Amgen 2010 Annual Report Download - page 133

units. If any shares subject to an award granted under our Prior Plans during the stub period or any awards granted
under the 2009 Plan expire, or are forfeited, terminated or cancelled without the issuance of shares, the shares
subject to such awards are added back to the pool of available shares under the 2009 Plan on the same basis that they
were removed. As of December 31, 2010, the 2009 Plan provides for future grants and/or issuances of up to
approximately 70 million shares of our common stock. Stock-based awards under our employee compensation
plans are made with newly issued shares reserved for this purpose.
The following table reflects the components of stock-based compensation expense recognized in our
Consolidated Statements of Income for the years ended December 31, 2010, 2009 and 2008 (in millions):
2010 2009 2008
Stock options ................................................... $ 124 $ 115 $ 103
Restricted stock units ............................................. 182 134 105
Performance units................................................ 47 35 54
Total stock-based compensation expense, pre-tax ....................... 353 284 262
Tax benefit from stock-based compensation expense ...................... (120) (97) (89)
Total stock-based compensation expense, net of tax ..................... $ 233 $ 187 $ 173
Employee stock option and restricted stock unit grants
Eligible employees generally receive a grant of stock options and/or restricted stock units annually with the
size and type of award generally determined by the employee’s salary grade and performance level. In addition,
certain management and professional level employees typically receive stock options and/or restricted stock unit
grants upon commencement of employment. Our stock option and restricted stock unit grants provide for
accelerated or continued vesting in certain circumstances as defined in the plans, including upon death, disability,
a change in control, or retirement of employees who meet certain service and/or age requirements. Grants of stock
options and restricted stock units generally vest over a four year period.
Stock option grants
The exercise price for stock options granted under our 2009 Plan and Prior Plans is set at the closing price of
our common stock on the date of grant and the related number of shares granted is fixed at that point in time. Awards
granted to employees on and after April 26, 2010 expire 10 years from the date of grant; options granted to
employees prior to that date expire seven years from the date of grant.
We use the Black-Scholes option valuation model to estimate the grant date fair value of our employee stock
options. The weighted-average assumptions used in the Black-Scholes option valuation model and the resulting
weighted-average estimated grant date fair values of our employee stock options were as follows for the years ended
December 31, 2010, 2009 and 2008:
2010 2009 2008
Closing price of our common stock on grant date ........................ $58.32 $ 50.65 $ 43.60
Fair value of stock options granted ................................... $20.97 $ 18.35 $ 14.50
Expected volatility ............................................... 28.0% 39.6% 31.6%
Expected life (in years) ........................................... 6.6 4.6 4.6
Risk-free interest rate............................................. 3.2% 2.1% 2.9%
Expected dividend yield ........................................... 0% 0% 0%
The expected volatility reflects the consideration of the implied volatility in publicly traded instruments
associated with Amgen’s common stock during the period the options were granted. We believe implied volatility in
these instruments is more indicative of expected future volatility than the historical volatility in the price of our
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AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)