Boeing 2011 Annual Report Download - page 106

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The fair values of options were estimated using the Black-Scholes option-pricing model with the
following assumptions:
Grant Year
Grant
Date
Expected
Life
Expected
Volatility
Dividend
Yield
Risk Free
Interest Rate
Weighted-Average
Grant Date Fair
Value Per Share
2011 2/22/2011 6 years 29.8% 2.3% 2.5% $17.96
2010 2/22/2010 6 years 31.5% 3.0% 2.9% $15.70
2009 2/23/2009 6 years 39.0% 2.4% 2.0% $11.12
The expected volatility of the stock options is based on a combination of our historical stock volatility
and the volatility levels implied on the grant date by actively traded option contracts on our common
stock. We determined the expected term of the stock option grants to be six years, calculated using the
“simplified” method in accordance with the SEC Staff Accounting Bulletin 110. We use the “simplified”
method since we changed the vesting terms, tax treatment and the recipients of our stock options
beginning in 2006 such that we believe our historical data no longer provides a reasonable basis upon
which to estimate expected term and we do not have enough option exercise data from our grants
issued subsequent to 2006 to support our own estimate.
Restricted Stock Units
In February 2011, 2010 and 2009, we granted to our executives 1,364,440, 1,459,256 and 2,144,501
restricted stock units (RSUs) as part of our long-term incentive program with grant date fair values of
$71.44, $63.83 and $35.57 per share, respectively. The RSUs vest on the third anniversary of the
grant date. If an executive terminates employment because of retirement, involuntary layoff, disability,
or death, the employee (or beneficiary) will immediately vest on a proration of stock units based on
active employment during the three-year service period. In all other cases, the RSUs will not vest and
all rights to the stock units will terminate completely.
In addition to RSUs awarded under our long-term incentive program, we grant RSUs to certain
executives and employees to encourage retention or to reward various achievements. These RSUs are
labeled other restricted stock units in the table below. The fair values of all RSUs are estimated using
the average stock price on the date of grant. Stock units settle in common stock on a one-for-one basis
and are not contingent upon stock price.
Stock unit activity for the year ended December 31, 2011 is as follows:
Incentive Program
Restricted Stock Units
Other Restricted Stock
Units
Number of units:
Outstanding at beginning of year 3,425,800 1,701,951
Granted 1,421,906 197,526
Dividends 104,895 37,848
Forfeited (152,608) (32,721)
Distributed (112,759) (410,436)
Outstanding at end of year 4,687,234 1,494,168
Unrecognized compensation cost $ 98 $ 23
Weighted average remaining contractual life (years) 1.8 1.9
94