Stock-Based Compensation

9 Months Ended

Sep. 30, 2022

Stock-Based Compensation

Stock-Based Compensation

17. Stock-Based Compensation:

Stock-based compensation cost for stock awards and stock options is measured at grant date, based on the fair value of the award, and is recognized over the employee requisite service period. The following table presents total stock-based compensation cost included in income from continuing operations.

	Three Months Ended September 30,				Nine Months Ended September 30,
(Dollars in millions)	2022		2021		2022		2021
Cost	$	40	$	38	$	124	$	106
Selling, general and administrative		138		144		427		399
Research, development and engineering		73		60		188		160
Pre-tax stock-based compensation cost	$	251	$	242	$	739	$	665
Income tax benefits		(51)		(54)		(191)		(166)
Total net stock-based compensation cost	$	200	$	188	$	548	$	499

Effective April 1, 2022, the company increased the discount for eligible participants under its Employees Stock Purchase Plan (ESPP) from 5 percent to 15 percent off the average market price on the date of purchase. With this change, the ESPP is considered compensatory under the accounting requirements for stock-based compensation.

Pre-tax stock-based compensation cost for the three months ended September 30, 2022 increased $10 million compared to the corresponding period in the prior year, including increases in ESPP ($15 million) as a result of the change described above and performance share units ($5 million), partially offset by decreases in stock options ($10 million) primarily due to the conversion of stock options of acquired entities in the prior year.

Pre-tax stock-based compensation cost for the nine months ended September 30, 2022 increased $74 million compared to the corresponding period in the prior year, including increases in restricted stock units ($32 million), ESPP ($30 million) and performance share units ($16 million). The increases are driven by the change in ESPP described above and a change in the timing of the company’s executive grant cycle in 2022.

Total unrecognized compensation cost related to non-vested awards at September 30, 2022 was $1.6 billion and is expected to be recognized over a weighted-average period of approximately 2.7 years.

Capitalized stock-based compensation cost was not material at September 30, 2022 and 2021.