Common Stock

Common Stock — As discussed in Note 2, Acquisition of Federal-Mogul, pursuant to the Amended and Restated Certificate of Incorporation, a new class of Class B Common Stock was created and the Company’s existing common stock was reclassified as Class A Common Stock. See Note 2, Acquisition of Federal-Mogul for additional information.

Equity Plans — We have granted a variety of awards, including common stock, restricted stock, restricted stock units (RSUs), performance share units (PSUs), stock appreciation rights (SARs), and stock options to our directors, officers, and employees.

Accounting Methods — Prior to 2018, for employees eligible to retire at grant date, we immediately expensed stock options and restricted stock. In 2018, we prospectively changed our vesting policy regarding retirement eligibility and now require a retirement eligible employee (or an employee who becomes retirement eligible) to provide at least one year of service from the grant date in order for the award to vest. If an employee becomes retirement eligible after the first year of vesting but before completion of the three-year term, we amortize the expense for the share-based awards over a period starting at the grant date to the date an employee becomes retirement eligible.

Stock Options — There have been no stock options granted since 2014. There is no compensation expense in each of the three month periods ended September 30, 2018 and 2017, and the nine month periods ended September 30, 2018. There is less than $1 million of compensation expense (net of tax) for the nine month period ended September 30, 2017 related to nonqualified stock options, which was recorded in selling, general, and administrative expense. This had no impact on basic or diluted earnings per share for the three month periods ended September 30, 2018 and 2017 and nine month period ended September 30, 2018 and a decrease of less than $0.01 in both basic and diluted earnings per share for the nine month period ended September 30, 2017.

As of September 30, 2018, there was no unrecognized compensation cost related to our stock option awards.

Cash received from stock option exercises for the nine month periods ended September 30, 2018 and 2017 was less than $1 million and $7 million, respectively.

Stock options exercised in the first nine months of 2018 and 2017 generated a tax benefit of less than $1 million and $2 million, respectively.

The following table reflects the status and activity for all options to purchase common stock for the period indicated:



	Nine Months Ended September 30, 2018
	Shares Under Option		Weighted Avg. Exercise Prices		Weighted Avg. Remaining Life in Years	Aggregate Intrinsic Value
						(Millions)
Outstanding Stock Options
Outstanding, January 1, 2018	318,016		$	43.60	2.6	$	5
Exercised	(4,607	)	26.78			—
Outstanding, March 31, 2018	313,409		43.84		2.1	4
Forfeited	(2,368	)	54.34			—
Outstanding, June 30, 2018	311,041		43.76		1.8	2
Exercised	(11,420	)	29.93			—
Outstanding, September 30, 2018	299,621		$	44.29	2.4	$	1

As mentioned above, there have been no stock options granted since 2014. Accordingly, no options vested during the nine month period ended September 30, 2018. The total fair value of shares vested from options that were granted prior to 2015 for the nine month period ended September 30, 2017 was $2 million.

Long-Term Performance Units, PSUs, RSUs and SARs — Long-term performance units, RSUs granted prior to 2018 and SARs are paid in cash (cash-settled awards) and recognized as a liability based upon their fair value. PSUs and RSUs granted in 2018 onward (share-settled RSUs) are settled in shares upon vesting and recognized in equity based on their fair value. As of September 30, 2018, $3 million of total unrecognized compensation costs is expected to be recognized on the cash-settled awards over a weighted-average period of approximately 1.2 years.

Compensation expense for restricted stock, RSUs, long-term performance units, PSUs and SARs (net of tax) was $3 million and $2 million for the three month periods ended September 30, 2018 and 2017, respectively, and $7 million and $10 million for the nine month periods ended September 30, 2018 and 2017, respectively, and was recorded in selling, general, and administrative expense.

The following table reflects the status for all nonvested restricted shares, share-settled RSUs and PSUs for the period indicated:



	Restricted Shares				Share-Settled RSUs				PSUs
	Shares		Weighted Avg. Grant Date Fair Value		Shares		Weighted Avg. Grant Date Fair Value		Shares		Weighted Avg. Grant Date Fair Value
Nonvested balance at January 1, 2018	410,251		$	49.95	—		$	—	—		$	—
Granted	17,440		55.05		253,257		55.02		214,348		50.75
Vested	(168,409	)	47.08		—		—		—		—
Forfeited	(5,108	)	48.68		(1,362	)	55.04		—		—
Nonvested balance at March 31, 2018	254,174		52.23		251,895		55.02		214,348		50.75
Granted	1,573		47.97		16,995		47.17		25,957		35.64
Vested	(60,434	)	49.89		(192	)	55.04		—		—
Forfeited	(2,482	)	57.15		(8,001	)	55.04		(4,051	)	50.75
Nonvested balance at June 30, 2018	192,831		53.14		260,697		54.51		236,254		49.28
Granted	—		—		14,903		42.22		8,623		32.24
Vested	(6,443	)	53.31		—		—		—		—
Forfeited	(1,210	)	62.79		(6,408	)	55.04		(5,882	)	50.75
Nonvested balance at September 30, 2018	185,178		$	53.07	269,192		$	57.51	238,995		$	48.68

The fair value of restricted stock grants is equal to the average of the high and low trading price of our common stock on the date of grant. As of September 30, 2018, approximately $4 million of total unrecognized compensation costs related to restricted stock awards is expected to be recognized over a weighted-average period of approximately 1.2 years. The total fair value of restricted shares vested was $11 million and $14 million at September 30, 2018 and 2017, respectively.

The fair value of share-settled RSU grants is equal to the average of the high and low trading price of our common stock on the date of the grant and vest ratably over a three-year period. As of September 30, 2018, approximately $10 million of total unrecognized compensation costs related to share-settled RSUs is expected to be recognized over a weighted-average period of approximately 2.4 years.

PSU grants are subject to service, market and performance conditions. PSU grants are valued based on the fair value of the high and low trading price of our common stock at grant date and at the end of a three-year period, if performance measures are met. As of September 30, 2018, approximately $8 million of total unrecognized compensation costs related to PSUs is expected to be recognized over a weighted-average period of approximately 2.4 years.

Share Repurchase Program — In January 2015, our Board of Directors approved a share repurchase program, authorizing our Company to repurchase up to $350 million of our outstanding common stock over a three year period. In October 2015, our Board of Directors expanded this share repurchase program, authorizing the repurchase of an additional $200 million of the Company's outstanding common stock.

In February 2017, our Board of Directors authorized the repurchase of up to $400 million of the Company's outstanding common stock over the next three years, inclusive of $112 million that remained authorized under earlier repurchase programs. The Company anticipates acquiring the shares through open market or privately negotiated transactions, which will be funded from cash flow from operations. The repurchase program does not obligate the Company to repurchase shares within any specific time or situations, and opportunities in higher priority areas could affect the cadence of this program. We did not repurchase any shares through this program in the nine months ended September 30, 2018. Since we announced the share repurchase program in January 2015, we have repurchased 11.3 million shares for $607 million through September 30, 2018.

Treasury shares were 14,592,888 shares at September 30, 2018 and December 31, 2017, respectively.

Dividends — On February 1, 2017, the Company announced the reinstatement of a quarterly dividend program under which we expect to pay quarterly dividends of $0.25 per share on our common stock, representing planned annual dividends of $1.00 per share. We paid a quarterly dividend of $0.25 per share in each of the first three quarters of 2017 and 2018. Dividends declared and paid were $39 million and $40 million in the nine month periods ended September 30, 2018 and 2017, respectively. As a result of the Federal-Mogul transaction, and the resulting higher share count, the quarterly dividend payment will increase to $20 million beginning in the fourth quarter. In view of our current stock price and overall sector valuations, we will evaluate the best methodology to return this value to our shareholders. This may result in a change in the dividend and returning that capital via share buybacks in a comparable amount.