Lockheed Martin 2011 Annual Report Download - page 84

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2011 Activity
Stock Options
The following table summarizes stock option activity during 2011:
Number of
Stock
Options
(In thousands)
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
(In years)
Aggregate
Intrinsic
Value
(In millions)
Outstanding at December 31, 2010 24,497 $75.90
Granted 2,540 79.60
Exercised (2,257) 51.56
Terminated (221) 83.77
Outstanding at December 31, 2011 24,559 78.45 5.7 $204.1
Vested and expected-to-vest at December 31, 2011 24,476 78.45 5.6 204.0
Vested at December 31, 2011 18,356 78.41 4.8 187.1
Stock options vest over three years and have 10-year terms. Exercise prices of stock options awarded for all periods
were equal to the market price of the stock on the date of grant. The following table pertains to stock options that were
granted, vested, and exercised in 2011, 2010, and 2009:
(In millions, except for grant-date fair value of stock options) 2011 2010 2009
Weighted average grant-date fair value of stock options granted $13.06 $14.05 $14.91
Aggregate fair value of all the stock options that vested 60 71 72
Aggregate intrinsic value of all of the stock options exercised 60 50 37
We estimate the fair value for stock options at the date of grant using the Black-Scholes option pricing model, which
requires us to make certain assumptions. We base the risk-free interest rate on U.S. Treasury zero-coupon issues with a
remaining term equal to the expected life assumed at the date of grant. The dividend yield is determined based on estimated
dividend payments and changes to our stock price during the expected option life. We estimate volatility based on the
historical volatility of our daily stock price over the past five years, which is commensurate with the expected life of the
options. We base the average expected life on the contractual term of the stock option, historical trends in employee exercise
activity, and post-vesting employment termination trends. We estimate forfeitures at the date of grant based on historical
experience. The impact of forfeitures is not material.
We used the following weighted average assumptions in the Black-Scholes option pricing model to determine the fair
values of stock-based compensation awards during 2011, 2010, and 2009:
2011 2010 2009
Risk-free interest rate 1.97% 2.49% 1.69%
Dividend yield 4.20% 3.40% 2.30%
Volatility factors 0.277 0.272 0.244
Expected option life 5 years 5 years 5 years
RSUs
The following table summarizes activity related to nonvested RSUs during 2011:
Number of RSUs
(In thousands)
Weighted Average
Grant-Date Fair
Value Per Share
Nonvested at December 31, 2010 3,756 $82.53
Granted 2,021 79.21
Vested (1,122) 94.41
Terminated (353) 77.81
Nonvested at December 31, 2011 4,302 $78.25
76