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112
Stock Option Program
The following table summarizes stock option activity for the years ended December 31:
2013
2012
2011
Number of
Options
Weighted
Average
Exercise Price
Number of
Options
Weighted
Average
Exercise Price
Number of
Options
Weighted
Average
Exercise Price
Under option —
January 1
56,565,030
$
80.33
64,148,415
$
77.28 70,335,044 $
74.80
Granted:
Annual
6,220,810
101.55
5,770,190
87.91 5,514,500 89.46
Progressive (Reload)
140,447
109.83
110,065
89.65 237,839 94.02
Other
191
119.62
51,661
89.25 8,953 86.71
Exercised
(18,825,218)
79.25
(13,123,617)
68.78 (11,625,863) 68.47
Canceled (162,482) 89.92
(391,684)
83.65 (322,058) 75.09
December 31 43,938,778 $
83.84 56,565,030
$
80.33 64,148,415 $
77.28
Options exercisable
December 31 32,038,228 $
79.58 45,207,143
$
78.78 52,644,364 $
76.90
Stock options vest over a period from one to three years with the expiration date at 10 years from date of grant.
Outstanding options under grant include grants from previous plans. As of December 31, 2013, there was $51 million of
compensation expense that has yet to be recognized related to non-vested stock option based awards. This expense is
expected to be recognized over the remaining weighted-average vesting period of 21 months. For options outstanding at
December 31, 2013, the weighted-average remaining contractual life was 62 months and the aggregate intrinsic value
was $2.478 billion. For options exercisable at December 31, 2013, the weighted-average remaining contractual life was
47 months and the aggregate intrinsic value was $1.944 billion.
The total intrinsic values of stock options exercised during 2013, 2012 and 2011 was $562 million, $282 million and $287
million, respectively. Cash received from options exercised during 2013, 2012 and 2011 was $1.492 billion, $903 million
and $796 million, respectively. The Company’s actual tax benefits realized for the tax deductions related to the exercise of
employee stock options for 2013, 2012 and 2011 was $208 million, $98 million and $96 million, respectively.
The Company does not have a specific policy to repurchase common shares to mitigate the dilutive impact of options;
however, the Company has historically made adequate discretionary purchases, based on cash availability, market
trends, and other factors, to satisfy stock option exercise activity.
For annual and progressive (reload) options, the weighted average fair value at the date of grant was calculated using the
Black-Scholes option-pricing model and the assumptions that follow.
Stock Option
Assumptions
Annual Progressive (Reload)
2013 2012 2011 2013 2012
2011
Exercise price $
101.49
$
87.89
$
89.47 $
109.84 $
87.89
$
93.94
Risk-free interest rate 1.2
%
1.1
%
2.8 %
0.2 %
0.2
%
0.4
%
Dividend yield 2.7
%
2.6
%
2.6 %
2.7 %
2.6
%
2.6
%
Volatility
20.0
%
24.5
%
22.0 %
16.3 %
23.4
%
21.5
%
Expected life (months) 75
74
72 12 19
15
Black-Scholes fair value $
13.46
$
14.94
$
16.10 $
6.42 $
8.50
$
7.49
Expected volatility is a statistical measure of the amount by which a stock price is expected to fluctuate during a period.
For the 2013 annual grant date, the Company estimated the expected volatility based upon the average of the most
recent one year volatility, the median of the term of the expected life rolling volatility, the median of the most recent term of