Meritor Acquisition and 2022 Financial Results
Table of Contents
NOTE 19. NONCONTROLLING INTERESTS
Noncontrolling interests in the equity of consolidated subsidiaries were as follows:
December 31,
In millions
2022
2021
Eaton Cummins Automated Transmission Technologies
Cummins India Ltd.
$
525 $
518
342
347
Other
125
24
Noncontrolling interests
$
992 S
889
NOTE 20. STOCK INCENTIVE AND STOCK OPTION PLANS
Our stock incentive plan (the Plan) allows for granting of up to8.5 million total shares of equity awards to executives, employees and non-employee directors. Awards available
for grant under the Plan include, but are not limited to, stock options, stock appreciation rights, performance shares and other stock awards. Shares issued under the Plan may be
newly issued shares or reissued treasury shares.
Stock options are generally granted with a strike price equal to the fair market value of the stock on the date of grant and a life ofl0 years. Stock options granted have a three-
year vesting period. The strike price may be higher than the fair value of the stock on the date of the grant, but cannot be lower. Compensation expense is recorded on a straight-
line basis over the vesting period beginning on the grant date. The compensation expense is based on the fair value of each option grant using the Black-Scholes option pricing
model. Options granted to employees eligible for retirement under our retirement plan are fully expensed at the grant date.
Stock options are also awarded through the Key Employee Stock Investment Plan (KESIP) which allows certain employees, other than officers, to purchase shares of common
stock on an installment basis up to an established credit limit. For every block of 100 KESIP shares purchased by the employee 50 stock options are granted. The options
granted through the KESIP program are considered awards under the Plan and are vested immediately. Compensation expense for stock options granted through the KESIP
program is recorded based on the fair value of each option grant using the Black-Scholes option pricing model.
Performance shares are granted as target awards and are earned based on certain measures of our operating performance. A payout factor has been established ranging from to
200 percent of the target award based on our actual performance during the three-year performance period. The fair value of the award is equal to the average market price,
adjusted for the present value of dividends over the vesting period, of our stock on the grant date. Compensation expense is recorded ratably over the period beginning on the
grant date until the shares become unrestricted and is based on the amount of the award that is expected to be earned under the plan formula, adjusted each reporting period
based on current information.
Restricted stock and restricted stock units are awarded from time to time at no cost to certain employees. Restrictions limit the sale or transfer of the shares during a defined
period. Most awards are not entitled to cash dividends and voting rights until vesting. Generally, the shares vest and become free from restrictions ratably over a three-year
service period, provided the participant remains an employee. The fair value of the awards typically equals the average market price of our stock on the grant date adjusted for
the present value of dividends over the vesting period. Compensation expense is determined at the grant date and is recognized over the restriction period on a straight-line
basis.
Employee compensation expense (net of estimated forfeitures) related to our share-based plans for the years ended December 31, 2022, 2021 and 2020, was approximately $3
million, $36 million and $30 million, respectively. The excess tax benefit associated with our employee share-based plans for the years ended December 31, 2022, 2021 and
2020, was $8 million, $9 million and $4 million, respectively. The total unrecognized compensation expense (net of estimated forfeitures) related to nonvested awards for our
employee share-based plans was approximately $86 million at December 31, 2022 and is expected to be recognized over a weighted-average period of approximatelytwo years.
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