Emerson 2015 Annual Report Download - page 54

52 | 2015 Annual Report
The weighted-average grant date fair value per option was $12.48, $14.83 and $10.12 in 2015, 2014 and 2013,
respectively. Cash received for option exercises was $36 in 2015, $77 in 2014 and $104 in 2013. The total intrinsic
value of options exercised in 2015, 2014 and 2013 was $16, $61 and $66, respectively, while the tax benefit realized
by the Company from tax deductions related to option exercises was $10, $14 and $7, respectively.
The grant date fair value of options is estimated using the Black-Scholes option-pricing model. The weighted-
average assumptions used in valuations for 2015, 2014 and 2013 are, respectively: risk-free interest rate, based
on U.S. Treasury yields, 1.9 percent, 2.0 percent and 1.2 percent; dividend yield, 3.1 percent, 2.6 percent and
3.2 percent; and expected volatility, based on historical volatility, 28 percent for all years shown. The expected life
of each option awarded is seven years based on historical experience and expected future exercise patterns.
PERFORMANCE SHARES, RESTRICTED STOCK AND RESTRICTED STOCK UNITS
The Company’s incentive shares plans include performance shares awards which distribute the value of common
stock to key management employees subject to certain operating performance conditions and other restrictions.
The form of distribution is primarily shares of common stock, with a portion in cash. Compensation expense for
performance shares is recognized over the service period based on the number of shares ultimately expected to be
earned. Performance shares awards are accounted for as liabilities in accordance with ASC 718, Compensation - Stock
Compensation, with compensation expense adjusted at the end of each reporting period to reflect the change in fair
value of the awards.
In 2014, vested performance shares that had been awarded primarily in 2010 were distributed as follows: 2,782,143
issued as shares, 1,829,617 withheld for income taxes, and the value of 211,285 paid in cash. 14,694 shares were
canceled and not distributed. As of September 30, 2015, the rights to receive a maximum of 5,782,114 common
shares awarded primarily in 2013 were outstanding, contingent on the Company achieving its performance
objectives through 2016 and the provision of additional service by employees.
Incentive shares plans also include restricted stock awards which involve distribution of common stock to key
management employees subject to cliff vesting at the end of service periods ranging from three to ten years. The
fair value of restricted stock awards is determined based on the average of the high and low market prices of the
Company’s common stock on the date of grant, with compensation expense recognized ratably over the applicable
service period. In 2015, 151,000 shares of restricted stock vested as a result of participants fulfilling the applicable
service requirements. Consequently, 79,568 shares were issued while 71,432 shares were withheld for income taxes
in accordance with minimum withholding requirements. As of September 30, 2015, there were 1,349,500 shares of
unvested restricted stock outstanding.
The total fair value of shares vested under incentive shares plans was $9, $315 and $19, respectively, in 2015, 2014
and 2013, of which $5, $134 and $8 was paid in cash, primarily for tax withholding. As of September 30, 2015,
16.2 million shares remained available for award under incentive shares plans.
Changes in shares outstanding but not yet earned under incentive shares plans during the year ended September 30,
2015 follow:
AVERAGE GRANT DATE
(SHARES IN THOUSANDS) SHARES FAIR VALUE PER SHARE
Beginning of year 6,404 $47.81
Granted 437 $61.96
Earned/vested (151) $37.36
Canceled (313) $49.02
End of year 6,377 $48.97
Total compensation expense for stock options and incentive shares was $30, $143 and $221 for 2015, 2014 and
2013, respectively. The decrease in expense for 2015 reflects a stock option award in 2014 and no incentive stock
plan overlap in 2015, and a lower stock price in the current year. The decrease in 2014 is due to a reduced impact
from performance shares plans overlap in 2014 and a slightly lower stock price, partially offset by a stock option
award in 2014. Income tax benefits recognized in the income statement for these compensation arrangements
during 2015, 2014 and 2013 were $2, $39 and $68, respectively. As of September 30, 2015, total unrecognized
compensation expense related to unvested shares awarded under these plans was $125, which is expected to be
recognized over a weighted-average period of 1.5 years.