Stock Compensation Plans

9 Months Ended

Sep. 30, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK COMPENSATION PLANS

STOCK COMPENSATION PLANS

Our Board of Directors granted 0.7 million stock options, 0.1 million restricted stock units and0.2 million performance share units during the nine months ended September 30, 2017 under our stock compensation plans. The weighted average exercise price per share and weighted average fair value per share of the stock option grants during the nine months ended September 30, 2017 were $35.26 and $12.08, respectively. We estimated the fair value of the stock options using the following assumptions in our Black-Scholes model:

Expected term: 7.2 years

Interest rate: 2.13%

Volatility: 33.63%

Dividend yield: 1.13%

We measure the fair value of grants of restricted stock units and performance share units based primarily on the closing market price of a share of our common stock on the date of the grant, modified as appropriate to take into account the features of such grants. The weighted average fair value per share was $35.05 for restricted stock units and $36.78 for performance share units granted during the nine months ended September 30, 2017.

We recognized stock-based compensation expense of $5 million and $17 million during the three and nine months ended September 30, 2017, respectively. At September 30, 2017, unearned compensation cost related to the unvested portion of all stock-based awards was approximately $29 million and is expected to be recognized over the remaining vesting period of the respective grants, through the first quarter of 2022. We recognized stock-based compensation expense of $7 million and $18 million during the three and nine months ended September 30, 2016, respectively.

Stock based awards are made pursuant to stock compensation plans that are approved by our shareholders. The 2017 Performance Plan was adopted by our shareholders on April 10, 2017 and will expire on April 9, 2027 unless earlier terminated. The 2017 Performance Plan replaced the 2013 Performance Plan, which was terminated on April 10, 2017, except with respect to outstanding awards.