Amgen 2012 Annual Report Download - page 115

F-16
in control and the retirement of employees who meet certain service and/or age requirements. RSUs and stock options granted
prior to April 25, 2011, generally vest in equal amounts on each of the first four anniversaries of the grant date. Stock options and
RSUs granted on and after April 25, 2011, generally vest in approximately equal amounts on the second, third and fourth
anniversaries of the grant date. RSUs granted on and after April 27, 2012, accrue dividend equivalents which are typically payable
in shares only when and to the extent the underlying RSUs vest and are issued to the recipient.
Stock options
The exercise price for stock options 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 an option valuation model to estimate the grant date fair value of stock options. The weighted-average assumptions
used in the option valuation model and the resulting weighted-average estimated grant date fair values of stock options were as
follows for the years ended December 31, 2012, 2011 and 2010:
2012 2011 2010
Closing price of our common stock on grant date $ 74.56 $ 54.66 $ 58.32
Expected volatility 22.2% 23.5% 28.0%
Expected life (in years) 8.1 5.9 6.6
Risk-free interest rate 1.6% 2.5% 3.2%
Expected dividend yield 2.1% 2.0% 0%
Fair value of stock options granted $ 14.65 $ 11.39 $ 20.97
The expected volatility reflects 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 common stock. We use historical data to estimate the
expected life of the options. The risk-free interest rates for periods within the expected life of the option are based on the U.S.
Treasury yield curve in effect during the period the options were granted. The expected dividend yield for options granted on and
after April 25, 2011, was based on expectations regarding our policy of paying dividends announced in April 2011.
The following summarizes select information regarding our stock options during the year ended December 31, 2012:
Options
(in millions)
Weighted-
average
exercise price
Weighted-
average
remaining
contractual
life (years)
Aggregate
intrinsic
value
(in millions)
Balance unexercised at December 31, 2011 34.2 $ 59.11
Granted 0.1 $ 74.56
Exercised (20.9) $ 60.67
Expired/forfeited (1.1) $ 63.97
Balance unexercised at December 31, 2012 12.3 $ 56.09 4.9 $ 371
Vested or expected to vest at December 31, 2012 12.2 $ 56.10 4.9 $ 367
Exercisable at December 31, 2012 6.3 $ 56.59 3.1 $ 187
The total intrinsic values of options exercised during the years ended December 31, 2012, 2011 and 2010, were $320 million,
$47 million and $15 million, respectively. The actual tax benefits realized from tax deductions from option exercises during the
three years ended December 31, 2012, 2011 and 2010, were $117 million, $14 million and $5 million, respectively.
Restricted stock units
The grant date fair value of an RSU equaled the closing price of our common stock on the grant date for RSUs granted prior
to April 25, 2011, and on and after April 27, 2012. Prior to April 2011, we did not have a policy of paying dividends, and beginning
April 27, 2012, RSUs granted accrue dividend equivalents during the vesting period. The fair values of RSUs granted on April 25,
2011 through April 26, 2012, are based on the closing price of our common stock on the grant date reduced by the weighted-