Pfizer 2009 Annual Report Download - page 88

Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
The following table provides data related to all stock option activity:
YEAR ENDED DECEMBER 31,
(MILLIONS OF DOLLARS, EXCEPT PER STOCK OPTION AMOUNTS AND YEARS) 2009 2008 2007
Weighted-average grant date fair value per stock option $3.30 $3.30 $4.11
Aggregate intrinsic value on exercise $2 $ 9 $ 173
Cash received upon exercise $7 $ 29 $ 532
Tax benefits realized related to exercise $1 $3 $54
Total compensation cost related to nonvested stock options not yet recognized,
pre-tax $ 147 $ 159 $ 216
Weighted-average period in years over which stock option compensation cost is
expected to be recognized 1.2 1.1 1.2
C. Restricted Stock Units (RSUs)
RSUs, which, when vested, entitle the holder to receive a specified number of shares of Pfizer common stock, including shares
resulting from dividend equivalents paid on such RSUs, are accounted for using a fair-value-based method at the date of grant. For
RSUs granted in 2009, 2008 and 2007, in virtually all instances, the units vest after three years of continuous service from the grant
date and the values determined using the fair-value-based method are amortized on an even basis over the vesting term into Cost
of sales, Selling, informational and administrative expenses and Research and development expenses, as appropriate.
The value of each RSU grant is estimated on the grant date. The fair-value-based method utilizes the closing price of Pfizer
common stock on the date of grant. The following table summarizes all RSU activity during 2009:
SHARES
(THOUSANDS)
WEIGHTED-
AVERAGE
GRANT
DATE FAIR
VALUE PER
SHARE
Nonvested, December 31, 2008 28,964 $24.47
Granted 15,152 13.75
Vested (5,179) 25.25
Reinvested dividend equivalents 1,656 15.39
Forfeited (2,510) 21.53
Nonvested, December 31, 2009 38,083 19.90
The following table provides data related to all RSU activity:
YEAR ENDED DECEMBER 31,
(MILLIONS OF DOLLARS EXCEPT YEARS) 2009 2008 2007
Total fair-value-based amount of shares vested $131 $119 $146
Total compensation cost related to nonvested RSU awards not yet recognized, pre-tax $198 $257 $254
Weighted-average period in years over which RSU cost is expected to be recognized 1.3 1.5 2.1
D. Performance Share Awards (PSAs) and Performance-Contingent Share Awards (PCSAs)
PSAs and PCSAs are awarded to senior and key management. PSAs in 2009, 2008, 2007 and 2006, and PCSAs in earlier years
entitle the holder to receive, at the end of a vesting term, a number of shares of our common stock within a specified range of
shares, calculated using a non-discretionary formula that measures our performance relative to an industry peer group. PSAs are
accounted for using a fair-value-based method at the date of grant in the consolidated statements of income beginning with grants in
2006. Further, PSAs generally are amortized on an even basis over the vesting term into Cost of sales, Selling, informational and
administrative expenses and Research and development expenses, as appropriate. PCSAs, which have not been awarded since
2005, are accounted for using the intrinsic value method in the consolidated statements of income. Senior and other key members
of management may receive PSA grants and were eligible to receive PCSA grants. In most instances, PSA grants vest after three
years, and PCSA grants vest after five years of continuous service from the grant date. In certain instances, PCSA grants vest over
two to four years of continuous service from the grant date. The vesting terms are equal to the contractual terms.
PSA grants made in 2009, 2008, 2007 and 2006 vest and are paid based on a non-discretionary formula that measures our
performance using relative total shareholder return over a performance period relative to an industry peer group. If our minimum
performance in the measure is below the threshold level relative to the peer group, then no shares are paid. PCSA grants, which
were all made prior to 2006, vest and are paid based on a non-discretionary formula that measures our performance using relative
total shareholder return and relative change in diluted EPS over a performance period relative to an industry peer group. If our
minimum performance is below the threshold level relative to the peer group, then no shares will be paid.
We measure PSA grants using a fair-value-based amount, which is derived from a Monte Carlo simulation model, times the target
number of shares. The target number of shares is determined by reference to the fair value of share-based awards to similar
employees in the industry peer group. We measure PCSA grants at intrinsic value whereby the probable award is allocated over the
term of the award, and then the resultant shares are adjusted to the fair value of our common stock at each accounting period until
the date of payment.
86 2009 Financial Report