Stock-Based Compensation

9 Months Ended

Sep. 30, 2014

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

The Company recorded stock-based compensation expense of $7 million and $5 million ($4 million and $3 million, net of tax) during the three months ended September 30, 2014 and 2013, respectively and $23 million and $14 million ($14 million and $9 million, net of tax) during the nine months ended September 30, 2014 and 2013, respectively. In jurisdictions with net operating loss carryforwards, exercises and/or vestings of stock-based awards have generated $48 million of total tax deductions at September 30, 2014. Approximately $19 million of tax benefits will be recorded in additional paid-in capital when these tax deductions are realized in these jurisdictions.

The weighted average assumptions used in the Monte Carlo simulation model to calculate the fair value of the Company’s stock unit awards containing a market condition are as follows:



	Nine Months Ended September 30,
	2014	2013
Expected volatility of stock price	40%	43%
Risk-free interest rate	0.83%	0.39%
Expected term of awards	3 years	3 years
Dividend yield	0.0%	0.0%

The activity related to the Company’s restricted stock units (“RSUs”) and cash units, consisted of (in thousands of shares):



		Time-Based RSUs				Performance-Based and Market-Based RSUs				Cash Unit Awards
		Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value		Number of Units	Weighted Average Grant Date Fair Value
Outstanding at January 1, 2014 ^(a)		1,308		$	17.92	2,043		$	13.79	267	$	14.90
	Granted	381		42.05		326		42.03		—	—
	Vested ^(b)	(605	)	16.72		(436	)	10.91		—	—
	Forfeited/expired	(73	)	23.92		(42	)	20.25		—	—
Outstanding at September 30, 2014 ^(c)		1,011		$	27.27	1,891		$	19.19	267	$	14.90

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^(a)	Reflects the maximum number of stock units assuming achievement of all time-, performance- and market-vesting criteria and does not include those for non-employee directors. The weighted-average fair value of time-based RSUs, performance-based and market-based RSUs, and cash units granted during the nine months ended September 30, 2013 was $21.77, $20.03 and $17.14, respectively.


^(b)	The total grant date fair value of RSUs vested during the nine months ended September 30, 2014 and 2013 was $15 million and $14 million, respectively.

^(c)

The Company’s outstanding time-based RSUs, performance-based and market-based RSUs, and cash units had aggregate intrinsic value of $56 million, $104 million and $15 million, respectively. Aggregate unrecognized compensation expense related to time-based RSUs and performance-based and market-based RSUs amounted to $35 million and will be recognized over a weighted average vesting period of 0.8 years. The Company assumes that substantially all outstanding awards will vest over time.

The stock option activity consisted of (in thousands of shares):



		Number of Options		Weighted Average Exercise Price		Aggregate Intrinsic Value (in millions)		Weighted Average Remaining Contractual Term (years)
Outstanding at January 1, 2014		979		$	2.82	$	37	5.2
	Granted	—		—		—
	Exercised	(121	)	2.28		6
	Forfeited/expired	—		—		—
Outstanding at September 30, 2014 ^(a)		858		2.90		45		4.5
Exercisable at September 30, 2014		826		$	2.56	$	43	4.5

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^(a)	The Company assumes that substantially all outstanding stock options will vest over time.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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