Note 9 – Employee Compensation and Benefit Plans
Stock Awards
During the second quarter of 2013, the Company’s Board of Directors and stockholders approved the 2013 Omnibus Incentive Plan, which authorized the issuance of up to 63,275,000 shares of common stock. Under the incentive plan, the Company may grant stock options, stock appreciation rights, restricted stock, restricted stock units, and performance awards to employees, consultants, advisors and non-employee directors. As of December 31, 2013, there were 40 million shares of common stock available for future grants under the incentive plan.
In June 2013, the Company granted restricted stock units (“RSUs”) to eligible employees and certain non-employee directors. RSUs entitle the grantee to receive shares of T-Mobile common stock at the end of a vesting period up to 3.5 years.
In June 2013, the Company also granted performance stock units (“PSUs”) to eligible key executives of the Company. PSUs entitle the holder to receive shares of T-Mobile common stock at the end of a vesting period of approximately 2.5 years if the performance goal is achieved. The number of shares ultimately received is dependent on T-Mobile's business performance against the specified performance goal. The PSUs were considered granted for accounting purposes upon specification of the performance goal in July 2013.
The Company recognized stock-based compensation expense of $100 million and related income tax benefits of $38 million for the year ended December 31, 2013.
The following activity occurred under the RSU and PSU awards:
|
| | | | | | |
| Units | | Weighted Average Grant-Date Fair Value |
Nonvested, December 31, 2012 | — |
| | $ | — |
|
Granted | 24,685,791 |
| | 22.07 |
|
Vested | (88,440 | ) | | 21.28 |
|
Forfeited | (1,648,186 | ) | | 21.22 |
|
Nonvested, December 31, 2013 | 22,949,165 |
| | $ | 22.14 |
|
Vesting of the stock awards triggers a tax obligation for the employee, which is required to be remitted to the relevant tax authorities. The Company has agreed to withhold stock units from the employee to cover the tax obligation. For the year ended December 31, 2013 the Company withheld 25,621 stock units to cover tax obligations associated with vesting of stock awards. The net shares issued to the employee are accounted for as outstanding common stock.
As of December 31, 2013, total unrecognized stock-based compensation expense related to nonvested stock awards, net of estimated forfeitures, was $336 million, before income taxes, which is expected to be recognized over a weighted-average period of 2.2 years.
Stock Options
Prior to the business combination, MetroPCS had established the MetroPCS Communications, Inc. 2010 Equity Incentive Compensation Plan, the Amended and Restated MetroPCS Communications, Inc. 2004 Equity Incentive Compensation Plan and the Second Amended and Restated 1995 Stock Option Plan (“Predecessor Plans”). The MetroPCS stock options were adjusted in connection with the business combination. See Note 2 – Business Combinations for further information. Following stockholder approval of the Company’s 2013 Omnibus Incentive Plan, no new awards may be granted under the Predecessor Plans.
The following activity occurred under the Predecessor Plans for the period from May 1, 2013 through December 31, 2013:
|
| | | | | | | | |
| Shares | | Weighted-Average Exercise Price | | Weighted-Average Remaining Contractual Term (Years) |
Outstanding, May 1, 2013 | 16,738,643 |
| | $ | 19.66 |
| |
|
Exercised | (9,278,599 | ) | | 14.43 |
| |
|
Expired | (1,127,024 | ) | | 34.73 |
| |
|
Outstanding and exercisable, December 31, 2013 | 6,333,020 |
| | $ | 24.64 |
| | 4.6 |
Stock options exercised under the Predecessor Plans generated proceeds of approximately $137 million for the year ended December 31, 2013. The Company did not realize excess tax benefits for the year ended December 31, 2013 as such benefits would not have reduced income taxes payable.
Employee Retirement Savings Plan
The Company sponsors a retirement savings plan for the majority of its employees under section 401(k) of the Internal Revenue Code and similar plans. The plans allow employees to contribute a portion of their pretax income in accordance with specified guidelines. The plans match a percentage of employee contributions up to certain limits. Employer matching contributions were $58 million, $59 million and $51 million for the years ended December 31, 2013, 2012 and 2011, respectively.
Executive Compensation Plan
The Company maintains a performance-based Long Term Incentive Plan (“LTIP”) that aligns to the Company's long-term business strategy. LTIP awards were earned over a performance period of three years with 50% of the target value earned on a ratable schedule and 50% of the target value earned at the end of the three year performance period based on achievement of applicable performance metrics. As of December 31, 2013, there were LTIP awards outstanding for the 2013, 2012 and 2011 plans. Following the business combination with MetroPCS, awards were fixed at 100% attainment and will be paid out over the remaining three year period. In addition, no new awards are expected be granted under the LTIP.
Compensation expense reported within operating expenses related to the Company's LTIP was $63 million, $82 million and $52 million for the years ended December 31, 2013, 2012 and 2011, respectively. Payments of $61 million, $52 million, and $33 million were made to participants related to T‑Mobile's LTIP during the years ended December 31, 2013, 2012 and 2011, respectively.
