Macy's 2010 Annual Report Download - page 92

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company also has a stock credit plan. In 2006, key management personnel became eligible to earn a
stock credit grant over a two-year performance period ending February 2, 2008. There were a total of 727,629
stock credit awards outstanding as of January 29, 2011, including reinvested dividend equivalents earned during
the holding period, relating to the 2006 grant. In general, with respect to the stock credits awarded to participants
in 2006, the value of one-half of the stock credits earned plus reinvested dividend equivalents was paid in cash in
early 2010 and the value of the other half of such earned stock credits plus reinvested dividend equivalents was
paid in cash in early 2011. In 2008, key management personnel became eligible to earn a stock credit grant over a
two-year performance period ending January 30, 2010. There were a total of 1,690,716 stock credit awards
outstanding as of January 29, 2011, relating to the 2008 grant. In general, with respect to the stock credits
awarded to participants in 2008, the value of one-half of the stock credits earned plus reinvested dividend
equivalents will be paid in cash in early 2012 and the value of the other half of such earned stock credits plus
reinvested dividend equivalents will be paid in cash in early 2013. Compensation expense for stock credit awards
is recorded on a straight-line basis primarily over the vesting period and is calculated based on the ending stock
price for each reporting period. At January 29, 2011 and January 30, 2010, the liability under the stock credit
plans, which is reflected in other liabilities on the Consolidated Balance Sheets, was $52 million and $45 million,
respectively.
Activity related to stock credits for 2010 is as follows:
Shares
Stock credits, beginning of period ............................................ 3,267,355
Additional dividend equivalents earned ........................................ 22,339
Stock credits forfeited ...................................................... (145,404)
Stock credits distributed .................................................... (725,945)
Stock credits, end of period .................................................. 2,418,345
The weighted average grant date fair value of restricted stock and restricted stock units granted during 2010,
2009 and 2008 are as follows:
2010 2009 2008
Restricted stock ........................................................ $20.89 $ – $24.85
Restricted stock units .................................................... $20.95 $3.59 $ –
The fair value of the Target Shares and restricted stock awards are based on the fair value of the underlying
shares on the date of grant. The fair value of the Founders Award was determined using a Monte Carlo
simulation analysis to estimate the total shareholder return ranking of the Company among a ten-company
executive compensation peer group over the remaining performance period. The expected volatility of the
Company’s common stock at the date of grant was estimated based on a historical average volatility rate for the
approximate three-year performance period. The dividend yield assumption was based on historical and
anticipated dividend payouts. The risk-free interest rate assumption was based on observed interest rates
consistent with the approximate three-year performance measurement period.
Compensation expense is recorded for all restricted stock and restricted stock unit awards based on the
amortization of the fair market value at the date of grant over the period the restrictions lapse or over the
performance period of the performance-based restricted stock units.
F-44