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Notes to Consolidated Financial Statements
86 PepsiCo, Inc. 2010 Annual Report
Our weighted-average Black-Scholes fair value assumptions
are as follows:
2010 2009 2008
Expected life 5 yrs. 6 yrs. 6 yrs.
Risk-free interest rate 2.3% 2.8% 3.0%
Expected volatility 17% 17% 16%
Expected dividend yield 2.8% 3.0% 1.9%
The expected life is the period over which our employee groups
are expected to hold their options. It is based on our historical
experience with similar grants. The risk-free interest rate is
based on the expected U.S. Treasury rate over the expected life.
Volatility reflects movements in our stock price over the most
recent historical period equivalent to the expected life. Dividend
yield is estimated over the expected life based on our stated
dividend policy and forecasts of net income, share repurchases
and stock price.
A summary of our stock-based compensation activity for the
year ended December25, 2010 is presented below:
Our Stock Option Activity
Average Aggregate
Average Life Intrinsic
Options
(a) Price
(b) (years)
(c) Value
(d)
Outstanding at
December 26, 2009 106,011 $51.68
Granted 26,858 54.09
Exercised (23,940) 43.47
Forfeited/expired (2,726) 55.85
Outstanding at
December25, 2010 106,203 $54.03 5.19 $1,281,596
Exercisable at
December25, 2010 67,304 $50.26 3.44 $1,040,510
(a) Options are in thousands and include options previously granted under PBG,
PAS and Quaker plans. No additional options or shares may be granted under
the PBG, PAS and Quakerplans.
(b) Weighted-average exercise price.
(c) Weighted-average contractual life remaining.
(d) In thousands.
Our RSU Activity
Average Average Aggregate
Intrinsic Life Intrinsic
RSUs
(a) Price
(b) (years)
(c) Value
(d)
Outstanding at
December 26, 2009 6,092 $60.98
Granted 8,326 65.01
Converted (3,183) 63.58
Forfeited/expired (573) 62.50
Outstanding at
December25, 2010 10,662 $63.27 1.69 $700,397
(a) RSUs are in thousands and include RSUs previously granted under a PBG
plan. No additional RSUs or shares may be granted under the PBG plan.
(b) Weighted-average intrinsic value at grant date.
(c) Weighted-average contractual life remaining.
(d) In thousands.
Other Stock-Based Compensation Data
2010 2009 2008
Stock Options
Weighted-average fair value
of options granted $ 13.93 $ 7.02 $ 11.24
Total intrinsic value of options exercised(a) $502,354 $194,545 $410,152
RSUs
Total number of RSUs granted(a) 8,326 2,653 2,135
Weighted-average intrinsic value
of RSUs granted $ 65.01 $ 53.22 $ 68.73
Total intrinsic value of RSUs converted(a)
$202,717 $124,193 $180,563
(a) In thousands.
As of December25, 2010, there was $423million of total
unrecognized compensation cost related to nonvested share-
based compensation grants. This unrecognized compensation
is expected to be recognized over a weighted-average period
oftwoyears.
Note 7 Pension, Retiree Medical
and Savings Plans
Our pension plans cover full-time employees in the U.S. and
certain international employees. Benefits are determined based
on either years of service or a combination of years of service and
earnings. U.S. and Canada retirees are also eligible for medical
and life insurance benefits (retiree medical) if they meet age and
service requirements. Generally, our share of retiree medical
costs is capped at specified dollar amounts, which vary based
upon years of service, with retirees contributing the remainder
of the costs.
Gains and losses resulting from actual experience diering
from our assumptions, including the dierence between the
actual return on plan assets and the expected return on plan
assets, and from changes in our assumptions are also deter-
mined at each measurement date. If this net accumulated gain
or loss exceeds 10% of the greater of the market-related value of
plan assets or plan liabilities, a portion of the net gain or loss is
included in expense for the following year based upon the aver-
age remaining service period of active plan participants, which
is approximately 11 years for pension expense and approximately
eightyears for retiree medical expense. The cost or benefit of plan
changes that increase or decrease benefits for prior employee
service (prior service cost/(credit)) is included in earnings on a
straight-line basis over the average remaining service period of
active plan participants.