Macy's 2012 Annual Report Download - page 84

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
F-37
Also during 2012, 2011 and 2010, the CMD Committee approved awards of time-based restricted stock or time-based
restricted stock units to certain senior executives of the Company and awards of time-based restricted stock units to the non-
employee members of the Company’s board of directors.
Stock Options
The fair value of stock-options granted during 2012, 2011 and 2010 and the weighted average assumptions used to
estimate the fair value are as follows:
2012 2011 2010
Weighted average grant date fair value of stock options
granted during the period............................................................................. $ 12.22 $ 7.12 $ 7.34
Dividend yield................................................................................................. 2.2% 2.3% 1.0%
Expected volatility .......................................................................................... 39.8% 38.8% 37.6%
Risk-free interest rate...................................................................................... 1.2% 2.0% 2.7%
Expected life ................................................................................................... 5.7 years 5.6 years 5.5 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.
Activity related to stock options for 2012 is as follows:
Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life
Aggregate
Intrinsic
Value
(thousands) (years) (millions)
Outstanding, beginning of period........................................ 34,405.3 $ 26.36
Granted ................................................................................ 3,627.8 $ 39.84
Canceled or forfeited........................................................... (670.5) $ 31.58
Exercised ............................................................................. (7,569.7) $ 21.69
Outstanding, end of period .................................................. 29,792.9 $ 29.07
Exercisable, end of period................................................... 19,991.4 $ 30.09 4.0 $ 188
Options expected to vest...................................................... 8,429.3 $ 26.99 8.0 $ 106