Stockholders' Equity

12 Months Ended

Dec. 31, 2015

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, 2015, there were no shares of preferred stock issued.

Share-based Compensation

During 2007, the Company adopted the Allegheny Technologies Incorporated 2007 Incentive Plan (the “2007 Incentive Plan”), which was amended and restated in 2010 and further amended in 2012. During 2015, the Company adopted the Allegheny Technologies Incorporated 2015 Incentive Plan (the “2015 Incentive Plan”). Upon adoption of the 2015 Incentive Plan, the 2007 Incentive Plan was terminated, although outstanding awards under the 2007 Incentive Plan remain in effect in accordance with their respective terms. Awards earned under the Company’s 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, 2015, 3.4 million shares of common stock were available for future awards under the 2015 Incentive Plan. The general terms of each arrangement granted under the 2007 Incentive Plan or the 2015 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. Periods prior to 2014 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 awards, dividend equivalents, whether in stock or cash form, accumulate but are not paid until the underlying award vests. In 2015, 461,215 shares of nonvested stock were granted to employees under the PRSP.

In 2015, 126,421 shares of nonvested stock were granted under the LTSV portion of the LTPP plan. LTSV awards vest 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, 2015, 85% and 100% of these operational goals were expected to be attained for the 2015 and 2014 LTSV awards, respectively.

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 2015, 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 cumulatively over a three-year period. The remaining nonvested stock awarded to most employees under the 2015 PRSP vests over a service period of three years; for certain senior executives this service period is five years for the 2015 award. The remaining PRSP nonvested stock awarded to employees under the 2012, 2013 and 2014 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, 2015, the income target for the 2013 PRSP award was not met, and 244,899 shares were forfeited. 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 portion of both the 2013 and 2012 PRSP awards continues over the five-year service period through February 2018 and 2017, respectively. The income targets for both the 2014 and 2015 PRSP awards are not expected to be attained for the performance shares, therefore, no expense was recognized on the performance shares. Expense for the remaining nonvested stock under the 2015 and 2014 PRSP awards is recognized on a straight line basis over the applicable three or five-year service period.

Compensation expense in continuing operations related to all nonvested stock awards was $5.5 million in 2015, $2.4 million in 2014, and $11.3 million in 2013. Reduced compensation expense in 2015 and 2014 is primarily the result of changes in estimates that PRSP award performance shares would vest. Approximately $17.9 million of unrecognized fair value compensation expense relating to nonvested stock awards is expected to be recognized through 2020 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, 2015, 2014, and 2013 was as follows:

(Shares in thousands, $ in millions)	2015					2014					2013
	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	1,376		$	47.8		927		$	36.9		727		$	38.6
Granted	669		20.8			675		20.3			576		16.4
Vested	(23	)	(0.8		)	(18	)	(1.0		)	(333	)	(16.4		)
Forfeited	(370	)	(10.8		)	(208	)	(8.4		)	(43	)	(1.7		)
Nonvested, end of year	1,652		$	57.0		1,376		$	47.8		927		$	36.9

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 2015, the Company established a 2015-2017 TSR award, with 328,564 shares at the target award level. A maximum of 2.05 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 $10.6 million in 2015, $9.8 million in 2014, and $12.3 million in 2013 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, 2015 Unrecognized Compensation Expense		Minimum Shares	Target Shares	Maximum Shares
2013 - 2015	$	10.5	$	—	—	296	592
2014 - 2016	$	9.3	3.1		—	277	554
2015 - 2017	$	13.4	8.9		—	296	592
Total			$	12.0	—	869	1,738

Based on the Company’s stock price and dividend performance for the three-year period ended December 31, 2015 relative to the peer group, no award for the 2013-2015 TSRP performance period was earned.

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, 2015.