Stock Options and Other Share-Based Compensation
Compensation expense for stock options for 2013, 2012 and 2011 was $292 ($190 after tax), $283 ($184 after tax) and $265 ($172 after tax), respectively. In addition, compensation expense for stock appreciation rights, restricted stock, performance units and restricted stock units was $223 ($145 after tax), $177 ($115 after tax) and $214 ($139 after tax) for 2013, 2012 and 2011, respectively. No significant stock-based compensation cost was capitalized at December 31, 2013, or December 31, 2012.
Cash received in payment for option exercises under all share-based payment arrangements for 2013, 2012 and 2011 was $553, $753 and $948, respectively. Actual tax benefits realized for the tax deductions from option exercises were $73, $101 and $121 for 2013, 2012 and 2011, respectively.
Cash paid to settle performance units and stock appreciation rights was $186, $123 and $151 for 2013, 2012 and 2011, respectively.
Chevron Long-Term Incentive Plan (LTIP) Awards under the LTIP may take the form of, but are not limited to, stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and nonstock grants. From April 2004 through May 2023, no more than 260 million shares may be issued under the LTIP. For awards issued on or after May 29, 2013, no more than 50 million of those shares may be in a form other than a stock option, stock appreciation right or award requiring full payment for shares by the award recipient. For the major types of awards outstanding as of December 31, 2013, the contractual terms vary between three years for the performance units and 10 years for the stock options and stock appreciation rights.
Unocal Share-Based Plans (Unocal Plans) When Chevron acquired Unocal in August 2005, outstanding stock options and stock appreciation rights granted under various Unocal Plans were exchanged for fully vested Chevron options and appreciation rights. These awards retained the same provisions as the original Unocal Plans. Unexercised awards began expiring in early 2010 and will continue to expire through early 2015.
The fair market values of stock options and stock appreciation rights granted in 2013, 2012 and 2011 were measured on the date of grant using the Black-Scholes option-pricing model, with the following weighted-average assumptions:
|
| | | | | | | | | | | | | |
| Year ended December 31 |
| 2013 |
| | | 2012 |
| | 2011 |
| |
Stock Options | | | | | | |
|
Expected term in years1 | 6.0 |
|
|
| 6.0 |
|
| 6.2 |
|
|
Volatility2 | 31.3 |
| % |
| 31.7 |
| % | 31.0 |
| % |
Risk-free interest rate based on zero coupon U.S. treasury note | 1.2 |
| % |
| 1.1 |
| % | 2.6 |
| % |
Dividend yield | 3.3 |
| % |
| 3.2 |
| % | 3.6 |
| % |
Weighted-average fair value per option granted | $ | 24.48 |
|
|
| $ | 23.35 |
|
| $ | 21.24 |
|
|
| |
1 | Expected term is based on historical exercise and postvesting cancellation data. |
| |
2 | Volatility rate is based on historical stock prices over an appropriate period, generally equal to the expected term. |
A summary of option activity during 2013 is presented below:
|
| | | | | | | | | | | | |
| | | | | | | |
| | | Weighted- |
| | Average | | |
| | | Average |
| | Remaining | | Aggregate |
|
| Shares |
| | Exercise |
| | Contractual | | Intrinsic |
|
| (Thousands) |
| | Price |
| | Term (Years) | | Value |
|
Outstanding at
January 1, 2013 | 71,895 |
| | $ | 81.26 |
| |
| |
|
Granted | 13,194 |
| | $ | 116.45 |
| |
| |
|
Exercised | (8,377 | ) | | $ | 68.20 |
| |
| |
|
Forfeited | (1,086 | ) | | $ | 93.98 |
| |
| |
|
Outstanding at
December 31, 2013 | 75,626 |
| | $ | 88.44 |
| | 6.12 | | $ | 2,758 |
|
Exercisable at
December 31, 2013 | 51,797 |
| | $ | 78.52 |
| | 5.05 | | $ | 2,403 |
|
The total intrinsic value (i.e., the difference between the exercise price and the market price) of options exercised during 2013, 2012 and 2011 was $445, $580 and $668, respectively. During this period, the company continued its practice of issuing treasury shares upon exercise of these awards.
As of December 31, 2013, there was $259 of total unrecognized before-tax compensation cost related to nonvested share-based
compensation arrangements granted under the plans. That cost is expected to be recognized over a weighted-average period of 1.7 years.
At January 1, 2013, the number of LTIP performance units outstanding was equivalent to 2,827,757 shares. During 2013, 776,180 units were granted, 1,007,952 units vested with cash proceeds distributed to recipients and 64,715 units were forfeited. At December 31, 2013, units outstanding were 2,531,270, and the fair value of the liability recorded for these instruments was $312 measured using the Monte Carlo simulation method. In addition, outstanding stock appreciation rights and other awards that were granted under various LTIP and former Unocal programs totaled approximately 2.9 million equivalent shares as of December 31, 2013. A liability of $107 was recorded for these awards.
