PG&E 2009 Annual Report Download - page 106

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The fair value of each stock option on the date of grant
is estimated using the Black-Scholes valuation method. The
weighted average grant date fair value of options granted
using the Black-Scholes valuation method was $5.95, $4.46,
and $7.81 per share in 2009, 2008, and 2007, respectively.
The significant assumptions used for shares granted in
2009, 2008, and 2007 were:
2009 2008 2007
Expected stock price
volatility 28.8% 18.9% 16.5%
Expected annual
dividend payment $1.68 $1.56 $1.44
Risk-free interest rate 2.30% 2.77% 4.73%
Expected life 5.3 years 5.4 years 5.4 years
Expected volatilities are based on historical volatility of
PG&E Corporation’s common stock. The expected
dividend payment is the dividend yield at the date of grant.
The risk-free interest rate for periods within the contractual
term of the stock option is based on the U.S. Treasury rates
in effect at the date of grant. The expected life of stock
options is derived from historical data that estimates stock
option exercises and employee departure behavior.
The following table summarizes total intrinsic value (fair
market value of PG&E Corporation’s stock less stock
option strike price) of options exercised for PG&E
Corporation and the Utility in 2009, 2008, and 2007:
(in millions) PG&E
Corporation Utility
2009:
Intrinsic value of options exercised $18 $13
2008:
Intrinsic value of options exercised $13 $ 9
2007:
Intrinsic value of options exercised $59 $34
The tax benefit from stock options exercised totaled $6
million, $4 million, and $20 million for the years ended
December 31, 2009, 2008, and 2007 respectively, of which
$5 million, $3 million, and $10 million was recorded by
the Utility.
The following table summarizes stock option activity for PG&E Corporation and the Utility for 2009:
Options Shares Weighted Average
Exercise Price
Weighted
Average
Remaining
Contractual
Term Aggregate
Intrinsic Value
Outstanding at January 1 2,968,261 $23.45
Granted(1) 14,543 $35.53
Exercised (1,005,063) $22.53
Forfeited or expired (2,400) $29.76
Outstanding at December 31 1,975,341 $23.99 3.38 $40,812,560
Expected to vest at December 31 27,583 $38.24 8.18 $ 204,479
Exercisable at December 31 1,947,758 $23.79 3.31 $40,635,663
(1) No stock options were awarded to employees in 2009; however, certain non-employee directors of PG&E Corporation were awarded stock options.
The following table summarizes stock option activity for the Utility for 2009:
Options Shares Weighted Average
Exercise Price
Weighted
Average
Remaining
Contractual
Term Aggregate
Intrinsic Value
Outstanding at January 1(1) 2,494,868 $22.99
Granted ––
Exercised (711,652) $22.13
Forfeited or expired (2,400) $29.76
Outstanding at December 31(1) 1,780,816 $23.62 3.29 $37,446,306
Expected to vest at December 31 – $ – – $ –
Exercisable at December 31 1,780,816 $23.62 3.29 $37,446,306
(1) Includes net employee transfers of 185,045 shares between PG&E Corporation and the Utility during 2009.
102