National Oilwell Varco 2010 Annual Report Download - page 89

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We also have inactive stock option plans that were acquired in connection with the acquisitions of Varco International, Inc. in 2005 and Grant
Prideco in 2008. We converted the outstanding stock options under these plans to options to acquire our common stock and no further options are
being issued under these plans. Stock option information summarized below includes amounts for the National Oilwell Varco Long-Term
Incentive Plan and stock plans of acquired companies. Options outstanding at December 31, 2010 under the stock option plans have exercise
prices between $8.33 and $73.98 per share, and expire at various dates from January 31, 2011 to May 13, 2020.
The following summarizes options activity:
Years Ended December 31,
2010 2009 2008
Number Average Number Average Number Average
of Exercise of Exercise of Exercise
Shares Price Shares Price Shares Price
Shares under option at beginning of year 10,255,982 $ 34.19 7,547,822 $ 37.24 7,903,832 $ 29.12
Granted 3,485,283 44.03 3,234,400 26.03 2,993,000 48.59
Cancelled (232,488) 40.53 (156,356) 29.79 (218,560) 30.90
Exercised (2,469,233) 30.35 (369,884) 40.86 (3,130,450) 27.08
Shares under option at end of year 11,039,544 $ 38.01 10,255,982 $ 34.19 7,547,822 $ 37.24
Exercisable at end of year 5,067,186 $ 36.31 5,308,465 $ 33.14 3,110,462 $ 26.17
The following summarizes information about stock options outstanding as of December 31, 2010:
Weighted-Avg Options Outstanding Options Exercisable
Remaining Weighted-Avg Weighted-Avg
Range of Exercise Price Contractual
Life Shares Exercise
Price Shares Exercise
Price
8.33 -15.00 2.79 416,027 $ 11.42 395,639 $ 11.42
15.92 - 33.29 7.25 3,214,610 24.68 1,174,403 22.45
33.57 - 73.98 7.53 7,408,907 45.29 3,497,144 43.89
Total 7.27 11,039,544 $ 38.01 5,067,186 $ 36.31
The weighted-average fair value of options granted during 2010, 2009 and 2008 was approximately $16.73, $11.89 and $22.16 (excluding
options assumed in the Grant Prideco merger) per share, respectively, as determined using the Black-Scholes option-pricing model. The total
intrinsic value of options exercised during 2010 and 2009 was $60 million and $6 million, respectively.
The determination of fair value of share-based payment awards on the date of grant using an option-pricing model is affected by our stock price
as well as assumptions regarding a number of highly complex and subjective variables. These variables include, but are not limited to, the
expected stock price volatility over the term of the awards, and actual and projected employee stock option exercise activity. The use of the Black
Scholes model requires the use of extensive actual employee exercise activity data and the use of a number of complex assumptions including
expected volatility, risk-free interest rate, expected dividends and expected term.
Years Ended December 31,
2010 2009 2008
Valuation Assumptions:
Expected volatility 55.0% 63.5% 41.8%
Risk-free interest rate 2.3% 1.8% 2.9%
Expected dividends $ 0.4 $ $
Expected term (in years) 3.2 3.4 3.6
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