Nordstrom 2008 Annual Report Download - page 52

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Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share and per option amounts
As of January 31, 2009, we have options outstanding under two stock option plans (collectively, the “Nordstrom, Inc. Plans”). Options vest
over periods ranging from four to eight years, and expire ten years after the date of grant. We recognize stock-based compensation expense on
a straight–line basis over the requisite service period. A summary of the stock option activity for 2008 under the Nordstrom, Inc. Plans is
presented below:
Fiscal Year 2008
Shares
Weighted–
Average
Exercise Price
Weighted-Average
Remaining Contractual
Life (Years)
Aggregate
Intrinsic
Value
Outstanding, beginning of year 10.9 $25
Granted 2.2 38
Exercised (0.8) 17
Cancelled (0.5) 40
Outstanding, end of year 11.8 $27 6 $9
Options exercisable at end of year 7.5 $19 4 $9
Options vested or expected to vest at end of year 11.1 $26 6 $9
The total intrinsic value of options exercised during 2008, 2007 and 2006 was $14, $79 and $111. The total fair value of stock options vested during
fiscal years 2008, 2007 and 2006 was $24, $24 and $30. As of January 31, 2009, the total unrecognized stock-based compensation expense related to
nonvested stock options was $37, which is expected to be recognized over a weighted average period of 30 months.
PERFORMANCE SHARE UNITS
We grant performance share units to executive officers as one of the ways to align compensation with shareholder interests. Performance share
units are payable in either cash or stock as elected by the employee; therefore they are classified as a liability award in accordance with Statement
of Financial Accounting Standards No. 123(R),
Share-Based Payment . Performance share units vest after a three-year period only when our total
shareholder return (reflecting daily stock price appreciation and compound reinvestment of dividends) is positive and outperforms companies in a
defined group of direct competitors determined by the Compensation Committee of our Board of Directors. The percentage of units that are earned
depends on our relative position at the end of the vesting period and can range from 0% to 125% of the number of units granted.
The liability is remeasured and the appropriate earnings adjustment is taken at each fiscal quarter-end during the vesting period. The performance
share unit liability is remeasured using the estimated vesting percentage multiplied by the closing market price of our common stock on the current
period-end date and is pro-rated based on the amount of time passed in the vesting period. The price used to issue stock or cash for the
performance share units upon vesting is the closing market price of our common stock on the vest date.
As of January 31, 2009, we had no liabilities related to performance share units. As of February 2, 2008, our liabilities included $3 for performance
share units. As of January 31, 2009, we did not have any unrecognized stock-based compensation expense for unvested performance share units as
we had a negative total shareholder return for all outstanding periods. This position may change before the end of the vesting period for the
unvested performance share units. At February 2, 2008, 113,743 units were unvested. During the year ended January 31, 2009, 79,504 units were
granted, 57,006 units were vested but unearned and 18,852 units were cancelled, resulting in an ending balance of 117,389 unvested units as of
January 31, 2009.
The following table summarizes the information for performance share units that vested during the period:
Fiscal Year 2008 2007 2006
Number of performance share units earned1 – 191,794 216,865
Total fair value of performance share units earned – $12 $11
Total amount of performance share units settled or to be settled for cash – $3 $6
1In 2008, 57,006 units were vested, but unearned as the units had a negative total shareholder return as of January 31, 2009 (vest date).
NONEMPLOYEE DIRECTOR STOCK INCENTIVE PLAN
The Nonemployee Director Stock Incentive Plan authorizes the grant of stock awards to our nonemployee directors. These awards may be deferred
or issued in the form of restricted or unrestricted stock, nonqualified stock options or stock appreciation rights. In 2008, we deferred shares with a
total expense of $1. As of January 31, 2009, we had 0.7 remaining shares available for issuance.
EMPLOYEE STOCK PURCHASE PLAN
We offer an Employee Stock Purchase Plan (“ESPP”) as a benefit to our employees. Employees may make payroll deductions of up to ten percent of
their base and bonus compensation. At the end of each six-month offering period, participants may purchase shares of our common stock at 90% of
the fair market value on the last day of each offer period. Beginning in 2006, we recorded compensation expense over the purchase period at the
fair value of the ESPP at the end of each reporting period. We issued 0.6 shares under the ESPP during the year ended January 31, 2009. As of
January 31, 2009 and February 2, 2008, we had current liabilities of $5 and $6, respectively, for future purchase of shares under the ESPP.