ 39.71   

Granted

     1,101      $ 60.71   

Vested

     (483   $ 30.94   

Forfeited/canceled

     (81   $ 38.15   
  

 

 

   

Unvested shares at December 31, 2012

     2,373      $ 51.37   
  

 

 

   
The Composition of Teradata Restricted Stock Grants

The following table represents the composition of Teradata restricted stock unit grants in 2012:

 

Shares in thousands    Number of
Shares
     Weighted-
Average Grant
Date Fair Value
 

Service-based shares

     614       $ 62.41   

Performance-based shares

     487       $ 58.56   
  

 

 

    

Total stock grants

     1,101       $ 60.71   
  

 

 

    
Primary Assumptions Used in Valuation of Market Component of Awards

The primary assumptions used in the valuation of the market component of the awards were as follows:

 

     2012  

Grant date fair value per share of Company common stock

   $ 58.63   

Expected volatility

     36.44

Risk-free interest rate

     0.47

Dividend yield

     0   

Performance vesting hurdle - future fair value per share of Company common stock

   $ 85.00