Capital Stock and Stock-Based Compensation Plans

Preference Stock

The Company has the authority to issue 50,262,150 shares of preference stock.

Stock Repurchases

The Company repurchased its common stock at a cost of $1,530 during 2014 under a share repurchase program that was approved by the Board of Directors and publicly announced in September 2011 (the “2011 Program”). The 2011 Program authorized the Company to repurchase up to 50 million shares of its common stock. The Board authorized that the number of shares remaining under the 2011 Program as of May 15, 2013 be increased by 100% as a result of the two-for-one stock split of the Company’s common stock in 2013. The Board also has authorized share repurchases on an ongoing basis to fulfill certain requirements of the Company’s compensation and benefit programs. The shares may be repurchased from time to time in open market or privately negotiated transactions at the Company’s discretion, subject to market conditions, customary blackout periods and other factors.

On February 19, 2015, the Board authorized the repurchase of shares of the Company’s common stock having an aggregate purchase price of up to $5,000 under a new share repurchase program (the “2015 Program”), which replaced the 2011 Program. The Company will commence repurchase of shares of the Company’s common stock under the 2015 Program after February 19, 2015.

The Company may use either authorized and unissued shares or treasury shares to meet share requirements resulting from the exercise of stock options and the vesting of restricted stock unit awards.

A summary of common stock and treasury stock activity for the three years ended December 31, is as follows:



	Common Stock Outstanding		Treasury Stock
Balance, January 1, 2012	960,036,150		505,670,210

Common stock acquired	(38,730,602	)	38,730,602
Shares issued for stock options	12,217,230		(12,217,230	)
Shares issued for restricted stock units and other	2,205,898		(2,205,898	)
Balance, December 31, 2012	935,728,676		529,977,684

Common stock acquired	(25,573,317	)	25,573,317
Shares issued for stock options	7,883,834		(7,883,834	)
Shares issued for restricted stock units and other	1,907,382		(1,907,382	)
Balance, December 31, 2013	919,946,575		545,759,785

Common stock acquired	(23,131,081	)	23,131,081
Shares issued for stock options	7,977,124		(7,977,124	)
Shares issued for restricted stock units and other	1,919,527		(1,919,527	)
Balance, December 31, 2014	906,712,145		558,994,215

Stock-Based Compensation

The Company recognizes the cost of employee services received in exchange for awards of equity instruments, such as stock options and restricted stock units, based on the fair value of those awards at the date of grant. The value of restricted stock units, based on market prices, is amortized on a straight-line basis over the requisite service period. The estimated fair value of stock options on the date of grant is amortized on a straight-line basis over the requisite service period for each separately vesting portion of the award. Awards to employees eligible for retirement prior to the award becoming fully vested are recognized as compensation cost from the grant date through the date that the employee first becomes eligible to retire and is no longer required to provide service to earn the award.

The Company has one incentive compensation plan, which was approved by the Company’s stockholders on May 10, 2013, pursuant to which it issues restricted stock units and stock options to employees and shares of common stock and stock options to non-employee directors. The Personnel and Organization Committee of the Board of Directors, which is comprised entirely of independent directors, administers the incentive compensation plan. Previously, the Company issued these awards pursuant to four different stockholder-approved plans. The total stock-based compensation expense charged against pretax income for these plans was $131, $128 and $120 for the years ended December 31, 2014, 2013 and 2012, respectively. The total income tax benefit recognized on stock-based compensation was approximately $42, $39 and $37 for the years ended December 31, 2014, 2013 and 2012, respectively.

Stock-based compensation expense is recorded within Selling, general and administrative expenses in the Corporate segment as these amounts are not included in internal measures of segment operating performance.

The Company uses the Black-Scholes option pricing model to determine the fair value of stock option awards. The weighted-average estimated fair value of stock options granted in the years ended December 31, 2014, 2013 and 2012 was $7.60, $7.41 and $6.73, respectively. Fair value is estimated using the Black-Scholes option pricing model with the assumptions summarized in the following table:



	2014		2013		2012
Expected Term of Options	4.5 years		4.5 years		4.5 years
Expected Volatility Rate	17.1	%	18.4	%	20.8	%
Risk-Free Interest Rate	1.6	%	1.5	%	0.6	%
Expected Dividend Yield	2.3	%	2.3	%	2.4	%

The weighted-average expected term of options granted each year was determined with reference to historical exercise and post-vesting cancellation experience, the vesting period of the awards and contractual term of the awards, among other factors. Expected volatility incorporates implied share-price volatility derived from exchange traded options on the Company’s common stock. The risk-free interest rate for the expected term of the option is based on the yield of a zero-coupon U.S. Treasury bond with a maturity period equal to the option’s expected term.

Restricted Stock Units

The Company grants restricted stock unit awards to officers and other employees. Awards vest at the end of the restriction period, which is generally three years. As of December 31, 2014, approximately 12,414,000 shares of common stock were available for future restricted stock unit awards.

A summary of restricted stock unit activity during 2014 is presented below:



	Shares (in thousands)		Weighted Average Grant Date Fair Value Per Award
Restricted stock units as of January 1, 2014	4,539		$	48
Activity:
Granted	1,092		64
Vested	(1,867	)	42
Forfeited	(70	)	52
Restricted stock units as of December 31, 2014	3,694		$	56

As of December 31, 2014, there was $63 of total unrecognized compensation expense related to nonvested restricted stock unit awards, which will be recognized over a weighted-average period of 2.1 years. The total fair value of shares vested during the years ended December 31, 2014, 2013 and 2012 was $71, $69 and $63, respectively.

Stock Options

The Company issues non-qualified stock options to non-employee directors, officers and other employees. Stock options generally have a contractual term of six years and vest over three years. As of December 31, 2014, 46,062,000 shares of common stock were available for future stock option grants.

A summary of stock option activity during 2014 is presented below:



	Shares (in thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Intrinsic Value of Unexercised In-the-Money Options
Options outstanding, January 1, 2014	42,832		$	47
Granted	9,036		64
Exercised	(8,526	)	41
Forfeited or expired	(440	)	57
Options outstanding, December 31, 2014	42,902		52		4	$	746
Options exercisable, December 31, 2014	24,946		$	46	3	$	582

As of December 31, 2014, there was $46 of total unrecognized compensation expense related to options, which will be recognized over a weighted-average period of 1.5 years. The total intrinsic value of options exercised during the years ended December 31, 2014, 2013 and 2012 was $211, $180 and $210, respectively.

The benefits of tax deductions in excess of grant date fair value resulting from the exercise of stock options and vesting of restricted stock unit awards for the years ended December 31, 2014, 2013 and 2012 was $63, $51 and $60, respectively, and was reported as a financing cash flow. Cash proceeds received from options exercised for the years ended December 31, 2014, 2013 and 2012 were $314, $289 and $409, respectively.