Citibank 2010 Annual Report Download - page 191

189
Information with respect to stock option activity under Citigroup stock option programs for the years ended December 31, 2010, 2009 and 2008 is as follows:
2010 2009 2008
Options
Weighted-
average
exercise
price
Intrinsic
value
per share Options
Weighted-
average
exercise
price
Intrinsic
value
per share Options
Weighted-
average
exercise
price
Intrinsic
value
per share
Outstanding, beginning of period 404,044,806 $12.75 $ — 143,860,657 $41.84 $— 172,767,122 $43.08 $—
Granted—original 44,500,171 4.78 — 321,244,728 4.27 — 18,140,448 24.70 —
Granted—reload — — — — — — 15,984 28.05 —
Forfeited or exchanged (43,680,864) 11.51 — (39,285,305) 36.98 — (24,080,659) 42.19 —
Expired (29,358,634) 45.87 — (21,775,274) 36.21 — (20,441,584) 38.88 —
Exercised (645,381) 4.08 0.38 — — — (2,540,654) 22.36 —
Outstanding, end of period 374,860,098 $ 9.37 $ — 404,044,806 $12.75 $— 143,860,657 $41.84 $—
Exercisable, end of period 151,897,095 78,939,093 123,654,795
The following table summarizes the information about stock options outstanding under Citigroup stock option programs at December 31, 2010:
Options outstanding Options exercisable
Range of exercise prices
Number
outstanding
Weighted-average
contractual life
remaining
Weighted-average
exercise price
Number
exercisable
Weighted-average
exercise price
$2.97–$9.99 318,677,392 4.9 years $ 4.17 105,316,879 $ 4.18
$10.00–$19.99 5,465,017 7.8 years 14.77 1,414,660 14.54
$20.00–$29.99 9,766,158 3.5 years 24.51 5,423,229 24.64
$30.00–$39.99 4,636,301 4.0 years 34.44 3,636,302 34.68
$40.00–$49.99 30,889,716 0.6 years 46.10 30,889,233 46.10
$50.00–$56.41 5,425,514 1.3 years 52.14 5,216,792 52.06
374,860,098 4.5 years $ 9.37 151,897,095 $15.91
As of December 31, 2010, there was $252.8 million of total unrecognized
compensation cost related to stock options; this cost is expected to be
recognized over a weighted-average period of 1.3 years.
Fair Value Assumptions
Reload options are treated as separate grants from the related original grants.
Pursuant to the terms of currently outstanding reloadable options, upon
exercise of an option, if employees use previously owned shares to pay the
exercise price and surrender shares otherwise to be received for related tax
withholding, they will receive a reload option covering the same number
of shares used for such purposes, but only if the market price on the date of
exercise is at least 20% greater than the option exercise price. Reload options
vest after six months and carry the same expiration date as the option that
gave rise to the reload grant. The exercise price of a reload grant is the fair-
market value of Citigroup common stock on the date the underlying option
is exercised. Reload options are intended to encourage employees to exercise
options at an earlier date and to retain the shares acquired. The result of this
program is that employees generally will exercise options as soon as they are
able and, therefore, these options have shorter expected lives. Shorter option
lives result in lower valuations.
However, such values are expensed more quickly due to the shorter
vesting period of reload options. In addition, since reload options are treated
as separate grants, the existence of the reload feature results in a greater
number of options being valued. Shares received through option exercises
under the reload program, as well as certain other options, are subject to
restrictions on sale.
Additional valuation and related assumption information for Citigroup
option programs is presented below. Citigroup uses a lattice-type model to
value stock options.
For options granted during 2010 2009 2008
Weighted-average per-share fair
value, at December 31 $ 1.66 $ 1.38 $ 3.62
Weighted-average expected life
Original grants 6.06 years 5.87 years 5.00 years
Reload grants N/A N/A 1.04 years
Valuation assumptions
Expected volatility 36.42% 35.89% 25.11%
Risk-free interest rate 2.88% 2.79% 2.76%
Expected dividend yield 0.00% 0.02% 4.53%
Expected annual forfeitures
Original and reload grants 9.62% 7.60% 7.00%
N/A Not applicable