Banana Republic 2010 Annual Report Download - page 67

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At the end of each reporting period, we evaluate the probability that Stock Units will be granted. We record share-
based compensation expense based on the probability that the performance metrics will be achieved, with an
offsetting increase to current liabilities. We revalue the liability at the end of each reporting period and record an
adjustment to share-based compensation expense as required, based on the probability that the performance
metrics will be achieved. Upon achievement of the performance metrics, a Stock Unit is granted. At that time, the
associated liability is reclassified to stockholders’ equity.
Out of 3,431,422, 4,992,213, and 4,048,873 Stock Units granted in fiscal 2010, 2009, and 2008, respectively, 930,081,
703,146, and 600,544 Stock Units, respectively, were granted based on satisfaction of performance metrics.
At January 29, 2011 and January 30, 2010, the liability related to potential Stock Units based on performance metrics
was $1 million and $6 million, respectively, which is recorded in accrued expenses and other current liabilities in the
Consolidated Balance Sheets.
Stock Options
We have stock options outstanding under the 2006 Plan and 2002 Plan. Vesting is generally based on four years of
continued service by the employee, with 25 percent vesting on each of the four anniversary dates.
The fair value of stock options issued during fiscal 2010, 2009, and 2008 was estimated on the date of grant using
the following assumptions:
Fiscal Year
2010 2009 2008
Expected term (in years) .............................................................. 4.8 5.0 4.7
Expected volatility ................................................................... 29.0% 51.3% 38.3%
Dividendyield ....................................................................... 1.8% 1.9% 1.7%
Risk-free interest rate ................................................................. 2.7% 1.9% 2.5%
A summary of stock option activity under the 2006 Plan and 2002 Plan for fiscal 2010 is as follows:
Shares
Weighted-
Average
Exercise Price
Balance at January 30, 2010 ....................................................... 30,476,662 $19.79
Granted ......................................................................... 2,384,553 $22.93
Exercised........................................................................ (4,212,894) $18.47
Forfeited/Expired ................................................................ (4,478,998) $29.77
Balance at January 29, 2011 ........................................................ 24,169,323 $18.48
A summary of additional information about stock options is as follows:
Fiscal Year
2010 2009 2008
Weighted-average fair value per share of stock options granted ......................... $5.57 $4.86 $5.99
Aggregate intrinsic value of stock options exercised (in millions) ........................ $19 $14 $19
Fair value of stock options vested (in millions) ......................................... $15 $14 $17
60 Gap Inc. Form 10-K