ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾

Quarterly report pursuant to Section 13 or 15(d)

STOCK-BASED COMPENSATION PLAN

v3.8.0.1
STOCK-BASED COMPENSATION PLAN
3 Months Ended
Mar. 31, 2018
STOCK-BASED COMPENSATION PLAN Ìý
STOCK-BASED COMPENSATION PLAN

16. STOCK‑BASED COMPENSATION PLANS

Ìý

On May 5, 2016, our stockholders approved a new ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ Corporation 2016 Stock Incentive Plan (the â€�2016 Stock Incentive Planâ€�), which reserved 8.2 million shares for issuance. The ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ Corporation Stock Incentive Plan, as amended and restated (the “Prior Planâ€�), remains in effect for outstanding awards granted pursuant to the Prior Plan, but no further awards may be granted under the Prior Plan. Under the 2016 Stock Incentive Plan we may grant nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, phantom stock, performance share units and other stock-based awards to our employees, directors and consultants and to employees and consultants of our subsidiaries, provided that incentive stock options may be granted solely to employees. The terms of the grants under both the 2016 Stock Incentive Plan and the Prior Plan are fixed at the grant date. As of March 31, 2018, we were authorized to grant up to 8.2Ìýmillion shares under the 2016 Stock Incentive Plan. As of March 31, 2018, we had approximately 8Ìýmillion shares remaining under the 2016 Stock Incentive Plan available for grant. Option awards have a maximum contractual term of 10Ìýyears and generally must have an exercise price at least equal to the market price of our common stock on the date the option award is granted. Outstanding stock-based awards generally vest annually over a three-year period.

Ìý

The compensation cost from continuing operations under the 2016 Stock Incentive Plan and the Prior Plan for our Company and ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International were as follows (dollars in millions):

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Three months ended MarchÌý31,Ìý

Ìý

ÌýÌýÌýÌý

2018

Ìý

2017

ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ Corporation compensation cost

ÌýÌýÌýÌý

$

Ìý8

Ìý

$

Ìý9

ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International compensation cost

Ìý

Ìý

Ìý7

Ìý

Ìý

Ìý8

Ìý

The total income tax benefit recognized in the condensed consolidated statements of operations for us and ÀÖÌìÌÃfun88(ÖйúÇø)¹Ù·½ÍøÕ¾ International for stock-based compensation arrangements was $4 million and $2Ìýmillion for the three months ended March 31, 2018 and 2017, respectively.

Ìý

Stock Options

Ìý

The fair value of each stock option award is estimated on the date of grant using the Black‑Scholes valuation model that uses the assumptions noted in the following table. Expected volatilities are based on the historical volatility of our common stock through the grant date. The expected term of options granted was estimated based on the contractual term of the instruments and employees� expected exercise and post‑vesting employment termination behavior. The risk‑free rate for periods within the contractual life of the option was based on the U.S. Treasury yield curve in effect at the time of grant. The assumptions noted below represent the weighted average of the assumptions utilized for stock options granted during the periods.

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Three months ended MarchÌý31,Ìý

Ìý

ÌýÌýÌýÌý

Ìý

2018

Ìý

2017

Dividend yield

Ìý

Ìý

1.5

%

Ìý

2.4

%

Expected volatility

Ìý

Ìý

55.2

%

Ìý

56.9

%

Risk-free interest rate

Ìý

Ìý

2.6

%

Ìý

2.0

%

Expected life of stock options granted during the period

Ìý

Ìý

5.9

years

Ìý

5.9

years

Ìý

A summary of stock option activity under the 2016 Stock Incentive Plan and the Prior Plan as of March 31, 2018 and changes during the three months then ended is presented below:

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Weighted

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Weighted

Ìý

Average

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Average

Ìý

Remaining

Ìý

Aggregate

Ìý

Ìý

Ìý

Ìý

Ìý

Exercise

Ìý

Contractual

Ìý

Intrinsic

Option Awards

ÌýÌýÌýÌý

Shares

ÌýÌýÌýÌý

Price

ÌýÌýÌýÌý

Term

ÌýÌýÌýÌý

Value

Ìý

Ìý

(inÌýthousands)

Ìý

Ìý

Ìý

Ìý

(years)

Ìý

(inÌýmillions)

Outstanding at JanuaryÌý1, 2018

ÌýÌýÌýÌý

Ìý

7,988

Ìý

$

13.99

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Granted

Ìý

Ìý

479

Ìý

Ìý

32.77

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Exercised

Ìý

Ìý

(715)

Ìý

Ìý

10.05

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Forfeited

Ìý

Ìý

(12)

Ìý

Ìý

13.58

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Outstanding at MarchÌý31,Ìý2018

Ìý

Ìý

7,740

Ìý

Ìý

15.52

Ìý

Ìý

Ìý5.9

Ìý

$

108

Exercisable at MarchÌý31,Ìý2018

Ìý

Ìý

5,919

Ìý

Ìý

14.49

Ìý

Ìý

5.0

Ìý

Ìý

87

Ìý

The weighted‑average grant‑date fair value of stock options granted during the three months ended March 31, 2018 was $15.38 per option. As of March 31, 2018, there was $13 million of total unrecognized compensation cost related to nonvested stock option arrangements granted under the 2016 Stock Incentive Plan and the Prior Plan. That cost is expected to be recognized over a weighted-average period of approximately 2.3 years.

Ìý

The total intrinsic value of stock options exercised during the three months ended March 31, 2018 and 2017 was approximatelyÌý$17 million andÌý$5 million, respectively. Cash received from stock options exercised during the three months ended March 31, 2018 and 2017 was approximately $6 million and $17 million, respectively. The cash tax benefit from stock options exercised during the three months ended March 31, 2018 and 2017 was approximately $3 million and $1 million, respectively.

Ìý

Nonvested Shares

Ìý

Nonvested shares granted under the 2016 Stock Incentive Plan and the Prior Plan consist of restricted stock and performance share unit awards, which are accounted for as equity awards, and phantom stock, which is accounted for as a liability award because it can be settled in either stock or cash.

Ìý

The fair value of each performance share unit award is estimated using a Monte Carlo simulation model that uses various assumptions, including an expected volatility rate and a risk-free interest rate. For the three months ended March 31, 2018 and 2017, the weighted-average expected volatility rate was 44.3% and 45.0%, respectively, and the weighted average risk-free interest rate was 2.3% and 1.5%, respectively. For the performance share unit awards granted in the three months ended March 31, 2018 and 2017, the number of shares earned varies based upon the Company achieving certain performance criteria over a Ìýthree-year performance period. The performance criteria are total stockholder return of our common stock relative to the total stockholder return of a specified industry peer group for the three-year performance periods.

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A summary of the status of our nonvested shares as of March 31, 2018 and changes during the three months then ended is presented below:

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Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

Ìý

EquityÌýAwards

Ìý

LiabilityÌýAwards

Ìý

Ìý

Ìý

Ìý

Ìý

Weighted

Ìý

Ìý

Ìý

Ìý

Weighted

Ìý

Ìý

Ìý

Ìý

Ìý

Average

Ìý

Ìý

Ìý

Ìý

Average

Ìý

Ìý

Ìý

Ìý

Ìý

Grant-ÌýDate

Ìý

Ìý

Ìý

Ìý

Grant-Date

Ìý

ÌýÌýÌýÌý

Shares

ÌýÌýÌýÌý

FairÌýValue

ÌýÌýÌýÌý

Shares

ÌýÌýÌýÌý

FairÌýValue

Ìý

Ìý

(inÌýthousands)

Ìý

Ìý

Ìý

Ìý

(inÌýthousands)

Ìý

Ìý

Ìý

Nonvested at JanuaryÌý1, 2018

Ìý

Ìý

2,457

Ìý

$

14.93

Ìý

Ìý

696

Ìý

$

14.69

Granted

Ìý

Ìý

414

Ìý

Ìý

35.32

Ìý

Ìý

169

Ìý

Ìý

32.77

Vested

Ìý

Ìý

(699)

(1)ÌýÌý

Ìý

16.71

Ìý

Ìý

(328)

Ìý

Ìý

14.67

Forfeited

Ìý

Ìý

(107)

Ìý

Ìý

14.97

Ìý

Ìý

(6)

Ìý

Ìý

14.41

Nonvested at MarchÌý31,Ìý2018

Ìý

Ìý

2,065

Ìý

Ìý

18.42

Ìý

Ìý

531

Ìý

Ìý

20.47


(1)

As of March 31, 2018, a total of 473,110 restricted stock units were vested but not yet issued, of which 12,360 vested during the three months ended March 31, 2018. These shares have not been reflected as vested shares in this table because, in accordance with the restricted stock unit agreements, shares of common stock are not issued for vested restricted stock units until termination of employment.

As of March 31, 2018, there was $38Ìýmillion of total unrecognized compensation cost related to nonvested share compensation arrangements granted under the 2016 Stock Incentive Plan and the Prior Plan. That cost is expected to be recognized over a weighted‑average period of approximately 2.1 years. The value of share awards that vested during the three months ended March 31, 2018 and 2017 was $22Ìýmillion and $20Ìýmillion, respectively.