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Share-Based Compensation | 12 Months Ended
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Dec. 31, 2018
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
Share-Based Compensation | 9. Share-Based Compensation The Company has four share-based compensation plans: the Amended and Restated Herbalife Ltd. 2005 Stock Incentive Plan, or the 2005 Stock Incentive Plan, the Amended and Restated Herbalife Ltd. 2014 Stock Incentive Plan, or the 2014 Stock Incentive Plan, the Amended and Restated Herbalife Ltd. Independent Directors Deferred Compensation and Stock Unit Plan, or the Independent Director Stock Unit Plan, and the Amended and Restated Non-Management Directors Compensation Plan, or the Non-Management Directors Plan. The 2014 Stock Incentive Plan replaced the 2005 Stock Incentive Plan and after the adoption thereof, no additional awards were made under the 2005 Stock Incentive Plan. The terms of the 2014 Stock Incentive Plan are substantially similar to the terms of the 2005 Stock Incentive Plan. The 2014 Stock Incentive Plan authorizes the issuance of 17,400,000 common shares pursuant to awards granted under the plan, plus any shares that remained available for issuance under the 2005 Stock Incentive Plan as of April 29, 2014. The purpose of the Independent Directors Stock Unit Plan and the Non-Management Directors Plan is to facilitate equity ownership in the Company by its directors through equity awards. As of December 31, 2018, an aggregate of approximately 6.3 million common shares remain available for future issuance under the 2014 Stock Incentive Plan. The Company’s share-based compensation plans generally provide for grants of stock options, SARs, and stock unit awards, which are collectively referred to herein as awards. Certain SARs generally vest annually over a three-year period. The contractual term of stock options and SARs is generally ten years. Certain stock unit awards under the 2014 Stock Incentive Plan vest annually over a three year period. Certain stock unit awards subject to service and performance conditions vest after the passage of a performance period as determined by the compensation committee of the Company’s board of directors. Stock unit awards granted to directors generally vest over a one-year period. Awards can be subject to the following: market and service conditions, or market condition awards; performance and service conditions, or performance condition awards; market, service and performance conditions, or market and performance condition awards; or be subject only to continued service with the Company, or service condition awards. All awards granted by the Company are market condition awards, performance condition awards, or service condition awards. Unless otherwise determined at the time of grant, upon vesting, each stock unit award represents the right to receive one common share. For stock unit awards, the Company issues new shares, net of shares withheld for tax purposes, when vested. For SARs, the Company issues new shares based on the intrinsic value when exercised, net of shares withheld for tax purposes. The Company’s stock compensation awards outstanding as of December 31, 2018 include SARs and stock unit awards. There were no SARs with performance conditions granted during the year ended December 31, 2018. During the years ended December 31, 2017 and 2016, the Company granted SARs with performance conditions to certain employees. These awards generally vest 20% in the first succeeding year, 20% in the second succeeding year, and 60% in the third succeeding year, subject to achievement of certain sales leader retention metrics. The fair value of these SARs was determined on the date of grant using the Black-Scholes-Merton option pricing model. The compensation expense for these grants is recognized over the vesting term using the graded vesting method. There were no SARs with service conditions granted during the year ended December 31, 2018. During the years ended December 31, 2017 and 2016, the Company granted SARs with service conditions to certain employees. The fair value of these SARs was determined on the date of grant using the Black-Scholes-Merton option pricing model. The compensation expense for these grants is recognized over the vesting term using the straight line method. During the years ended December 31, 2018 and 2017, the Company granted performance stock unit awards to certain executives, which will vest on December 31, 2020 and December 31, 2019, respectively, subject to their continued employment through that date and the achievement of certain performance conditions. The performance conditions include targets for local currency net sales, Volume Points, adjusted earnings before interest and taxes, and adjusted earnings per share. These performance stock unit awards can vest at between 0% and 200% of the target award based on the achievement of the performance conditions. During the years ended December 31, 2018 and 2017, the Company granted stock unit awards with service conditions to directors and certain employees. Share-based compensation expense is included in selling, general, and administrative expenses within the Company’s consolidated statements of income. The Company’s policy is to estimate the number of forfeitures expected to occur. For the years ended December 31, 2018, 2017, and 2016, share-based compensation expense relating to service condition awards amounted to $26.2 million, $24.4 million, and $23.9 million, respectively. For the years ended December 31, 2018, 2017, and 2016, share-based compensation expense relating to market condition awards amounted to less than $0.1 million, $1.3 million, and $0.4 million, respectively. For the years ended December 31, 2018, 2017, and 2016, share-based compensation expense relating to performance condition awards amounted to $9.2 million, $16.4 million, and $15.9 million, respectively. For the years ended December 31, 2018, 2017, and 2016, the related income tax benefits recognized in earnings for all awards amounted to $8.1 million, $9.4 million, and $14.8 million, respectively. Excess tax benefits on share-based compensation arrangements totaled $53.1 million, $31.1 million, and $0.4 million for the years ended December 31, 2018, 2017, and 2016, respectively. As of December 31, 2018, the total unrecognized compensation cost related to non-vested service condition stock awards was $38.0 million and the related weighted-average period over which it is expected to be recognized is approximately 1.3 years. As of December 31, 2018, the total unrecognized compensation cost related to non-vested performance condition awards was $11.2 million and the related weighted-average period over which it is expected to be recognized is approximately 1.6 years. Stock unit awards are valued at the market value on the date of grant. The fair value of service condition SARs and performance condition SARs are estimated on the date of grant using the Black-Scholes-Merton option-pricing model. The fair value of SARs with market conditions or with market and performance conditions are estimated on the date of grant using the Monte Carlo lattice model. The Company calculates the expected term of its SARs based on historical data. All groups of employees have been determined to have similar historical exercise patterns for valuation purposes. The expected volatility of the SARs is based upon the historical volatility of the Company’s common shares and is also validated against the volatility rates of a peer group of companies. The risk free interest rate is based on the implied yield on a U.S. Treasury zero-coupon issue with a remaining term equal to the expected term of the SARs. The expected dividend yield assumption is based on the Company’s historical and expected amount of dividend payouts. There were no SARs granted during the year ended December 31, 2018. There were no SARs granted to independent directors during the years ended December 31, 2017, and 2016. The following table summarizes the weighted-average assumptions used in the calculation of the fair value for service condition SARs awards for the years ended December 31, 2017, and 2016:
|  | Year Ended December 31, |
|  | 2017 |  |  | 2016 |
Expected volatility |  |  | 49.2 | % |  |  | 49.6 | %
Dividend yield |  |  | 0.0 | % |  |  | 0.1 | %
Expected term |  | 6.0 years |  |  | 6.0 years |
Risk-free interest rate |  |  | 2.2 | % |  |  | 1.2 | %
The following table summarizes the weighted-average assumptions used in the calculation of the fair value for performance condition SARs awards granted during the years ended December 31, 2017, and 2016:
|  | Year Ended December 31, |
|  | 2017 |  |  | 2016 |
Expected volatility |  |  | 49.6 | % |  |  | 49.6 | %
Dividend yield |  |  | 0.0 | % |  |  | 0.0 | %
Expected term |  | 6.1 years |  |  | 6.0 years |
Risk-free interest rate |  |  | 2.2 | % |  |  | 1.2 | %
The following table summarizes the activities for SARs under all share-based compensation plans for the year ended December 31, 2018:
|  | Number of Awards |  |  | Weighted-Average Exercise Price Per Award |  |  | Weighted-Average Remaining Contractual Term |  | Aggregate Intrinsic Value(1) |
|  | (in thousands) |  |  |  |  |  |  |  |  | (in millions) |
Outstanding as of December 31, 2017(2)(3) |  |  | 19,193 |  |  | $ | 23.36 |  |  | 6.2 years |  | $ | 212.0 |
Granted |  |  | — |  |  | $ | — |  |  |  |  |  |  |
Exercised(4) |  |  | (10,369 | ) |  | $ | 20.34 |  |  |  |  |  |  |
Forfeited(5) |  |  | (354 | ) |  | $ | 28.91 |  |  |  |  |  |  |
Outstanding as of December 31, 2018(2)(3) |  |  | 8,470 |  |  | $ | 26.82 |  |  | 6.1 years |  | $ | 272.1 |
Exercisable as of December 31, 2018(6) |  |  | 5,220 |  |  | $ | 25.03 |  |  | 5.0 years |  | $ | 177.1 |
Vested and expected to vest as of December 31, 2018 |  |  | 8,279 |  |  | $ | 26.76 |  |  | 6.0 years |  | $ | 266.5 |
(1) | The intrinsic value is the amount by which the current market value of the underlying stock exceeds the exercise price of the stock awards.
(2) | Includes less than 0.1 million and 0.2 million market condition SARS as of December 31, 2018 and 2017, respectively.
(3) | Includes 3.1 million and 6.2 million performance condition SARs as of December 31, 2018 and 2017, respectively.
(4) | Includes 0.2 million market condition and 3.0 million performance condition SARs.
(5) | Includes 0.1 million performance condition SARs.
(6) | Includes less than 0.1 million market condition and 1.8 million performance condition SARs.
The weighted-average grant date fair value of service condition SARs granted during the years ended December 31, 2017 and 2016 was $14.32 and $14.67, respectively. The weighted-average grant date fair value of SARs with performance conditions granted during the years ended December 31, 2017 and 2016 was $14.16 and $14.85 respectively. The total intrinsic value of service condition SARs exercised during the years ended December 31, 2018, 2017, and 2016 was $211.0 million, $122.8 million, and $32.3 million, respectively. The total intrinsic value of performance condition SARs exercised during the years ended December 31, 2018, 2017, and 2016 was $95.0 million, $3.1 million, and $0.7 million, respectively. The total intrinsic value of market condition SARs exercised during the year ended December 31, 2018 was $7.8 million. There were no market condition SARS exercised during the years ended December 31, 2017 and 2016. The following table summarizes the activities for stock units under all share-based compensation plans for the year ended December 31, 2018:
|  | Number of Shares |  |  | Weighted-Average Grant Date Fair Value Per Share |
|  | (in thousands) |  |  |  |  |
Outstanding and nonvested as of December 31, 2017(1) |  |  | 326 |  |  | $ | 34.34 |
Granted(2) |  |  | 1,386 |  |  | $ | 43.75 |
Vested |  |  | (44 | ) |  | $ | 35.62 |
Forfeited |  |  | (57 | ) |  | $ | 43.15 |
Outstanding and nonvested as of December 31, 2018(1) |  |  | 1,611 |  |  | $ | 42.09 |
Expected to vest as of December 31, 2018(3) |  |  | 1,111 |  |  | $ | 43.47 |
(1) | Includes 708,836 and 268,776 performance based stock unit awards as of December 31, 2018 and 2017, respectively, which represents the maximum amount that can vest.
(2) | Includes 440,060 performance-based stock unit awards, which represents the maximum amount that can vest.
(3) | Includes 261,297 performance-based stock unit awards.
The total vesting date fair value of stock units which vested during the years ended December 31, 2018, 2017, and 2016 was $2.2 million, $2.0 million, and $2.1 million, respectively. Employee Stock Purchase Plan During 2007, the Company adopted a qualified employee stock purchase plan, or ESPP, which was implemented during the first quarter of 2008. In connection with the adoption of the ESPP, the Company has reserved for issuance a total of 4 million common shares. As of December 31, 2018, approximately 3.3 million common shares remain available for future issuance. Under the terms of the ESPP, rights to purchase common shares may be granted to eligible qualified employees subject to certain restrictions. The ESPP enables the Company’s eligible employees, through payroll withholdings, to purchase a limited number of common shares at 85% of the fair market value of a common share at the purchase date. Purchases are made on a quarterly basis.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -URI http://asc.fasb.org/subtopic&trid=2208855 + Details
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