HP 2011 Annual Report Download - page 99

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 2: Stock-Based Compensation (Continued)
performance-contingent stock options using a combination of the Monte Carlo simulation model and
lattice model, as these awards contain market conditions.
The weighted-average fair value of stock options was estimated using the following weighted-
average assumptions:
2011 2010 2009
Weighted-average fair value of grants per share(1) ..................... $7.85 $13.33 $13.04
Implied volatility ............................................. 41% 30% 43%
Risk-free interest rate ......................................... 1.20% 2.06% 2.07%
Dividend yield .............................................. 1.97% 0.68% 0.92%
Expected life in months ........................................ 63 61 61
(1) The fair value calculation was based on stock options granted during the period.
Option activity as of October 31 during each fiscal year was as follows:
2011 2010
Weighted- Weighted- Weighted- Weighted-
Average Average Average Average
Exercise Remaining Aggregate Exercise Remaining Aggregate
Price Contractual Intrinsic Price Contractual Intrinsic
Shares Per Share Term Value Shares Per Share Term Value
In thousands In years In millions In thousands In years In millions
Outstanding at beginning of year . . 142,916 $28 233,214 $33
Granted and assumed through
acquisitions ............. 18,804 $21 11,939 $22
Exercised ................ (37,121) $23 (75,002) $34
Forfeited/cancelled/expired ...... (4,356) $39 (27,235) $55
Outstanding at end of year ..... 120,243 $28 3.0 $460 142,916 $28 2.7 $2,140
Vested and expected to vest at end
of year ................ 117,066 $28 2.9 $442 141,082 $28 2.7 $2,114
Exercisable at end of year ...... 97,967 $29 2.0 $332 125,232 $28 2.1 $1,895
In relation to fiscal 2011 acquisitions, HP assumed approximately 6 million shares of options with a
weighted-average exercise price of $14 per share. In relation to fiscal 2010 acquisitions, HP assumed
approximately 10 million shares of options with a weighted-average exercise price of $19 per share.
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value that
option holders would have received had all option holders exercised their options on October 31, 2011
and 2010. The aggregate intrinsic value is the difference between HP’s closing stock price on the last
trading day of fiscal 2011 and fiscal 2010 and the exercise price, multiplied by the number of
in-the-money options. Total intrinsic value of options exercised in fiscal 2011, 2010 and 2009 was
$0.7 billion, $1.3 billion and $0.8 billion, respectively. Total grant date fair value of options vested and
expensed in fiscal 2011, 2010 and 2009 was $95 million, $93 million and $172 million, respectively, net
of taxes.
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