XML 97 R22.htm IDEA: XBRL DOCUMENT v3.19.3.a.u2
Equity
 12 Months Ended
Dec. 31, 2019
Equity
NOTE 14—Equity:
a.
Ordinary shares and ADSs
As of December 31, 2019 and 2018, Teva had approximately 1.2 billion
 
ordinary shares issued. Teva ordinary shares are traded on the
Tel-Aviv
Stock Exchange and on the New York Stock Exchange, in the form of American Depositary Shares (“ADSs”), each of which represents one ordinary share.
On December 17, 2018, the mandatory convertible preferred shares automatically converted into ordinary shares. As a result of this conversion, Teva issued 70.6 million ADSs.
b.
Mandatory convertible preferred shares
On December 17, 2018, the mandatory convertible preferred shares automatically converted into ordinary shares at a ratio of 1 mandatory convertible preferred share to 16 ADSs, and all of the accumulated and unpaid dividends on the mandatory convertible preferred shares were paid in ADSs, at a ratio of 3.0262 ADSs per mandatory convertible preferred share, all in accordance with the conversion mechanism set forth in the terms of the mandatory convertible preferred shares.
c.
Stock-based compensation plans:
Stock-based compensation plans are comprised of employee stock options, RSUs, PSUs, and other equity-based awards to employees, officers and directors. The purpose of the plans is to enable the Company to attract and retain qualified personnel and to motivate such persons by providing them with equity participation in the Company.
On June 29, 2010, the Teva 2010 Long-Term Equity-Based Incentive Plan was approved by Teva’s shareholders, under which 70 million equivalent share units, including options exercisable into ordinary shares, RSUs and PSUs, were approved for grant. The 2010 Plan expired on June 28, 2015 (except with respect to awards outstanding on that date), and no additional awards under the 2010 Plan may be made.
On September 3, 2015, the Teva 2015 Long-Term Equity-Based Incentive Plan was approved by Teva’s shareholders, under which 43.7 million equivalent share units, including options exercisable into ordinary shares, RSUs and PSUs, were approved for grant.
On April 18, 2016, Teva’s shareholders approved an increase of an additional 33.3 million equivalent share units to the share reserve of Teva’s 2015 Long-Term Equity-Based Incentive Plan, so that 77 million equivalent share units, including options exercisable into ordinary shares, RSUs and PSUs, are approved for grant.
On July 13, 2017, Teva’s shareholders approved an increase of an additional 65 million equivalent share units to the share reserve of Teva’s 2015 Long-Term Equity-Based Incentive Plan, so that 142 million equivalent share units, including options exercisable into ordinary shares, RSUs and PSUs, are approved for grant.
As of December 31, 2019, 62.7 million equivalent share units remain available for future awards.
In the past, Teva had various employee stock and incentive plans under which stock options and other share-based awards were granted. Stock options and other share-based awards granted under such prior plans continue in accordance with the terms of the respective plans.
The vesting period of the outstanding options, RSUs and PSUs is generally from 1 to 4 years from the date of grant. The rights of the ordinary shares obtained from the exercise of options, RSUs or PSUs are identical to those of the other ordinary shares of the Company. The contractual term of these options is primarily for seven years in prior plans and ten years for options granted under the 2010 and 2015 plans described above.
Status of options
A summary of the status of the options as of December 31, 2019, 2018 and 2017, and changes during the years ended on those dates, is presented below (the number of options represents ordinary shares exercisable in respect thereof).
 
Year ended December 31,
 
  
2019
   
2018
   
2017
 
  
Number
(in thousands)
 
  
Weighted
average
exercise
price
 
  
Number
(in thousands)
 
  
Weighted
average
exercise
price
 
  
Number
(in thousands)
 
  
Weighted
average
exercise
price
 
Balance outstanding at begin
n
ing of year
   
48,393
   
$
38.62
     
43,121
    $
44.32
     
32,789
    $
50.71
 
Changes during the year:
   
     
     
     
     
     
 
Granted
   
—  
     
—  
     
12,401
     
19.12
     
15,467
     
32.08
 
Exercised
   
(11
)     
16.99
     
(84
 )    
17.01
     
(7
 )    
17.44
 
Forfeited
   
(8,318
)     
42.12
     
(7,040
 )    
39.38
     
(4,953
 )    
47.92
 
Expired
   
—  
     
—  
     
(5
 )    
50.65
     
(175
 )    
59.81
 
                                                 
Balance outstanding at end of year
   
40,064
     
37.90
     
48,393
     
38.62
     
43,121
     
44.32
 
                                                 
Balance exercisable at end of year
   
26,601
     
43.41
     
24,086
     
46.89
     
19,129
     
47.94
 
                                                 
The weighted average fair value of options granted during these years was generally estimated by using the Black-Scholes option-pricing model as follows:
 
  Year ended December 31,  
 
 
2019
 
 
2018
 
 
2017
 
Weighted average fair value
 
 
—  
 
 
$
7.4
 
 
$
5.7
 
 
The fair value of these options was estimated on the date of grant, based on the following weighted average assumptions:
 
  Year ended December 31,  
 
 
2019
 
 
2018
 
 
2017
 
Dividend yield
 
 
—  
 
 
 
0
%
 
 
3.7
%
Expected volatility
 
 
—  
 
 
 
40
%
 
 
29
%
Risk-free interest rate
 
 
—  
 
 
 
2.6
%
 
 
2.1
%
The expected term was estimated based on the weighted average period for which the options granted are expected to be outstanding, taking into consideration the current vesting of options and the historical exercise patterns of existing options. The expected volatility assumption used is based on a blend of the historical and implied volatility of the Company’s stock. The risk-free interest rate used is based on the yield of U.S. Treasuries with a maturity closest to the expected term of the options granted. The dividend yield assumption reflects the expected dividend yield based on historical dividends and expected dividend growth.
The following tables summarize
 
information a
s of
December 31, 2019 regarding the number of ordinary shares issuable upon (1) outstanding options and (2) vested options:
 
                                 
(1) Number of ordinary shares issuable upon exercise of outstanding options
 
 
 
Range of exercise prices
 
 
  
Balance at end of
period (in thousands)
 
  
Weighted average
exercise price
 
  
Weighted average
remaining life
 
  
Aggregate intrinsic
value (in millions)
 
 
Number of shares
 
  
$
 
  
Years
 
  
$
 
Lower than $15.01
   
592
     
11.40
     
7.85
     
—  
 
$15.01 - $25.00
   
10,938
     
18.94
     
8.13
     
—  
  
$25.01 - $35.00
   
7,914
     
34.62
     
7.16
     
—  
 
$35.01 - $45.00
   
5,511
     
40.59
     
2.49
     
—  
 
$45.01 - $55.00
   
10,328
     
50.74
     
4.53
     
—  
 
$55.01 - $65.00
   
4,781
     
59.20
     
5.31
     
—  
 
                                 
Total
   
40,064
     
37.90
     
5.89
     
—  
 
                                 
 
 
 
 
 
 
(2) Number of ordinary shares issuable upon exercise of vested options
 
 
 
Range of exercise prices
 
 
  
Balance at end of
period (in thousands)
 
  
Weighted average
exercise price
 
  
Weighted average
remaining life
 
  
Aggregate intrinsic
value (in millions)
 
 
Number of shares
 
  
$
 
  
Years
 
  
$
 
Lower than
 
$15.01
 
 
 
197
 
 
 
11.40
 
 
 
7.85
 
 
 
—  
 
$15.01
- $25.00
 
 
3,211
 
 
 
18.57
 
 
 
8.05
 
 
 
—  
 
$25.01
- $35.00
 
 
3,983
 
 
 
34.61
 
 
 
7.16
 
 
 
—  
 
$35.01
- $45.00
 
 
5,511
 
 
 
40.59
 
 
 
2.49
 
 
 
—  
 
$45.01
- $55.00
 
 
9,165
 
 
 
50.43
 
 
 
4.32
 
 
 
—  
 
                                 
$
55.01
 - $
65.00
 
 
4,534
 
 
 
59.37
 
 
 
5.27
 
 
 
—
 
Total
   
26,601
     
43.41
     
5.00
     
—  
  
                                 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
The aggregate intrinsic value in the above tables represents the total
pre-tax
intrinsic value, based on the Company’s closing stock price of $9.8 on December 31, 2019, less the weighted average exercise price in each range. This represents the potential amount receivable by the option holders had all option holders exercised their options as of such date. As of December 31, 2019, there was an immaterial amount of options exercisable that were
in-the-money.
The total intrinsic value of options exercised during the years ended December 31, 2019, 2018 and 2017 was immaterial, based on the Company’s average stock price of
$11.50
,
 
$20.92
 
and $25.62, for the years then ended, respectively
.
Status of
non-vested
RSUs and PSUs
The fair value of RSUs and PSUs is estimated based on the market value of the Company’s stock on the date of award grant (fair value of PSUs includes the effect of market conditions), less an estimate of dividends that will not accrue to RSU and PSU holders prior to vesting.
The following table summarizes information about the number of RSUs and PSUs issued and outstanding:
                                                 
 
Year ended December 31,
 
 
2019
   
2018
   
2017
 
 
Number
(in thousands)
 
  
Weighted
average
grant date
fair value
 
  
Number
(in thousands)
 
  
Weighted
average
grant date
fair value
 
  
Number
(in thousands)
 
  
Weighted
average
grant date
fair value
 
Balance outstanding at beginning of year
   
10,403
    $
20.93
     
7,468
    $
27.95
     
4,636
    $
45.15
 
Granted
   
9,303
     
15.36
     
5,900
     
18.80
     
5,461
     
20.10
 
Vested
   
(2,435
 )    
30.24
     
(1,638
 )    
37.30
     
(1,884
 )    
39.63
 
Forfeited
   
(1,294
 )    
18.74
     
(1,327
 )    
32.50
     
(745
 )    
42.84
 
                                                 
Balance outstanding at end of year
   
15,977
     
16.49
     
10,403
     
20.93
     
7,468
     
27.95
 
                                                 
 
 
 
 
 
The Company expenses compensation costs
are
based on the grant-date fair value. For the years ended December 31, 2019, 2018 and 2017, the Company recorded stock-based compensation costs as follows:
                         
 
Year ended December 31,
 
 
2019
 
  
2018
 
  
2017
 
 
(U.S. $ in millions)
 
Employee stock options
  $
46
    $
74
    $
64
 
RSUs and PSUs
   
73
     
81
     
69
 
                         
Total stock-based compensation expense
   
119
     
155
     
133
 
Tax effect on stock-based compensation expense
   
14
     
18
     
24
 
                         
Net effect
  $
105
    $
137
    $
109
 
                         
 
 
 
 
 
 
 
 
 
 
 
 
 
A
s of
December 31, 2019, the total unrecognized compensation cost before tax on employee stock options and RSU/PSUs amounted to $53 million and $159 
million, respectively. This cost is expected to be recognized over a weighted average period of approximately 1.9 years and
2.7
years, respectively.
d.
Dividends:
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Commencing in April 2015, dividends on Teva’s ordinary shares were declared in U.S. dollars. Dividends
paid
per share in the years ended December 31, 2019, 2018 and 2017 were $0, $0 and $0.85, respectively.
In addition, total dividends paid on Teva’s mandatory convertible preferred shares in the years ended December 31, 2019, 2018 and 2017 were
 
$
0
,
$
0
 
and $70
 
million, respectively.
Teva has not paid dividends on Teva ordinary shares or ADSs since December 2017.
e.
Accumulated other comprehensive loss:
The components of accumulated other
 
comprehensive loss attributable to Teva are presented in the table below:
                                         
 
Net Unrealized Gains/(Losses)
   
Benefit Plans
 
  
 
 
Foreign
currency
translation
adjustments
 
  
Available-
for-
sale securities
 
  
Derivative
financial
instruments
 
  
Actuarial
gains/(losses)
and prior 
service
(costs)/credits
 
  
Total
 
                                         
Balance, January 
1, 201
7
    
(2,592
 )    
(7
 )    
(479
 )    
(81
 )    
(3,159
 )
Other comprehensive income/(loss) before reclassifications
   
1,075
     
64
     
(167
 )    
(3
 )    
969
 
Amounts reclassified to the statements of income
   
378
     
(66
 )    
27
     
(5
 )    
334
 
                                         
Net other comprehensive income/(loss) before tax
   
1,453
     
(2
 )    
(140
 )    
(8
 )    
1,303
 
Corresponding income tax
   
  
      
5
     
—  
      
(2
 )    
3
 
                                         
Net other comprehensive income/(loss) after tax*
   
1,453
     
3
     
(140
 )    
(10
 )    
1,306
 
                                         
Balance, December 31, 2017 
    
(1,139
 )    
(4
 )    
(619
 )    
(91
 )    
(1,853
 )
                                         
Cumulative effect of new accounting standard
**
    
—  
      
5
     
—  
      
—  
      
5
 
Other comprehensive income/(loss) before reclassifications
   
(739
 )    
(1
 )    
87
     
4
     
(649
 )
Amounts reclassified to the statements of income
   
     
1
     
28
     
13
     
42
 
                                         
Net other comprehensive income/(loss) before tax
   
(739
 )    
—  
     
115
     
17
     
(607
 )
Corresponding income tax
   
—  
      
  
      
—  
      
(4
 )    
(4
 )
                                         
Net other comprehensive income/(loss) after tax*
   
(739
 )    
—  
     
115
     
13
     
(611
 )
                                         
Balance, December 31, 2018
    
(1,878
 )    
1
     
(504
 )    
(78
 )    
(2,459
 )
Other comprehensive income/(loss) before reclassifications
 
 
84
 
 
 
(1
)
 
 
 
54
 
 
 
(11
)
 
 
126
 
Amounts reclassified to the statements of income
 
 
  
 
 
 
 
 
 
 
30
 
 
 
(10
)
 
 
20
 
Net other comprehensive income/(loss) before tax
 
 
84
 
 
 
(1
)
 
 
 
84
 
 
 
(21
)
 
 
146
 
Corresponding income tax
 
 
—  
 
 
 
—  
 
 
 
—  
 
 
 
1
 
 
 
1
 
Net other comprehensive income/(loss) after tax*
 
 
84
 
 
 
(1
)
 
 
 
84
 
 
 
(20
)
 
 
147
 
Balance, December 31, 2019 
 
 
(1,794
)
 
 
 
—
 
 
 
(420
)
 
 
 
(98
)
 
 
(2,312
)
 
                                         
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
* Amounts do not include foreign currency translation adjustments attributable to
non-controlling
interests of $14 million gain in 201
9
, $26 million
gain
 in 201
8
 and $63 million loss in 201
7
.
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
**
Following the adoption of ASU 2016-01, the Company recorded a $5 million opening balance reclassification from accumulated other comprehensive income to retained earnings.