Humana 2015 Annual Report Download - page 126

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Humana Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
118
on the intrinsic value, or the excess of the market value over the exercise or purchase price, of stock options exercised
and restricted stock vested during the period, subject to limitations on the deductibility of annual compensation in
excess of $500,000 per employee as mandated by the Health Care Reform Law. The actual tax benefit realized for the
deductions taken on our tax returns from option exercises and restricted stock vesting totaled $34 million in 2015, $30
million in 2014, and $20 million in 2013. There was no capitalized stock-based compensation expense during these
years.
At December 31, 2015, there were 18.1 million shares reserved for stock award plans. These reserved shares
included giving effect to, under the 2011 Plan, 8.7 million shares of common stock available for future grants assuming
all stock options were granted or 3.8 million shares available for future grants assuming all restricted stock were
granted. Shares may be issued from authorized but unissued company stock or treasury stock.
Restricted Stock
Restricted stock is granted with a fair value equal to the market price of our common stock on the date of grant
and generally vests three years from the date of grant. Restricted stock granted on or after July 2, 2015, generally vests
in equal annual tranches over a three year period from the date of grant. Certain of our restricted stock units also include
performance-based conditions generally associated with strategic membership growth and return on invested capital.
Restricted stock units have forfeitable dividend equivalent rights equal to the dividend paid on common stock. The
weighted-average grant date fair value of our restricted stock was $165.26 in 2015, $103.57 in 2014, and $73.50 in
2013. Activity for our restricted stock was as follows for the year ended December 31, 2015:
Shares
Weighted-
Average
Grant-Date
Fair Value
(shares in thousands)
Nonvested restricted stock at December 31, 2014 3,635 $ 85.52
Granted 837 165.26
Vested (919) 84.95
Forfeited (188) 98.92
Nonvested restricted stock at December 31, 2015 3,365 $ 104.58
Approximately 30% of the nonvested restricted stock at December 31, 2015 included performance-based
conditions.
The fair value of shares vested was $153 million during 2015, $99 million during 2014, and $52 million during
2013. Total compensation expense not yet recognized related to nonvested restricted stock was $88 million at
December 31, 2015. We expect to recognize this compensation expense over a weighted-average period of
approximately 1.4 years. There are no other contractual terms covering restricted stock once vested.
Stock Options
Stock options are granted with an exercise price equal to the fair market value of the underlying common stock
on the date of grant. Our stock plans, as approved by the Board of Directors and stockholders, define fair market value
as the average of the highest and lowest stock prices reported on the composite tape by the New York Stock Exchange
on a given date. Exercise provisions vary, but most options vest in whole or in part 1 to 3 years after grant and expire
7 years after grant.