STOCK COMPENSATION

3 Months Ended

Mar. 31, 2016

9. STOCK COMPENSATION

Stock compensation expense totaled $23 million and $29 million in the first quarter of 2016 and 2015, respectively. Over 70% of stock compensation expense is classified in marketing and administrative expenses with the remainder classified in cost of sales and R&D expenses.

The company awarded stock compensation grants consisting of 6.4 million stock options, 1.0 million RSUs and 0.3 million PSUs during the first quarter of 2016.

Stock Options

The weighted-average Black-Scholes assumptions used in estimating the fair value of stock options granted during the period, along with the weighted-average grant-date fair values, were as follows.


	Three months ended March 31,
	2016			2015
Expected volatility		20	%		20	%
Expected life (in years)		5.5			5.5
Risk-free interest rate		1.4	%		1.7	%
Dividend yield		1.2	%		3.0	%
Fair value per stock option		$7			$9

The total intrinsic value of stock options exercised was $55 million and $14 million during the first quarters of 2016 and 2015, respectively.

As of March 31, 2016, the unrecognized compensation cost related to all unvested stock options of $87 million is expected to be recognized as expense over a weighted-average period of 2.1 years.

Restricted Stock Units

As of March 31, 2016, the unrecognized compensation cost related to all unvested RSUs of $94 million is expected to be recognized as expense over a weighted-average period of 2.0 years.

Performance Share Units

As of March 31, 2016, the unrecognized compensation cost related to all granted unvested PSUs of $20 million is expected to be recognized as expense over a weighted-average period of 2.1 years.