Prudential 2012 Annual Report Download - page 170

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
17. SHARE-BASED PAYMENTS (continued)
A summary of the Company’s restricted stock units and performance shares and performance unit awards is as follows:
Restricted
Stock
Units
Weighted
Average Grant
Date Fair Value
Performance
Share and
Performance
Unit Awards(1)
Weighted
Average Grant
Date Fair Value
Restricted at December 31, 2011(3) ....................... 6,241,778 $40.37 593,376 $50.12
Granted(3) ...................................... 1,547,327 58.89 354,134 53.33
Forfeited ........................................ (93,931) 56.98 (14,138) 41.39
Performance adjustment(2) ......................... 0 0
Released ........................................ (3,328,013) 26.86 0 0
Restricted at December 31, 2012(3) ....................... 4,367,161 $56.87 933,372 $53.33
(1) Performance share and performance unit awards reflect the target awarded, reduced for cancellations and releases to date. The actual number of units to
be awarded at the end of each performance period will range between 0% and 150% of the target number of awards granted, based upon a measure of
the reported performance for the Company’s Financial Services Businesses relative to stated goals.
(2) Represents the change in shares issued based upon the attainment of performance goals for the Company’s Financial Services Businesses. No
performance shares or performance unit awards were released in 2012 as no performance shares or performance units were granted in 2009.
(3) For performance share and performance unit awards issued after January 1, 2010, the grant date is the same as the date the grant vests. The features of
the grant are such that a mutual understanding of the key terms and conditions of the award between the employee and employer have not been reached
until the grant is vested. Consequently, the weighted average grant date fair value as of December 31, 2012 and December 31, 2011 is the year end
closing stock price of Prudential Financial’s common stock.
The fair market value of restricted stock units and performance shares released for the years ended December 31, 2012, 2011 and 2010
was $196 million, $75 million and $56 million, respectively.
The weighted average grant date fair value for restricted stock units granted during the years ended December 31, 2012, 2011 and
2010 was $58.89, $63.39 and $48.56, respectively. The weighted average grant date fair value for performance shares and performance
units granted during the years ended December 31, 2012, 2011 and 2010 was $53.33, $50.12 and $58.71, respectively.
The number of restricted stock units, performance shares and performance units expected to vest at December 31, 2012 is 4,993,644.
Unrecognized Compensation Cost
Unrecognized compensation cost for stock options as of December 31, 2012 was $18 million with a weighted average recognition
period of 1.66 years. Unrecognized compensation cost for restricted stock units, performance shares and performance units as of
December 31, 2012 was $77 million with a weighted average recognition period of 1.74 years.
Tax Benefits Realized
The tax benefit realized for exercises of stock options during the years ended December 31, 2012, 2011 and 2010 was $21 million,
$18 million and $14 million, respectively.
The tax benefit realized upon vesting of restricted stock units and performance shares for the years ended December 31, 2012, 2011
and 2010 was $69 million, $26 million and $18 million, respectively.
Stock Purchase Plan
At the Annual Meeting of the Shareholders of the Company held on June 7, 2005, the shareholders approved the Prudential Financial,
Inc. Employee Stock Purchase Plan. The plan is a qualified Employee Stock Purchase Plan under Section 423 of the Code. Under the plan,
eligible participants may purchase shares based upon quarterly offering periods at an amount equal to the lesser of (1) 85% of the closing
market price of the Common Stock on the first day of the quarterly offering period, or (2) 85% of the closing market price of the Common
Stock on the last day of the quarterly offering period. Participant contributions will be limited to the lower of 10% of eligible earnings or
$25,000.
Compensation cost is recognized for each three-month offering period and is based on grant date fair value. The fair value is estimated
using the 15% discount off of the grant date share price, plus the value of three month call and put options on shares at the grant date share
price, less the value of forgone interest. Compensation costs recognized for employees under the Company’s Employee Stock Purchase
Plan for the years ended December 31, 2012, 2011 and 2010 was $13 million, $12 million and $12 million, respectively. The weighted
average grant date fair value for employee shares recognized in compensation cost for the years ended December 31, 2012, 2011 and 2010
was $11.10, $12.87, and $13.06, respectively.
Tax benefits are only recorded in the event of a disqualifying disposition. For the years ended December 31, 2012, 2011 and 2010, tax
benefits realized upon disqualifying dispositions were de minimis.
During the year ended December 31, 2012, 1,362,896 shares were purchased under the plan, including those shares purchased in
January 2012 related to the October 1 to December 31, 2011 offering period. During the year ended December 31, 2011, 1,117,395 shares
were purchased under the plan, including those shares purchased in January 2011 related to the October 1 to December 31, 2010 offering
period. During the year ended December 31, 2010, 1,092,676 shares were purchased under the plan, including those shares purchased in
January 2010 related to October 1 to December 31 2009 offering period. As of December 31, 2012, 19,148,813 authorized shares remain
available for future issuance under the plan.
168 Prudential Financial, Inc. 2012 Annual Report