Time Warner Cable 2011 Annual Report Download - page 105

TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Equity-based compensation expense and the related tax benefit recognized for the years ended December 31, 2011, 2010
and 2009 was as follows (in millions):
Year Ended December 31,
2011 2010 2009
Equity-based compensation expense recognized:
Restricted stock units(a) .................................................. $ 75 $ 64 $ 52
Stock options ......................................................... 38 45 45
Total equity-based compensation expense(a) ................................. $ 113 $ 109 $ 97
Tax benefit recognized .................................................. $ 44 $ 43 $ 38
(a) Amounts in 2011 include $1 million of equity-based compensation expense that is classified in merger-related and restructuring costs in the
consolidated statement of operations.
RSUs, including RSUs subject to performance-based vesting conditions (“PBUs”), generally vest equally on each of the
third and fourth anniversary of the grant date, subject to continued employment and, in the case of PBUs, subject to the
satisfaction and certification of the applicable performance conditions. RSUs provide for accelerated vesting upon the
grantee’s termination of employment after reaching a specified age and years of service and, in the case of PBUs, subject to
the satisfaction and certification of the applicable performance conditions. PBUs are subject to forfeiture if the applicable
performance condition is not satisfied. RSUs awarded to non-employee directors are not subject to vesting or forfeiture
restrictions and the shares underlying the RSUs will generally be issued in connection with a director’s termination of service
as a director. Pursuant to the directors’ compensation program, certain directors with more than 3 years of service on the
Board of Directors have elected an in-service vesting period for their RSU awards. Holders of RSUs are generally entitled to
receive cash dividend equivalents or retained distributions related to regular cash dividends or other distributions,
respectively, paid by TWC. In the case of PBUs, the receipt of the dividend equivalents is subject to the satisfaction and
certification of the applicable performance conditions. Retained distributions are subject to the vesting requirements of the
underlying RSUs. Refer to “Separation-related Equity Awards” below for further details.
Stock options, including stock options subject to performance-based vesting conditions (“PBOs”), have exercise prices
equal to the fair market value of TWC common stock at the date of grant. Generally, stock options vest ratably over a
four-year vesting period and expire ten years from the date of grant, subject to continued employment and, in the case of
PBOs, subject to the satisfaction and certification of the applicable performance condition. Certain stock option awards
provide for accelerated vesting upon the grantee’s termination of employment after reaching a specified age and years of
service and, in the case of PBOs, subject to the satisfaction and certification of the applicable performance conditions. PBOs
are subject to forfeiture if the applicable performance condition is not satisfied. In connection with the payment of the
Special Dividend and the TWC Reverse Stock Split, adjustments were made to the number of shares covered by and exercise
prices of outstanding stock options to maintain the fair value of those awards. These adjustments were made pursuant to
existing antidilution provisions in the 2006 Plan and related award agreements and, therefore, did not result in the recognition
of incremental compensation expense. Refer to “Separation-related Equity Awards” below for further details.
Upon the exercise of a stock option or the vesting of a RSU, shares of TWC common stock may be issued from
authorized but unissued shares or from treasury stock, if any.
Separation-related Equity Awards
In connection with the Special Dividend, holders of RSUs could elect to receive the retained distribution on their RSUs
related to the Special Dividend (the “Special Dividend retained distribution”) in the form of cash (payable, without interest,
upon vesting of the underlying RSUs) or in the form of additional RSUs (with the same vesting dates as the underlying
RSUs). In connection with these elections and in conjunction with the payment of the Special Dividend, during the first
quarter of 2009, the Company (a) granted 1.305 million RSUs and (b) established a liability of $46 million in other liabilities
and TWC shareholders’ equity in the consolidated balance sheet for the Special Dividend retained distribution to be paid in
cash, taking into account estimated forfeitures. In addition, in connection with the TWC Reverse Stock Split, pursuant to the
2006 Plan and related award agreements, adjustments were made to reduce the number of outstanding RSUs. Neither the
payment of the Special Dividend retained distribution (in cash or additional RSUs) nor the adjustment to reflect the TWC
Reverse Stock Split results in the recognition of incremental compensation expense. During the years ended December 31,
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