MCDONALDS CORP | 2013 | FY | 3


Share-based Compensation
 
The Company maintains a share-based compensation plan which authorizes the granting of various equity-based incentives including stock options and restricted stock units (RSUs) to employees and nonemployee directors. The number of shares of common stock reserved for issuance under the plans was 73.1 million at December 31, 2013, including 46.0 million available for future grants.
STOCK OPTIONS
Stock options to purchase common stock are granted with an exercise price equal to the closing market price of the Company’s stock on the date of grant. Substantially all of the options become exercisable in four equal installments, beginning a year from the date of the grant, and generally expire 10 years from the grant date.
Intrinsic value for stock options is defined as the difference between the current market value of the Company’s stock and the exercise price. During 2013, 2012 and 2011, the total intrinsic value of stock options exercised was $325.2 million, $469.8 million and $416.5 million, respectively. Cash received from stock options exercised during 2013 was $233.3 million and the tax benefit realized from stock options exercised totaled $98.9 million. The Company uses treasury shares purchased under the Company’s share repurchase program to satisfy share-based exercises.
A summary of the status of the Company’s stock option grants as of December 31, 2013, 2012 and 2011, and changes during the years then ended, is presented in the following table:
 
2013
 
 
2012
 
 
2011
 
Options
Shares in
millions

 
Weighted-
average
exercise
price
 
 
Weighted-
average
remaining
contractual
life in years
 
Aggregate
intrinsic
value in
millions
 
 
Shares in
millions

 
Weighted-
average
exercise
price
 
 
Shares in
millions

 
Weighted-
average
exercise
price
 
Outstanding at beginning of year
27.4

 
 
$
59.86

 
 
 
 
 
 
31.7

 
 
$
47.77

 
37.4

 
 
$
42.47

Granted
3.7

 
 
94.36

 
 
 
 
 
 
4.9

 
 
99.63

 
3.9

 
 
75.97

Exercised
(5.7
)
 
 
40.12

 
 
 
 
 
 
(8.6
)
 
 
38.51

 
(9.0
)
 
 
37.46

Forfeited/expired
(0.3
)
 
 
79.15

 
 
 
 
 
 
(0.6
)
 
 
55.28

 
(0.6
)
 
 
55.00

Outstanding at end of year
25.1

 
 
$
69.15

 
5.9
 
 
$
713.7

 
27.4

 
 
$
59.86

 
31.7

 
 
$
47.77

Exercisable at end of year
15.6

 
 
$
56.43

 
4.5
 
 
$
638.6

 
17.1

 
 
 
 
21.9

 
 
 

RSUs
RSUs generally vest 100% on the third anniversary of the grant and are payable in either shares of McDonald’s common stock or cash, at the Company’s discretion. Certain executives have been awarded RSUs that vest based on Company performance. The fair value of each RSU granted is equal to the market price of the Company’s stock at date of grant less the present value of expected dividends over the vesting period.
A summary of the Company’s RSU activity during the years ended December 31, 2013, 2012 and 2011 is presented in the following table:
 
2013
 
 
2012
 
 
2011
 
RSUs
Shares in
millions

 
Weighted-
average
grant date
fair value
 
 
Shares in
millions

 
Weighted-
average
grant date
fair value
 
 
Shares in
millions

 
Weighted-
average
grant date
fair value
 
Nonvested at beginning of year
1.8

 
 
$
68.23

 
2.1

 
 
$
56.78

 
2.3

 
 
$
51.17

Granted
1.0

 
 
83.98

 
0.5

 
 
90.34

 
0.6

 
 
67.96

Vested
(0.7
)
 
 
56.93

 
(0.8
)
 
 
50.69

 
(0.7
)
 
 
49.88

Forfeited
(0.1
)
 
 
82.44

 
0.0

 
 
68.72

 
(0.1
)
 
 
50.16

Nonvested at end of year
2.0

 
 
$
78.89

 
1.8

 
 
$
68.23

 
2.1

 
 
$
56.78


The total fair value of RSUs vested during 2013, 2012 and 2011 was $60.2 million, $76.4 million and $55.5 million, respectively. The tax benefit realized from RSUs vested during 2013 was $18.3 million.

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