Macy's 2010 Annual Report Download - page 91

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The fair value of stock-options granted during 2010, 2009 and 2008 and the weighted average assumptions
used to estimate the fair value are as follows:
2010 2009 2008
Weighted average grant date fair value of stock options granted
during the period ........................................... $ 7.34 $ 2.51 $ 7.42
Dividend yield ............................................... 1.0% 2.3% 2.2%
Expected volatility ............................................ 37.6% 36.4% 36.2%
Risk-free interest rate ......................................... 2.7% 1.9% 2.7%
Expected life ................................................ 5.5years 5.4 years 5.3 years
The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option-
pricing model. The Company estimates the expected volatility and expected option life assumption consistent
with ASC Topic 718, “Compensation – Stock Compensation.” The expected volatility of the Company’s
common stock at the date of grant is estimated based on a historic volatility rate and the expected option life is
calculated based on historical stock option experience as the best estimate of future exercise patterns. The
dividend yield assumption is based on historical and anticipated dividend payouts. The risk-free interest rate
assumption is based on observed interest rates consistent with the expected life of each stock option grant. The
Company uses historical data to estimate pre-vesting option forfeitures and records stock-based compensation
expense only for those awards that are expected to vest. Compensation expense is recorded for all stock options
expected to vest based on the amortization of the fair value at the date of grant on a straight-line basis primarily
over the vesting period of the options.
Stock option activity for 2010 is as follows:
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
(thousands) (years) (millions)
Outstanding, beginning of period .......................... 38,804.9 $25.47
Granted .............................................. 3,908.6 $20.88
Canceled or forfeited ................................... (2,285.2) $24.46
Exercised ............................................. (2,327.0) $16.70
Outstanding, end of period ............................... 38,101.3 $25.59
Exercisable, end of period ............................... 26,404.5 $27.92 4.0 $(130)
Options expected to vest ................................. 10,293.1 $20.35 8.0 $ 27
Additional information relating to stock options is as follows:
2010 2009 2008
(millions)
Intrinsic value of options exercised ............................................... $13 $ 2 $ 1
Grant date fair value of stock options that vested during the year ........................ 55 71 65
Cash received from stock options exercised ........................................ 39 8 6
Tax benefits realized from exercised stock options and vested restricted stock ............. 4 – –
F-43