Stock-Based Compensation

6 Months Ended

Jun. 30, 2016

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

Stock-Based Compensation

Note 14. Stock-Based Compensation

In accordance with our 2013 Long-Term Incentive Compensation Plan (the 2013 LTIP), during the six months ended June 30, 2016, we granted restricted stock, restricted stock units and performance shares to executive officers, members of the Board of Directors and certain employees.

In February 2016, a target number of contingent performance shares, which contain a market condition, were awarded to certain executives. Vesting of the performance shares is dependent upon a market condition and three years of continuous service beginning at date of grant, subject to a prorated adjustment for employees who are terminated under certain circumstances or who retire. The market condition is based on our total stockholder return relative to the total stockholder return of a specified group of peer companies at the end of a three-calendar-year performance period beginning January 1, 2016 and ending December 31, 2018. The number of performance shares earned is determined based on our percentile ranking among these companies. The performance shares are entitled to any dividends made during the performance period in the same proportion as the number of performance shares that vest. Dividends will be paid at the end of the service period.

We classified the performance shares as a share-based equity award, and as such, compensation expense related to these shares is based on the grant-date fair value, which will be recognized ratably over the requisite service period. We determined the fair value of the performance shares using a Monte Carlo simulation valuation model. The Monte Carlo simulation estimates the fair value of our performance awards primarily based on the terms associated with the grant and public information that is readily available. The underlying principles in the Monte Carlo simulation are that publicly traded stocks are fairly priced and the future returns of a stock may be estimated primarily by the stock’s assumed volatility.

During the second quarter of 2016, in connection with the Transactions, outstanding equity awards outstanding on May 11, 2016 were modified and converted into new equity awards pursuant to the plan agreement using conversion ratios designed to maintain the value of these awards to the holders immediately prior to the Transactions. Adjustments to our outstanding stock-based compensation awards resulted in an insignificant amount of compensation expense as their fair value immediately before the Transactions approximated their fair value immediately after the Transactions. Additionally, we cancelled approximately 133,000 restricted stock and units that were held by former employees that are now employees of ILG.

During the six months ended June 30, 2016, we granted approximately 177,000 performance shares with a grant date fair value of $78.56 per share. In addition, we granted approximately 1,151,000 shares of restricted stock and restricted stock units that had a weighted average grant date fair value of $64.83 per share or unit. In each case, the number of awards granted in the six months ended June 30, 2016 includes the adjustment discussed above to the outstanding equity awards as a result of the Transactions.

We recorded stock-based employee compensation expense, including the impact of reimbursements from third parties, of $13 million and $26 million in the three and six months ended June 30, 2016, respectively, compared to $12 million and $26 million, in the three and six months ended June 30, 2015, respectively.

As of June 30, 2016, there was approximately $78 million of unrecognized compensation cost, net of estimated forfeitures, including the impact of reimbursements from third parties, which is expected to be recognized on a straight-line basis over a weighted-average period of 1.6 years.