Pfizer 2012 Annual Report Download - page 97

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Notes to Consolidated Financial Statements
Pfizer Inc. and Subsidiary Companies
96
2012 Financial Report
The following table summarizes all RSU activity during 2012:
Shares
(Thousands)
Weighted-
Average
Grant Date
Fair Value
Per Share
Nonvested, December 31, 2011 41,940 $17.08
Granted 13,232 21.05
Vested (15,464) 15.09
Reinvested dividend equivalents 1,585 22.95
Forfeited (3,433) 19.17
Nonvested, December 31, 2012 37,860 $19.34
The following table provides data related to all RSU activity:
(MILLIONS OF DOLLARS)
Year Ended December 31,
2012 2011 2010
Total fair value of shares vested $348 $256 $222
Total compensation cost related to nonvested RSU awards not yet recognized, pre-tax $258 $264 $230
Weighted-average period over which RSU cost is expected to be recognized (years) 1.2 1.3 1.4
C. Stock Options
Stock options are awarded to select employees and, when vested, entitle the holder to purchase a specified number of shares of Pfizer
common stock at a price per share equal to the closing market price of Pfizer common stock on the date of grant.
All eligible employees may receive stock option grants. No stock options were awarded to senior and other key management in any period
presented; however, stock options were awarded to certain other employees. In virtually all instances, stock options granted since 2005 vest
after three years of continuous service from the grant date and have a contractual term of 10 years. In most cases, stock options must be held
for at least 1 year from the grant date before any vesting may occur. In the event of a sale or restructuring, options held by employees are
immediately vested and are exercisable for a period from three months to their remaining term, depending on various conditions.
We measure the value of stock option grants as of the grant date using, for virtually all grants, the Black-Scholes-Merton option-pricing model.
The values determined through this fair value methodology generally are amortized on a straight-line basis over the vesting term into Cost of
sales, Selling, informational and administrative expenses, and Research and development expenses, as appropriate.
The following table provides the weighted-average assumptions used in the valuation of stock options:
Year Ended December 31,
2012 2011 2010
Expected dividend yield(a) 4.10%4.14%4.00%
Risk-free interest rate(b) 1.28%2.59%2.87%
Expected stock price volatility(c) 23.78%25.55%26.85%
Expected term(d) (years) 6.50 6.25 6.25
(a) Determined using a constant dividend yield during the expected term of the option.
(b) Determined using the interpolated yield on U.S. Treasury zero-coupon issues.
(c) Determined using implied volatility, after consideration of historical volatility.
(d) Determined using historical exercise and post-vesting termination patterns.