United Technologies 2011 Annual Report Download - page 79

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In addition, we participate in several multiemployer
arrangements that provide postretirement benefits other than
pensions, with the National Elevator Industry Plan being the
most significant. These arrangements generally provide
medical and life benefits for eligible active employees and
retirees and their dependents. Contributions to multiemployer
plans that provide postretirement benefits other than
pensions were $10 million, $10 million and $11 million for 2011,
2010 and 2009, respectively.
Stock-based Compensation. We have long-term incentive
plans authorizing various types of market and performance
based incentive awards that may be granted to officers and
employees. Our Long Term Incentive Plan (LTIP) was initially
approved on April 13, 2005 and amended in 2011 to increase
the maximum number of shares available for award under the
LTIP to 119 million shares. Following initial approval of the
LTIP, we may not grant any new awards under previously
existing equity compensation plans. As of December 31, 2011,
approximately 56 million shares remain available for awards
under the LTIP. The LTIP does not contain an annual award
limit. We expect that the shares awarded on an annual basis
will range from 1% to 1.5% of shares outstanding. The LTIP will
expire after all shares have been awarded or April 30, 2017,
whichever is sooner.
Under all long-term incentive plans, the exercise price of
awards is set on the grant date and may not be less than the
fair market value per share on that date. Generally, stock
appreciation rights and stock options have a term of ten
years and a minimum three-year vesting period. In the event
of retirement, awards held for more than one year shall
immediately become vested and exercisable. In addition,
under the LTIP, awards with performance-based vesting
generally have a minimum three-year vesting period and vest
based on performance against pre-established metrics. In the
event of retirement, awards held more than one year remain
eligible to vest. We have historically repurchased shares of
our common stock in an amount at least equal to the number
of shares issued under our equity compensation
arrangements and will continue to evaluate this policy in
conjunction with our overall share repurchase program.
We measure the cost of all share-based payments, including
stock options, at fair value on the grant date and recognize
this cost in the statement of operations. For the years ended
December 31, 2011, 2010 and 2009, $229 million, $154 million
and $153 million, respectively, of compensation cost was
recognized in operating results. The associated future income
tax benefit recognized was $75 million, $47 million and $49
million for the years ended December 31, 2011, 2010 and 2009,
respectively.
For the years ended December 31, 2011, 2010 and 2009, the
amount of cash received from the exercise of stock options
was $226 million, $386 million and $342 million, respectively,
with an associated tax benefit realized of $101 million, $139
million and $95 million, respectively. In addition, for the years
ended December 31, 2011, 2010 and 2009, the associated tax
benefit realized from the vesting of performance share units
was $19 million, $20 million and $33 million, respectively. Also,
in accordance with the Compensation – Stock Compensation
Topic of the FASB ASC, for the years ended December 31,
2011, 2010 and 2009, $81 million, $94 million and $50 million,
respectively, of certain tax benefits have been reported as
operating cash outflows with corresponding cash inflows
from financing activities.
At December 31, 2011, there was $152 million of total
unrecognized compensation cost related to non-vested
equity awards granted under long-term incentive plans. This
cost is expected to be recognized ratably over a weighted-
average period of 1.9 years.
A summary of the transactions under all long-term incentive plans for the year ended December 31, 2011 follows:
STOCK OPTIONS STOCK APPRECIATION RIGHTS PERFORMANCE SHARE UNITS Other
Incentive
Shares / Units
(shares and units in thousands) Shares Average Price* Shares Average Price* Units Average Price**
Outstanding at:
December 31, 2010 27,337 $44.82 31,220 $ 64.72 3,024 $65.96 807
Granted 320 78.99 4,916 79.09 946 78.99 455
Exercised/Earned (6,551) 37.36 (1,249) 64.96 (746) 75.21 (116)
Cancelled (77) 53.78 (849) 68.30 (262) 71.40 (37)
DECEMBER 31, 2011 21,029 $47.63 34,038 $66.70 2,962 $ 67.31 1,109
* weighted-average exercise price
** weighted-average grant stock price
The weighted-average grant date fair value of stock options
and stock appreciation rights granted during 2011, 2010 and
2009 was $20.26, $17.86 and $16.01, respectively. The
weighted-average grant date fair value of performance share
units, which vest upon achieving certain performance metrics,
granted during 2011, 2010, and 2009 was $87.65, $78.73 and
$61.56, respectively. The total fair value of awards vested
during the years ended December 31, 2011, 2010 and 2009
was $170 million, $172 million and $235 million, respectively.
The total intrinsic value (which is the amount by which the
stock price exceeded the exercise price on the date of
exercise) of stock options and stock appreciation rights
exercised during the years ended December 31, 2011, 2010
and 2009 was $336 million, $446 million and $296 million,
respectively. The total intrinsic value (which is the stock price
at vesting) of performance share units vested was $59
million, $62 million and $100 million during the years ended
December 31, 2011, 2010 and 2009, respectively.
2011 ANNUAL REPORT 77