NOTE 16. OTHER STOCK-RELATED INFORMATION
We grant stock options, restricted stock units (RSUs) and performance share units (PSUs) to employees under the 2007 Long-Term Incentive Plan. This plan replaced the 1990 Long-Term Incentive Plan. In addition, we grant options and RSUs in limited circumstances to consultants, advisors and independent contractors under a plan approved by our Board of Directors in 1997 (the Consultants' Plan). Share requirements for all plans may be met from either unissued or treasury shares. Stock options expire 10 years from the date they are granted and vest over service periods that range from one to five years. RSUs give the recipients the right to receive shares of our stock upon the vesting of their related restrictions. Restrictions on RSUs vest in various increments and at various dates, beginning after one year from date of grant through grantee retirement. Although the plan permits us to issue RSUs settleable in cash, we have only issued RSUs settleable in shares of our stock. PSUs give recipients the right to receive shares of our stock upon the achievement of certain performance targets.
All grants of GE options under all plans must be approved by the Management Development and Compensation Committee, which consists entirely of independent directors.
| Stock Compensation Plans | ||||||||
| Securities | ||||||||
| to be | Weighted | Securities | ||||||
| issued | average | available | ||||||
| upon | exercise | for future | ||||||
| December 31, 2013 (Shares in thousands) | exercise | price | issuance | |||||
| Approved by shareowners | ||||||||
| Options | 473,247 | $ | 20.02 | (a) | ||||
| RSUs | 13,572 | (b) | (a) | |||||
| PSUs | 950 | (b) | (a) | |||||
| Not approved by shareowners (Consultants’ Plan) | ||||||||
| Options | 364 | 25.32 | (c) | |||||
| RSUs | - | (b) | (c) | |||||
| Total | 488,133 | $ | 20.02 | 404,574 | ||||
(a) In 2007, the Board of Directors approved the 2007 Long-Term Incentive Plan (the Plan), which replaced the 1990 Long-Term Incentive Plan. During 2012, an amendment was approved to increase the number of shares authorized for issuance under the Plan from 500 million shares to 925 million shares. No more than 230 million of the total number of authorized shares may be available for awards granted in any form provided under the Plan other than options or stock appreciation rights. Total shares available for future issuance under the Plan amounted to 376.4 million shares at December 31, 2013.
(b) Not applicable.
(c) Total shares available for future issuance under the Consultants' Plan amount to 28.2 million shares.
Outstanding options expire on various dates through December 13, 2023.
The following table summarizes information about stock options outstanding at December 31, 2013.
| Stock Options Outstanding | ||||||||||||||
| Outstanding | Exercisable | |||||||||||||
| Average | Average | |||||||||||||
| Shares | Average | exercise | Shares | exercise | ||||||||||
| Exercise price range | (In thousands) | life(a) | price | (In thousands) | price | |||||||||
| Under $10.00 | 34,973 | 4.9 | $ | 9.57 | 26,995 | $ | 9.57 | |||||||
| 10.01-15.00 | 56,571 | 5.1 | 11.98 | 45,821 | 11.98 | |||||||||
| 15.01-20.00 | 172,157 | 6.8 | 17.46 | 91,007 | 17.24 | |||||||||
| 20.01-25.00 | 139,740 | 9.1 | 22.55 | 20,533 | 21.57 | |||||||||
| 25.01-30.00 | 20,638 | 4.3 | 28.19 | 20,115 | 28.23 | |||||||||
| 30.01-35.00 | 35,993 | 1.6 | 33.54 | 35,993 | 33.54 | |||||||||
| Over $35.00 | 13,539 | 3.3 | 38.67 | 13,539 | 38.67 | |||||||||
| Total | 473,611 | 6.5 | $ | 20.02 | 254,003 | $ | 20.15 | |||||||
At year-end 2012, options with a weighted average exercise price of $20.85 were exercisable on 214 million shares.
(a) Average contractual life remaining in years.
| Stock Option Activity | |||||||||||
| Weighted | |||||||||||
| Weighted | average | Aggregate | |||||||||
| average | remaining | intrinsic | |||||||||
| Shares | exercise | contractual | value | ||||||||
| (In thousands) | price | term (In years) | (In millions) | ||||||||
| Outstanding at January 1, 2013 | 467,837 | $ | 19.27 | ||||||||
| Granted | 62,762 | 23.80 | |||||||||
| Exercised | (36,191) | 13.65 | |||||||||
| Forfeited | (9,688) | 18.95 | |||||||||
| Expired | (11,109) | 31.60 | |||||||||
| Outstanding at December 31, 2013 | 473,611 | $ | 20.02 | 6.5 | $ | 4,140 | |||||
| Exercisable at December 31, 2013 | 254,003 | $ | 20.15 | 5.1 | $ | 2,348 | |||||
| Options expected to vest | 200,909 | $ | 19.79 | 8.0 | $ | 1,656 | |||||
We measure the fair value of each stock option grant at the date of grant using a Black-Scholes option pricing model. The weighted average grant-date fair value of options granted during 2013, 2012 and 2011 was $4.52, $3.80 and $4.00, respectively. The following assumptions were used in arriving at the fair value of options granted during 2013, 2012 and 2011, respectively: risk-free interest rates of 2.5%, 1.3% and 2.6%; dividend yields of 4.0%, 4.0% and 3.9%; expected volatility of 28%, 29% and 30%; and expected lives of 7.5 years, 7.8 years and 7.7 years. Risk-free interest rates reflect the yield on zero-coupon U.S. Treasury securities. Expected dividend yields presume a set dividend rate and we used a historical five-year average for the dividend yield. Expected volatilities are based on implied volatilities from traded options and historical volatility of our stock. The expected option lives are based on our historical experience of employee exercise behavior.
The total intrinsic value of options exercised during 2013, 2012 and 2011 amounted to $392 million, $265 million and $65 million, respectively. As of December 31, 2013, there was $663 million of total unrecognized compensation cost related to nonvested options. That cost is expected to be recognized over a weighted average period of 2 years, of which approximately $180 million after tax is expected to be recognized in 2014.
Stock option expense recognized in net earnings during 2013, 2012 and 2011 amounted to $231 million, $220 million and $230 million, respectively. Cash received from option exercises during 2013, 2012 and 2011 was $490 million, $355 million and $89 million, respectively. The tax benefit realized from stock options exercised during 2013, 2012 and 2011 was $128 million, $88 million and $21 million, respectively.
| Other Stock-based Compensation | |||||||||||
| Weighted | |||||||||||
| Weighted | average | Aggregate | |||||||||
| average | remaining | intrinsic | |||||||||
| Shares | grant date | contractual | value | ||||||||
| (In thousands) | fair value | term (In years) | (In millions) | ||||||||
| RSUs outstanding at January 1, 2013 | 14,878 | $ | 22.45 | ||||||||
| Granted | 3,951 | 24.54 | |||||||||
| Vested | (4,583) | 24.35 | |||||||||
| Forfeited | (674) | 21.25 | |||||||||
| RSUs outstanding at December 31, 2013 | 13,572 | $ | 22.58 | 2.8 | $ | 380 | |||||
| RSUs expected to vest | 12,352 | $ | 22.32 | 2.7 | $ | 346 | |||||
The fair value of each restricted stock unit is the market price of our stock on the date of grant. The weighted average grant date fair value of RSUs granted during 2013, 2012 and 2011 was $24.54, $20.79 and $16.74, respectively. The total intrinsic value of RSUs vested during 2013, 2012 and 2011 amounted to $109 million, $116 million and $154 million, respectively. As of December 31, 2013, there was $190 million of total unrecognized compensation cost related to nonvested RSUs. That cost is expected to be recognized over a weighted average period of 2 years, of which approximately $42 million after tax is expected to be recognized in 2014. As of December 31, 2013, 1.0 million PSUs with a weighted average remaining contractual term of 2 years, an aggregate intrinsic value of $27 million and $8 million of unrecognized compensation cost were outstanding. Other share-based compensation expense for RSUs and PSUs recognized in net earnings amounted to $62 million, $79 million and $84 million in 2013, 2012 and 2011, respectively.
The income tax benefit recognized in earnings based on the compensation expense recognized for all share-based compensation arrangements amounted to $145 million, $153 million and $163 million in 2013, 2012 and 2011, respectively. The excess of actual tax deductions over amounts assumed, which are recognized in shareowners' equity, were $86 million $53 million and $12 million in 2013, 2012 and 2011, respectively.
When stock options are exercised and restricted stock vests, the difference between the assumed tax benefit and the actual tax benefit must be recognized in our financial statements. In circumstances in which the actual tax benefit is lower than the estimated tax benefit, that difference is recorded in equity, to the extent there are sufficient accumulated excess tax benefits. At December 31, 2013, our accumulated excess tax benefits are sufficient to absorb any future differences between actual and estimated tax benefits for all of our outstanding option and restricted stock grants.