Kroger 2012 Annual Report Download - page 115

Download and view the complete annual report

Please find page 115 of the 2012 Kroger annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 136

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136

A-57
NO T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S , CO N T I N U E D
Restricted stock
Changes in restricted stock outstanding under the restricted stock plans are summarized below:
Restricted
shares
outstanding
(in millions)
Weighted-average
grant-date
fair value
Outstanding, year-end 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4 $24.25
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.4 $20.25
Lapsed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2.3) $23.62
Canceled or Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.1) $23.13
Outstanding, year-end 2010 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.4 $22.39
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.5 $24.63
Lapsed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2.5) $21.96
Canceled or Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.2) $23.80
Outstanding, year-end 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 $23.92
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.6 $22.23
Lapsed . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2.4) $24.34
Canceled or Expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (0.1) $23.28
Outstanding, year-end 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.3 $22.67
The weighted-average fair value of stock options granted during 2012, 2011 and 2010 was $4.39, $6.00
and $5.12, respectively. The fair value of each stock option grant was estimated on the date of grant using the
Black-Scholes option-pricing model, based on the assumptions shown in the table below. The Black-Scholes
model utilizes extensive judgment and financial estimates, including the term employees are expected to retain
their stock options before exercising them, the volatility of the Company’s stock price over that expected
term, the dividend yield over the term and the number of awards expected to be forfeited before they vest.
Using alternative assumptions in the calculation of fair value would produce fair values for stock option grants
that could be different than those used to record stock-based compensation expense in the Consolidated
Statements of Operations. The decrease in the fair value of the stock options granted during 2012, compared
to 2011, resulted primarily from a decrease in the Company’s share price, a decrease in the weighted average
risk-free interest rate and an increase in the expected dividend yield. The increase in the fair value of the stock
options granted in 2011, compared to 2010, resulted primarily from an increase in the Company’s share price.
The following table reflects the weighted-average assumptions used for grants awarded to option holders:
2012 2011 2010
Weighted average expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . 26.49% 26.31% 26.87%
Weighted average risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . 0.97% 2.16% 2.57%
Expected dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.49% 1.90% 2.00%
Expected term (based on historical results) . . . . . . . . . . . . . . . . . . . 6.9 years 6.9 years 6.9 years
The weighted-average risk-free interest rate was based on the yield of a treasury note as of the grant date,
continuously compounded, which matures at a date that approximates the expected term of the options.
The dividend yield was based on our history and expectation of dividend payouts. Expected volatility was
determined based upon historical stock volatilities; however, implied volatility was also considered. Expected
term was determined based upon a combination of historical exercise and cancellation experience as well as
estimates of expected future exercise and cancellation experience.