Share-Based Compensation Plans

12 Months Ended

Dec. 31, 2011

Share-Based Compensation Plans

Share-Based Compensation Plans

Note 18—Share-Based Compensation Plans

Overview—We have (i) a long-term incentive plan (the “Long-Term Incentive Plan”) for executives, key employees and outside directors under which awards can be granted in the form of stock options, restricted shares, deferred units, SARs and cash performance awards and (ii) other incentive plans under which awards are currently outstanding.  Awards that may be granted under the Long-Term Incentive Plan include traditional time-vesting awards (“time-based awards”) and awards that are earned based on the achievement of certain performance criteria (“performance-based awards”) or market factors (“market-based awards”).  Our executive compensation committee of our board of directors determines the terms and conditions of the awards granted under the Long-Term Incentive Plan.  As of December 31, 2011, we had 36 million shares authorized and 15 million shares available to be granted under the Long-Term Incentive Plan.

Time-based awards typically vest either in three equal annual installments beginning on the first anniversary date of the grant or in an aggregate installment at the end of the stated vesting period.  Performance-based and market-based awards are typically awarded subject to either a two-year or a three-year measurement period during which the number of options, shares or deferred units remains uncertain.  At the end of the measurement period, the awarded number of options, shares or deferred units is determined (the “determination date”) subject to the stated vesting period.  The two-year awards generally vest in three equal installments beginning on the determination date and on January 1 of each of the two subsequent years.  The three-year awards generally vest in one aggregate installment following the determination date.  Once vested, options and SARs generally have a 10-year term during which they are exercisable.

As of December 31, 2011, total unrecognized compensation costs related to all unvested share-based awards totaled $91 million, which is expected to be recognized over a weighted-average period of 1.8 years.  We recognized additional share-based compensation expense of $3 million, $12 million and $8 million in connection with modifications of share-based awards for the years ended December 31, 2011, 2010 and 2009, respectively.

Option valuation assumptions—We estimated the fair value of each option award under the Long-Term Incentive Plan on the grant date using the Black-Scholes-Merton option-pricing model with the following weighted-average assumptions:

	Years ended December 31,
	2011		2010		2009
Dividend yield	4%		4%		—
Expected price volatility	40%		39%		49%
Risk-free interest rate	1.97%		2.30%		1.80%
Expected life of options	4.9 years		4.7 years		4.8 years
Weighted-average fair value of options granted	$	19.75	$	30.03	$	26.07

Time-Based Awards

Stock options—The following table summarizes vested and unvested time-based vesting stock option (“time-based options”) activity under our incentive plans during the year ended December 31, 2011:

	Number of shares under option		Weighted-average exercise price per share		Weighted-average remaining contractual term (years)	Aggregate intrinsic value (in millions)
Outstanding at January 1, 2011	1,653,683		$	66.37	5.29	$	5
Granted	194,342		78.76
Exercised	(210,997	)	46.37
Forfeited	(47,515	)	84.77
Expired	(10,229	)	42.79
Outstanding at December 31, 2011	1,579,284		$	70.16	2.67	$	—
Vested and exercisable at December 31, 2011	1,182,287		$	68.13	2.67	$	—

The weighted-average grant-date fair value of time-based options granted during the year ended December 31, 2011 was $19.75 per share.  The total pretax intrinsic value of time-based options exercised during the year ended December 31, 2011 was $5 million.  At December 31, 2011, we have presented the aggregate intrinsic value as zero since the weighted-average exercise price per share exceeded the market price of our shares on these dates.  There were 396,997 unvested time-based options outstanding as of December 31, 2011.

There were time-based options to purchase 253,288 and 597,898 shares granted during the years ended December 31, 2010 and 2009, respectively.  The weighted-average grant-date fair value of time-based options granted was $30.03 and $26.07 per share for the years ended December 31, 2010 and 2009, respectively.  There were 289,445 and 980,105 time-based options exercised during the years ended December 31, 2010 and 2009, respectively.  The total pretax intrinsic value of time-based options exercised was $11 million and $43 million during the years ended December 31, 2010 and 2009, respectively.  There were 470,400 and 656,790 unvested time-based options outstanding as of December 31, 2010 and 2009, respectively.

Restricted shares—The following table summarizes unvested share activity for time-based vesting restricted shares (“time-based shares”) granted under our incentive plans during the year ended December 31, 2011:

	Number of shares		Weighted-average grant-date fair value per share
Unvested at January 1, 2011	3,939		$	132.32
Vested	(3,939	)	132.32
Unvested at December 31, 2011	—		$	—

We did not grant time-based shares during the years ended December 31, 2011, 2010 and 2009.  There were 92,573 and 320,782 time-based shares that vested during the years ended December 31, 2010 and 2009, respectively.  The total grant-date fair value of time-based shares that vested was $1 million, $10 million and $39 million for the years ended December 31, 2011, 2010 and 2009, respectively.

Deferred units—A deferred unit is a unit that is equal to one share but has no voting rights until the underlying shares are issued.  The following table summarizes unvested activity for time-based vesting deferred units (“time-based units”) granted under our incentive plans during the year ended December 31, 2011:

	Number of units		Weighted-average grant-date fair value per share
Unvested at January 1, 2011	1,844,784		$	75.23
Granted	1,090,747		77.55
Vested	(832,252	)	78.97
Forfeited	(163,439	)	76.94
Unvested at December 31, 2011	1,939,840		$	74.78

The total grant-date fair value of the time-based units vested during the year ended December 31, 2011 was $66 million.

There were 1,055,367 and 1,287,893 time-based units granted during the years ended December 31, 2010 and 2009, respectively.  The weighted-average grant-date fair value of time-based units granted was $76.83 and $60.53 per share for the years ended December 31, 2010 and 2009, respectively.  There were 559,339 and 282,543 time-based units that vested during the years ended December 31, 2010 and 2009, respectively.  The total grant-date fair value of deferred units that vested was $45 million and $33 million for the years ended December 31, 2010 and 2009, respectively.

SARs—The following table summarizes share-settled SARs activity under our incentive plans during the year ended December 31, 2011:

	Number of awards		Weighted-average exercise price per share		Weighted-average remaining contractual term (years)	Aggregate intrinsic value (in millions)
Outstanding at January 1, 2011	189,139		$	93.28	5.76	$	—
Exercised	(1,400	)	77.73		—	—
Forfeited	(7,768	)	105.57		—	—
Outstanding at December 31, 2011	179,971		$	92.87	4.66	$	—
Vested and exercisable at December 31, 2011	179,971		$	92.87	4.66	$	—

At January 1 and December 31, 2011, we have presented the aggregate intrinsic value as zero since the weighted-average exercise price per share exceeded the market price of our shares on those dates.  We did not grant share-settled SARs during the years ended December 31, 2011, 2010, and 2009.  There were no share-settled SARs exercised during the year ended December 31, 2010.  There were 224 share-settled SARs exercised with a total pretax intrinsic value of zero during the year ended December 31, 2009.  There were no unvested share-settled SARs outstanding as of December 31, 2011, 2010 and 2009.

Performance-Based Awards

Stock options—We grant performance-based stock options (“performance-based options”) that can be earned depending on the achievement of certain performance targets.  The number of options earned is quantified upon completion of the performance period at the determination date.  The following table summarizes vested and unvested performance-based option activity under our incentive plans during the year ended December 31, 2011:

	Number of shares under option	Weighted-average exercise price per share		Weighted-average remaining contractual term (years)	Aggregate intrinsic value (in millions)
Outstanding at January 1, 2011	179,262	$	75.30	5.22	$	—
Outstanding at December 31, 2011	179,262	$	75.30	4.23	$	—
Vested and exercisable at December 31, 2011	179,262	$	75.30	4.23	$	—

At December 31, 2011, we have presented the aggregate intrinsic value as zero since the weighted-average exercise price per share exceeded the market price of our shares on that date.  We did not grant performance-based options during the years ended December 31, 2011, 2010 and 2009.  There were no performance-based options exercised during the years ended December 31, 2011, 2010 and 2009.  There were no unvested performance-based stock options outstanding as of December 31, 2011, 2010 and 2009.

Market-Based Awards

Deferred units—We grant market-based deferred units (“market-based units”) that can be earned depending on the achievement of certain market conditions.  The number of units earned is quantified upon completion of the specified period at the determination date.  The following table summarizes unvested activity for market-based units granted under our incentive plans during the year ended December 31, 2011:

	Number of units		Weighted-average grant-date fair value per share
Unvested at January 1, 2011	422,906		$	89.14
Granted	98,797		78.69
Forfeited	(105,756	)	121.89
Unvested at December 31, 2011	415,947		$	75.98

There were 122,934 and 285,012 market-based units granted with a weighted-average grant-date fair value of $82.55 and $75.98 per share during the years ended December 31, 2010 and 2009, respectively.  No market-based units vested in the years ended December 31, 2011, 2010 and 2009.