Macy's 2011 Annual Report Download - page 76

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-36
The fair value of stock-options granted during 2011, 2010 and 2009 and the weighted average assumptions used to
estimate the fair value are as follows:
2011 2010 2009
Weighted average grant date fair value of stock options
granted during the period............................................................................. $ 7.12 $ 7.34 $ 2.51
Dividend yield................................................................................................. 2.3% 1.0% 2.3%
Expected volatility .......................................................................................... 38.8% 37.6% 36.4%
Risk-free interest rate...................................................................................... 2.0% 2.7% 1.9%
Expected life ................................................................................................... 5.6 years 5.5 years 5.4 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 2011 is as follows:
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
(thousands) (years) (millions)
Outstanding, beginning of period........................................ 38,101.3 $ 25.59
Granted ................................................................................ 4,874.9 $ 23.43
Canceled or forfeited........................................................... (1,532.7) $ 26.90
Exercised ............................................................................. (7,038.2) $ 20.07
Outstanding, end of period .................................................. 34,405.3 $ 26.36
Exercisable, end of period................................................... 23,381.3 $ 29.57 4.1 $ 99
Options expected to vest...................................................... 9,701.1 $ 19.56 8.1 $ 138
Additional information relating to stock options is as follows:
2011 2010 2009
(millions)
Intrinsic value of options exercised ................................................................ $ 64 $ 13 $ 2
Grant date fair value of stock options that vested during the year.................. 50 55 71
Cash received from stock options exercised................................................... 141 39 8
Tax benefits realized from exercised stock options
and vested restricted stock........................................................................... 20 4 —
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. 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