Investor Presentaiton
Performance Share Units
Performance share units (PSUs) have been issued to certain employees that vest based on the satisfaction of a three-year
service period and total shareholder return relative to that of a group of peers. Awards earned at the end of the three-year
vesting period range from 0% to 200% of the targeted number of PSUs granted based on the ranking of total shareholder return
of the Company, assuming reinvestment of all dividends, relative to a defined peer group of companies. Equity-based
compensation expense for these PSUs is recognized over the period during which an employee is required to provide service in
exchange for the award. Upon vesting, dividends that have accumulated during the vesting period are paid on earned awards.
The Company uses a Monte Carlo simulation to estimate the fair value of PSUs with market conditions. The principal
assumptions utilized in valuing these PSUs include the expected stock price volatility (based on the most recent 3-year period
as of the grant date) and the risk-free interest rate (an estimate based on the yield of United States Treasury zero coupon bonds
with a three-year maturity as of the grant date). A summary of the assumptions used in determining fair value of these PSUs is
as follows:
2022
2021
2020
Expected volatility
35 %
35%
21 %
Risk-free interest rate
1.71 %
0.20 %
1.16 %
Weighted-average fair value of PSUs granted
$
171.63
$
159.74 $
121.01
A summary of these PSUs that vested is as follows:
(Performance share units in millions)
Percent payout
2022
2021
2020
178 %
0.4
189 %
0.5
178 %
0.4
Shares vested
A summary of the 2022 activity for these PSUs is as follows:
(Performance share units in millions)
Number of
performance
share units
Weighted-average fair
value per unit
1
Non-vested at January 1
Granted¹
Adjusted for performance results achieved²
Vested
Forfeited
Non-vested at December 31
0.4 $
139.00
0.2
171.63
0.2
121.01
(0.4)
121.01
(0.1)
130.75
0.3
141.88
Performance shares granted assuming the Company will perform at target relative to peers.
2 Adjustments for the number of shares vested under the 2020 awards at the end of the three-year performance period ended December 31,
2022, being higher than the target number of shares.
Information related to PSUs is as follows:
(In millions)
Pre-tax expense for PSUs
After-tax expense for PSUs
2022
2021
2020
$
21
$
26 $
25
17
21
20
As of December 31, 2022, total compensation expense not yet recognized related to non-vested PSUs was $26 million and
the weighted-average period in which the expense is to be recognized is 1.7 years. Excess tax benefit for PSUs totaled $10
million, $6 million and $3 million for 2022, 2021, and 2020, respectively.
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