Johnson and Johnson 2015 Annual Report Download - page 70

The approximate minimum rental payments required under operating leases that have initial or remaining non-cancelable
lease terms in excess of one year at January 3, 2016 are:
(Dollars in Millions)
2016 2017 2018 2019 2020
After
2020 Total
$224 194 136 90 74 109 827
Commitments under capital leases are not significant.
17. Common Stock, Stock Option Plans and Stock Compensation Agreements
At January 3, 2016, the Company had 2 stock-based compensation plans. The shares outstanding are for contracts under
the Company’s 2005 Long-Term Incentive Plan and the 2012 Long-Term Incentive Plan. The 2005 Long-Term Incentive
Plan expired April 26, 2012. All options and restricted shares granted subsequent to that date were under the 2012 Long-
Term Incentive Plan. Under the 2012 Long-Term Incentive Plan, the Company may issue up to 650 million shares of
common stock, plus any shares canceled, expired, forfeited, or not issued from the 2005 Long-Term Incentive Plan
subsequent to April 26, 2012. Shares available for future grants under the 2012 Long-Term Incentive Plan were
486 million at the end of 2015.
The compensation cost that has been charged against income for these plans was $874 million, $792 million and $728
million for 2015, 2014 and 2013, respectively. The total income tax benefit recognized in the income statement for share-
based compensation costs was $253 million, $259 million and $243 million for 2015, 2014 and 2013, respectively. The
total unrecognized compensation cost was $744 million, $722 million and $636 million for 2015, 2014 and 2013,
respectively. The weighted average period for this cost to be recognized was 0.98 years, 1.18 years and 1.26 years for
2015, 2014 and 2013, respectively. Share-based compensation costs capitalized as part of inventory were insignificant in
all periods.
The Company settles employee benefit equity issuances with treasury shares. Treasury shares are replenished throughout
the year for the number of shares used to settle employee benefit equity issuances.
Stock Options
Stock options expire 10 years from the date of grant and vest over service periods that range from 6 months to 4 years. All
options are granted at the average of the high and low prices of the Company’s Common Stock on the New York Stock
Exchange on the date of grant.
The fair value of each option award was estimated on the date of grant using the Black-Scholes option valuation model
that uses the assumptions noted in the following table. For 2014 and 2013 grants, expected volatility represents a
blended rate of 4-year daily historical average volatility rate, and a 5-week average implied volatility rate based on at-the-
money traded Johnson & Johnson options with a life of 2 years. For 2015 grants, expected volatility represents a blended
rate of 10-year weekly historical overall volatility rate, and a 5-week average implied volatility rate based on at-the-money
traded Johnson & Johnson options with a life of 2 years. For all grants, historical data is used to determine the expected life
of the option. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant.
The average fair value of options granted was $10.68, $8.42 and $4.88, in 2015, 2014 and 2013, respectively. The fair
value was estimated based on the weighted average assumptions of:
2015 2014 2013
Risk-free rate 1.77% 1.87% 1.01%
Expected volatility 15.48% 14.60% 14.04%
Expected life (in years) 7.0 6.0 6.0
Expected dividend yield 2.90% 3.10% 3.40%
58 •Johnson & Johnson 2015 Annual Report