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Stock-based Compensation and Outstanding Awards
 6 Months Ended
Jun. 30, 2014
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]  
Stock-based Compensation and Outstanding Awards

8. Stock-based Compensation and Outstanding Awards

Prior to the Separation, the Company participated in NOV’s stock-based compensation plan known as the National Oilwell Varco, Inc. Long-Term Incentive Plan (the “NOV Plan”) and the Company’s employees were issued NOV equity awards. Under the NOV Plan, our employees were granted stock options, restricted stock units (RSUs), performance share awards (PSAs) and/or restricted stock awards (RSAs).

In connection with the Separation, the Company established the NOW Inc. Long-Term Incentive Plan (the “Plan”). The Plan was adopted by the Company’s board of directors and approved by NOV, as the Company’s sole stockholder, on May 1, 2014. In connection with the Separation, stock-based compensation awards granted under the NOV Plan and held by Company employees as of May 30, 2014, were adjusted or substituted as follows. These adjustments were intended to preserve the intrinsic value of the awards on May 30, 2014.

 

  •   Stock option awards held by Company employees were replaced with substitute awards to purchase NOW common stock.

 

  •   Unvested RSAs and RSUs under the NOV plan were replaced with adjusted, substitute awards for NOW RSAs or RSUs, as applicable.

 

  •   PSAs received were replaced entirely with substitute NOW RSAs.

Stock based compensation expense recognized in the three month periods ended June 30, 2014 and 2013 totaled $3 million and $2 million, respectively. Stock based compensation expense recognized in the six month periods ended June 30, 2014 and 2013 totaled $5 million and $3 million, respectively. Adjustment and substitution of the awards did not result in additional compensation expense.

Awards granted under the Plan as a result of the adjustment and substitution of the NOV Plan awards in connection with the Separation and a summary of stock option, RSU and RSA activity for the period from May 30, 2014, to June 30, 2014, are presented in the following table:

 

     Stock Options      RSUs / RSAs  
     Options     Weighted-
average
Exercise Price		      Awards /
RSUs		      Weighted-
average
Exercise Price		  

Outstanding as of May 30, 2014

      3,599,654      $ 30.85         1,034,055       $ 31.94   

Granted post-Separation

      —          —           —           —     

Exercised or settled

      (4,667 )      32.57         —           —     

Outstanding as of June 30, 2014

      3,594,987      $ 30.85         1,034,055       $ 31.94   

All Stock Options, RSUs, and RSAs presented in this table are for NOW stock only.

Awards granted in connection with the adjustment and substitution of awards originally issued under the NOV Plan were deducted from the number of NOW shares of common stock available for grant under the Plan. As of June 30, 2014, unrecognized compensation cost related to stock option awards was $17 million, which is expected to be recognized over a weighted average period of 2.1 years. Unrecognized compensation cost related to RSU and RSA awards was $23 million, which is expected to be recognized over a weighted average period of 2.8 years. The calculations of unamortized expense and weighted-average periods include awards that were based on both NOW and NOV stock held by NOW employees.