Ford 2014 Annual Report Download - page 161

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FORD MOTOR COMPANY AND SUBSIDIARIES
NOTES TO THE FINANCIAL STATEMENTS
NOTE 19. SHARE-BASED COMPENSATION (Continued)
Under the 2014 Plan, RSUs granted to non-employee directors vest immediately at grant date and shares of
Common Stock are issued either immediately or at a subsequent specified date five years after grant or at separation.
Directors are required to serve the entire calendar year in order to retain the entire grant for that year; otherwise a
prorated award will be determined.
We also grant stock options to our employees. We measure the fair value of our stock options using the
option-pricing model, using historical volatility and our determination of the expected term. The expected
term of stock options is the time period that the stock options are expected to be outstanding. Historical data are used to
estimate option exercise behaviors and employee termination experience.
Stock options generally have a vesting feature whereby one-third of each grant of stock options are exercisable after
the first anniversary of the grant date, an additional one-third after the second anniversary, and the final one-third after the
third anniversary. Stock options expire 10 years from the grant date.
Expense for RSUs and stock options is recorded in Selling, administrative, and other expense and is based on the fair
value at grant date. RSU and stock option expense is recognized using the graded vesting method over the shorter of the
vesting period or the time period an employee becomes eligible to retain the award at retirement. Performance-based
RSU expense is recognized when it is probable and estimable as measured against the performance metrics over the
performance and restriction periods, if any.
We measure the intrinsic value of RSUs and stock options by comparing the award price to the closing stock price at
December 31.
We issue new shares of Common Stock upon vesting of RSUs and upon exercise of stock options.
Restricted Stock Units
RSU activity during 2014 was as follows (in millions, except for weighted average grant-date fair value):
Shares
Weighted-
Average Grant-
Date Fair Value
Aggregate
Intrinsic Value
Outstanding, beginning of year 20.3 $13.11
Granted 10.8 15.40
Vested (a) (7.5)13.60
Forfeited (0.2)13.87
Outstanding, end of year (a) 23.4 14.01 $362
RSU-stock expected to vest 23.0 N/A 358
__________
(a) 2014 Plan RSU awards vest immediately at grant. However, shares of Common Stock may be issued immediately, five years from grant, or at the
time of the Director’s separation. As such, the amounts reflect shares vested, but unissued.
The fair value and intrinsic value of RSUs at December 31 were as follows (in millions, except RSU per unit amounts):
2014 2013 2012
Fair value
Granted $ 166 $138 $102
Weighted average for multiple grant dates (per unit) 15.40 12.77 12.43
Vested 102 101 109
Intrinsic value
Vested $ 116 $119 $329
Compensation cost for RSUs for the years ended December 31 was as follows (in millions):
2014 2013 2012
Compensation cost (a) $ 95 $ 81 $ 62
__________
(a) Net of tax benefit of $49 million, $48 million, and $36 million in 2014, 2013, and 2012, respectively.
FS-55