Note 7—Stock-Based Compensation Plans

The Company grants stock-based compensation to employees and non-employee directors. Stock options awards were granted under the Amended and Restated 2002 Stock Incentive Plan, amended as of January 2006 (Second Restated 2002 Plan), and predecessor plans until, effective in the fourth quarter of fiscal 2006, the Company began awarding restricted stock units (RSUs) under the Second Restated 2002 Plan in lieu of stock options. Through a series of shareholder approvals, there have been a series of amended and restated plans and new provisions implemented by the Company. Under revisions in the Fourth Restated 2002 Plan in the fourth quarter of fiscal 2008, prospective grants of RSUs are subject, upon certain terminations of employment, to quarterly vesting, as opposed to daily vesting. Previously awarded RSU grants continue to involve daily vesting upon certain terminations of employment. Additionally, employees who attain certain years of service with the Company will receive shares under accelerated vesting provisions on the annual vesting date rather than upon qualified retirement. The first grant impacted by these amendments occurred in the first quarter of fiscal 2009. Each share issued in respect of stock bonus or stock unit awards is counted as 1.75 shares toward the limit of shares made available under the Fourth Restated 2002 Plan. The Sixth Restated 2002 Plan, amended in the second quarter of fiscal 2012, is the Company’s only active stock-based compensation plan at the end of 2012. The Sixth Restated 2002 Plan authorized the issuance of 16,000,000 shares (9,143,000 RSUs) of common stock for future grants in addition to shares previously authorized. The Company issues new shares of common stock upon exercise of stock options and upon vesting of RSUs. RSUs are delivered to participants annually, net of shares equal to the minimum statutory withholding taxes.

Summary of Stock Option Activity

All outstanding stock options were fully vested and exercisable at the end of 2012 and 2011. The following table summarizes stock option transactions during 2012:

 

		Number Of Options (in 000’s)				Weighted- Average Exercise Price				Weighted- Average Remaining Contractual Term (in years)				Aggregate Intrinsic Value(1)
Outstanding at the end of 2011			5,917			$	40.07
Exercised			(2,756	)			39.11
Outstanding at the end of 2012			3,161			$	40.90				2.06			$	180

 

(1)	The difference between the exercise price and market value of common stock at the end of 2012.

 

The following is a summary of stock options outstanding at the end of 2012:

 

		Options Outstanding and Exercisable
Range of Prices		Number of Options (in  000’s)				Weighted- Average Remaining Contractual Life				Weighted- Average Exercise Price
$30.41–$37.35			1,232				1.27			$	35.95
$37.44–$43.79			1,699				2.57				43.77
$45.99–$46.46			230				2.56				46.19
			3,161				2.06			$	40.90

Options exercisable and the weighted average exercise price at the end of 2010 were 13,032 shares and $39.43, respectively.

The tax benefits realized, derived from the compensation deductions resulting from the option exercises, and intrinsic value related to total stock options exercised during 2012, 2011, and 2010 are provided in the following table:

 

		2012				2011				2010
Actual tax benefit realized for stock options exercised		$	50			$	78			$	34
Intrinsic value of stock options exercised(1)		$	137			$	227			$	98

 

(1)	The difference between the exercise price and market value of common stock measured at each individual exercise date.

Employee Tax Consequences on Certain Stock Options

In 2010, the Company recorded a non-recurring benefit of $24 to selling, general and administrative expense related to a refund of a previously recorded Canadian employee tax liability.

Summary of Restricted Stock Unit Activity

RSUs granted to employees and to non-employee directors generally vest over five years and three years, respectively; however, the Company provides for accelerated vesting for employees and non-employee directors that have attained twenty-five or more years and five or more years of service with the Company, respectively. Recipients are not entitled to vote or receive dividends on non-vested and undelivered shares. At the end of 2012, 14,345,000 shares were available to be granted as RSUs under the Sixth Restated 2002 Plan.

The following awards were outstanding at the end of 2012:

 

•

8,558,000 time-based RSUs that vest upon continued employment over specified periods of time;

 

•

702,000 performance-based RSUs, of which 304,000 will be formally granted to certain executive officers of the Company upon the official certification of the attainment of specified performance targets for 2012. Once formally granted, the restrictions lapse upon continued employment over specified periods of time.

 

The following table summarizes RSU transactions during 2012:

 

		Number of Units (in 000’s)				Weighted-Average Grant Date Fair Value
Non-vested at the end of 2011			9,727			$	57.56
Granted			3,593				81.55
Vested and delivered			(3,819	)			58.97
Forfeited			(241	)			65.54
Non-vested at the end of 2012			9,260			$	66.14

The remaining unrecognized compensation cost related to non-vested RSUs at the end of 2012 was $422 and the weighted-average period of time over which this cost will be recognized is 1.7 years. At the end of 2012, there were approximately 2,900,000 RSUs vested, but not yet delivered.

Summary of Stock-Based Compensation

The following table summarizes stock-based compensation expense and the related tax benefits under the Company’s plans:

 

		2012				2011				2010
RSUs		$	241			$	206			$	171
Stock options			0				1				19
Total stock-based compensation expense before income taxes			241				207				190
Less recognized income tax benefit			79				67				63
Total stock-based compensation expense, net of income taxes		$	162			$	140			$	127