Stock-Based Compensation Programs

6 Months Ended

Jun. 30, 2016

15. Stock-Based Compensation Programs

The company has shareholder-approved stock plans under which options and stock-settled appreciation rights (SSARs) have been granted to employees at the market value of the company’s stock at the date of grant. In general, options and SSARs are exercisable in four equal installments commencing one year from the date of grant and terminating 10 years from the date of grant. Approximately 1 million stock options and SSARs were granted in January 2016. These options and SSARs cannot be traded in any equity market. However, based on the Black-Scholes option pricing model, options and SSARs granted in 2016 and 2015 have estimated weighted average fair values at the date of grant of $18.58 per share and $14.20 per share, respectively. The actual value an employee may realize will depend on the excess of the stock price over the exercise price on the date the option or SSAR is exercised. Consequently, there is no assurance the value realized by an employee will approximate the value estimated. The fair values were estimated using the following weighted average assumptions:


	January 2016		February 2015

Expected dividend yield	0.79	%	0.79	%
Expected stock price volatility	29.25	%	22.11	%
Risk-free interest rate	1.57	%	1.39	%
Expected life of options (in years)	5.94	years	5.85	years

In the first quarters of 2016 and 2015, the company’s board of directors granted 118,755 and 116,559 performance-contingent restricted stock units (PCEQs), respectively, to key employees. These PCEQs vest three years from the date of grant, and the number of shares available at the vesting date is based on the company’s growth in economic value added (EVA®) dollars in excess of the EVA® dollars generated in the calendar year prior to the grant as the minimum threshold, and can range from zero to 200 percent of each participant’s assigned PCEQ award. If the minimum performance goals are not met, the PCEQ will be forfeited. Grants under the plan are being accounted for as equity awards and compensation expense is recorded based upon the most probable outcome using the closing market price of the shares at the grant date. On a quarterly and annual basis, the company reassesses the probability of the goals being met and adjusts compensation expense as appropriate.

Rexam’s primary stock-based compensation programs consisted of Long Term Incentive Plans (LTIP) that vest based on service and performance conditions over a three-year period. Consistent with the agreement to acquire Rexam, the company cash settled awards to the extent the award was vested through the date of acquisition; of which $21 million was included in the consideration paid to acquire Rexam. The company provided replacement awards to employees for the unvested portion of Rexam awards at the date of acquisition, which vest over the shorter of the original remaining vesting period or if the employees leaves the company on good terms. Certain employees became vested in their replacement awards at the acquisition date when their employment with the company ended as a result of the acquisition or sale of the Divestment Business, which resulted in the company recording expense of $58 million in business consolidation and other activities in June 2016. In addition, certain other employees will remain as Ball employees or vest in their replacement awards when their employment with the company ends after a transition period. Based on June 30, 2016, the total future expense for these employees is estimated to be $18 million and will be reported as expense over the vesting periods. The awards are payable in cash and the amount is based on the fair value of company’s stock price. As a result, on a quarterly basis the company will remeasure the fair value of the awards based on the company’s stock prices and record the change in value in current period earnings.