Johnson Controls 2013 Annual Report Download - page 83

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83
The Company uses historical data to estimate option exercises and employee terminations within the valuation model. The expected
term of options represents the period of time that options granted are expected to be outstanding. The risk-free rate for periods
during the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.
Year Ended September 30,
2013 2012 2011
Expected life of option (years) 5.0 - 6.7 4.8 - 6.4 4.5 - 6.0
Risk-free interest rate 0.62% - 1.33% 0.54% - 1.61% 1.10% - 1.58%
Expected volatility of the Company’s stock 41.00% 40.00% 38.00%
Expected dividend yield on the Company’s stock 2.03% 1.81% 1.74%
A summary of stock option activity at September 30, 2013, and changes for the year then ended, is presented below:
Weighted
Average
Option Price
Shares
Subject to
Option
Weighted
Average
Remaining
Contractual
Life (years)
Aggregate
Intrinsic
Value
(in millions)
Outstanding, September 30, 2012 $ 26.39 36,468,503
Granted 27.96 5,554,690
Exercised 22.10 (11,576,924)
Forfeited or expired 30.03 (1,042,988)
Outstanding, September 30, 2013 $ 28.25 29,403,281 5.9 $ 390
Exercisable, September 30, 2013 $ 27.97 17,699,011 4.4 $ 239
The weighted-average grant-date fair value of options granted during the fiscal years ended September 30, 2013, 2012 and 2011
was $8.58, $8.92 and $9.09, respectively.
The total intrinsic value of options exercised during the fiscal years ended September 30, 2013, 2012 and 2011 was approximately
$154 million, $19 million and $101 million, respectively.
In conjunction with the exercise of stock options granted, the Company received cash payments for the fiscal years ended
September 30, 2013, 2012 and 2011 of approximately $254 million, $40 million and $105 million, respectively.
The Company has elected to utilize the alternative transition method for calculating the tax effects of stock-based compensation.
The alternative transition method includes computational guidance to establish the beginning balance of the additional paid-in
capital pool (APIC Pool) related to the tax effects of employee stock-based compensation, and a simplified method to determine
the subsequent impact on the APIC Pool for employee stock-based compensation awards that are vested and outstanding upon
adoption of ASC 718. The tax benefit from the exercise of stock options, which is recorded in capital in excess of par value, was
$35 million, $3 million and $30 million for the fiscal years ended September 30, 2013, 2012 and 2011, respectively. The Company
does not settle stock options granted under share-based payment arrangements for cash.
At September 30, 2013, the Company had approximately $36 million of total unrecognized compensation cost related to nonvested
stock options granted. That cost is expected to be recognized over a weighted-average period of 1.6 years.
Stock Appreciation Rights (SARs)
SARs vest under the same terms and conditions as stock option awards; however, they are settled in cash for the difference between
the market price on the date of exercise and the exercise price. As a result, SARs are recorded in the Company’s consolidated
statements of financial position as a liability until the date of exercise.
The fair value of each SAR award is estimated using a similar method described for stock options. The fair value of each SAR
award is recalculated at the end of each reporting period and the liability and expense adjusted based on the new fair value.