McDonalds 2014 Annual Report Download - page 50

44 McDonald’s Corporation 2014 Annual Report
Share-based Compensation
The Company maintains a share-based compensation plan which authorizes the granting of various equity-based incentives including stock
options and restricted stock units (RSUs) to employees and nonemployee directors. The number of shares of common stock reserved for
issuance under the plans was 67.6 million at December 31, 2014, including 42.0 million available for future grants.
STOCK OPTIONS
Stock options to purchase common stock are granted with an exercise price equal to the closing market price of the Company’s stock on the
date of grant. Substantially all of the options become exercisable in four equal installments, beginning a year from the date of the grant, and
generally expire 10 years from the grant date.
Intrinsic value for stock options is defined as the difference between the current market value of the Company’s stock and the exercise
price. During 2014, 2013 and 2012, the total intrinsic value of stock options exercised was $258.9 million, $325.2 million and $469.8 million,
respectively. Cash received from stock options exercised during 2014 was $235.4 million and the tax benefit realized from stock options
exercised totaled $80.8 million. The Company uses treasury shares purchased under the Company’s share repurchase program to satisfy
share-based exercises.
A summary of the status of the Company’s stock option grants as of December 31, 2014, 2013 and 2012, and changes during the years
then ended, is presented in the following table:
2014 2013 2012
Options
Shares in
millions
Weighted-
average
exercise
price
Weighted-
average
remaining
contractual
life in years
Aggregate
intrinsic
value in
millions
Shares in
millions
Weighted-
average
exercise
price
Shares in
millions
Weighted-
average
exercise
price
Outstanding at beginning of year 25.1 $ 69.15 27.4 $ 59.86 31.7 $ 47.77
Granted 3.9 95.13 3.7 94.36 4.9 99.63
Exercised (5.1) 46.09 (5.7) 40.12 (8.6) 38.51
Forfeited/expired (0.5) 94.56 (0.3) 79.15 (0.6) 55.28
Outstanding at end of year 23.4 $ 77.99 6.1 $ 403.6 25.1 $ 69.15 27.4 $ 59.86
Exercisable at end of year 14.4 $ 67.76 4.8 $ 389.9 15.6 17.1
RSUs
RSUs generally vest 100% on the third anniversary of the grant and are payable in either shares of McDonald’s common stock or cash, at
the Company’s discretion. Certain executives have been awarded RSUs that vest based on Company performance. The fair value of each
RSU granted is equal to the market price of the Company’s stock at date of grant less the present value of expected dividends over the
vesting period.
A summary of the Company’s RSU activity during the years ended December 31, 2014, 2013 and 2012 is presented in the following
table:
2014 2013 2012
RSUs
Shares in
millions
Weighted-
average
grant date
fair value
Shares in
millions
Weighted-
average
grant date
fair value
Shares in
millions
Weighted-
average
grant date
fair value
Nonvested at beginning of year 2.0 $ 78.89 1.8 $ 68.23 2.1 $ 56.78
Granted 0.9 85.12 1.0 83.98 0.5 90.34
Vested (0.6) 69.29 (0.7) 56.93 (0.8) 50.69
Forfeited (0.1) 85.16 (0.1) 82.44 0.0 68.72
Nonvested at end of year 2.2 $ 83.49 2.0 $ 78.89 1.8 $ 68.23
The total fair value of RSUs vested during 2014, 2013 and 2012 was $54.9 million, $60.2 million and $76.4 million, respectively. The tax
benefit realized from RSUs vested during 2014 was $16.5 million.