HP 2013 Annual Report Download - page 105

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HEWLETT-PACKARD COMPANY AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 2: Stock-Based Compensation (Continued)
The weighted-average fair value and the assumptions used to measure fair value were as follows:
2013 2012 2011
Weighted-average fair value of grants per option(1) ...................... $4.26 $9.06 $7.85
Expected volatility(2) ............................................ 42% 42% 41%
Risk-free interest rate(3) ......................................... 1.07% 1.17% 1.20%
Expected dividend yield(4) ........................................ 3.64% 1.83% 1.97%
Expected term in months(5) ....................................... 71 67 63
(1) The fair value calculation was based on stock options granted during the period.
(2) Determined using implied volatility from traded options on HP’s stock.
(3) Determined using the yield on U.S. Treasury zero-coupon issues.
(4) Determined using a constant dividend yield during the expected term of the option.
(5) Determined using historical exercise and post-vesting termination patterns.
Option activity as of October 31 during each fiscal year was as follows:
2013 2012 2011
Weighted- Weighted- Weighted-
Weighted- Average Weighted- Average Weighted- Average
Average Remaining Aggregate Average Remaining Aggregate Average Remaining Aggregate
Exercise Contractual Intrinsic Exercise Contractual Intrinsic Exercise Contractual Intrinsic
Shares Price Term Value Shares Price Term Value Shares Price Term Value
In thousands In years In millions In thousands In years In millions In thousands In years In millions
Outstanding at
beginning of year . . 87,296 $29 120,243 $28 142,916 $28
Granted(1) ....... 25,785 $15 7,529 $27 18,804 $21
Exercised ........ (10,063) $19 (29,683) $20 (37,121) $23
Forfeited/cancelled/
expired ........ (18,976) $25 (10,793) $35 (4,356) $39
Outstanding at end of
year . . . . . . . . . 84,042 $27 3.9 $303 87,296 $29 3.0 $15 120,243 $28 3.0 $460
Vested and expected to
vest at end of year . . 80,004 $27 3.7 $274 85,935 $29 2.9 $15 117,066 $28 2.9 $442
Exercisable at end of
year . . . . . . . . . 49,825 $33 1.8 $ 58 68,437 $31 1.9 $12 97,967 $29 2.0 $332
(1) In connection with fiscal 2011 acquisitions, HP assumed options to purchase approximately 6 million shares with a weighted-average exercise price of $14 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, 2013,
2012 and 2011. The aggregate intrinsic value is the difference between HP’s closing stock price on the
last trading day of fiscal 2013, 2012 and 2011 and the exercise price, multiplied by the number of
in-the-money options. Total intrinsic value of options exercised in fiscal 2013, 2012 and 2011 was
$36 million, $176 million and $673 million, respectively. Total grant date fair value of options vested in
fiscal 2013, 2012 and 2011 was $64 million, $104 million and $95 million, respectively, net of taxes.
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