Nordstrom 2013 Annual Report Download - page 55

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Nordstrom, Inc. and subsidiaries 55
Stock Options
We used the following assumptions to estimate the fair value for stock options at grant date:
Fiscal year 2013 2012 2011
Risk-free interest rate: Represents the yield on U.S. Treasury zero-coupon securities that
mature over the 10-year life of the stock options. 0.2% – 1.8% 0.3% – 2.0% 0.4% – 3.5%
Weighted-average volatility: Based on a combination of the historical volatility of our common
stock and the implied volatility of exchange-traded options for our common stock. 31.8% 36.5% 39.0%
Weighted-average expected dividend yield: Our forecasted dividend yield for the next 10
years. 2.0% 2.1%2.0%
Expected life in years: Represents the estimated period of time until option exercise. The
expected term of options granted was derived from the output of the Binomial Lattice option
valuation model and was based on our historical exercise behavior, taking into consideration
the contractual term of the option and our employees’ expected exercise and post-vesting
employment termination behavior.
6.7 6.1 5.9
The weighted-average fair value per option at the grant date was $14, $15 and $15 in 2013, 2012 and 2011. In 2013, 2012 and 2011, stock
option awards to employees were approved by the Compensation Committee of our Board of Directors and their exercise price was set at
$54, $53 and $45, the closing price of our common stock on March 4, 2013, February 22, 2012 and February 25, 2011 (the dates of grant).
The awards are determined based upon a percentage of the recipients’ base salary and the fair value of the stock options. In 2013, we
awarded stock options to 1,625 employees, compared with 1,477 and 1,331 employees in 2012 and 2011.
As of February 1, 2014, we have 13.8 options outstanding under the 2010 Plan. Options vest over four years, and expire 10 years after the
date of grant. A summary of the stock option activity for 2013 is presented below:
Fiscal year 2013
Shares
Weighted-
average
exercise price
Weighted-average
remaining
contractual
life (years)
Aggregate
intrinsic
value
Outstanding, beginning of year 13.5 $38
Granted 3.7 54
Exercised (3.0) 29
Cancelled (0.4) 51
Outstanding, end of year 13.8 $43 7 $195
Options exercisable at end of year 6.7 $35 5 $148
Options vested or expected to vest at end of year 13.1 $43 7 $190
The total intrinsic value of options exercised during 2013, 2012 and 2011 was $89, $90 and $80. The total fair value of stock options vested
during 2013, 2012 and 2011 was $34, $32 and $29. As of February 1, 2014, the total unrecognized stock-based compensation expense
related to nonvested stock options was $63, which is expected to be recognized over a weighted-average period of 26 months.
Table of Contents
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts