Black & Decker 2010 Annual Report Download - page 108

The number of stock options and weighted-average exercise prices are as follows:
Options Price Options Price Options Price
2010 2009 2008
Outstanding, beginning of year ..... 5,839,417 $39.75 7,082,224 $37.08 7,053,899 $37.83
Granted ...................... 2,055,942 60.69 502,500 48.46 849,360 33.73
Options assumed from merger ...... 5,843,623 44.41 —— ——
Exercised ..................... (1,720,507) 34.81 (1,603,205) 30.13 (400,972) 31.44
Forfeited ...................... (376,911) 54.95 (142,102) 44.65 (420,063) 48.31
Outstanding, end of year .......... 11,641,564 $48.69 5,839,417 $39.75 7,082,224 $37.08
Exercisable, end of year .......... 8,100,566 $46.70 4,364,180 $38.50 5,368,989 $35.30
At January 1, 2011, the range of exercise prices on outstanding stock options was $23.22 to $74.11. Stock
option expense was $17.7 million, $6.1 million and $4.8 million for the years ended January 1, 2011,
January 2, 2010 and January 3, 2009, respectively.
At January 1, 2011, the Company had $44.9 million of unrecognized pre-tax compensation expense for stock
options. This expense will be recognized over the remaining vesting periods which are 3.1 years on a weighted
average basis.
During 2010, the Company received $59.9 million in cash from the exercise of stock options. The related tax
benefit from the exercise of these options is $14.6 million. During 2010, 2009 and 2008 the total intrinsic
value of options exercised was $46.5 million, $16.5 million and $6.8 million, respectively. When options are
exercised, the related shares are issued from treasury stock.
ASC 718, “Compensation — Stock Compensation,” requires the benefit arising from tax deductions in excess
of recognized compensation cost to be classified as a financing cash flow. To quantify the recognized
compensation cost on which the excess tax benefit is computed, both actual compensation expense recorded
and pro-forma compensation cost reported in disclosures are considered. An excess tax benefit is generated on
the extent to which the actual gain, or spread, an optionee receives upon exercise of an option exceeds the fair
value determined at the grant date; that excess spread over the fair value of the option times the applicable tax
rate represents the excess tax benefit. In 2010 and 2009, the Company reported $10.8 million and $0.3 million,
respectively, of excess tax benefits as a financing cash flow within the proceeds from issuance of common
stock caption.
Outstanding and exercisable stock option information at January 1, 2011 follows:
Exercise Price Ranges Options
Weighted-average
Remaining
Contractual Life
Weighted-average
Exercise Price Options
Weighted-
average
Exercise Price
Outstanding Stock Options Exercisable Stock Options
$35.00 and below .... 3,062,866 6.46 $30.63 2,353,482 $30.28
$35.01 – 50.00 ...... 3,113,042 5.33 43.41 2,687,715 42.58
$50.01 – higher ..... 5,465,656 5.72 61.81 3,059,369 62.95
11,641,564 5.81 $48.69 8,100,566 $46.70
Compensation cost for new grants is recognized on a straight-line basis over the vesting period. The expense
for retirement eligible employees (those aged 55 and over and with 10 or more years of service) is recognized
by the date they became retirement eligible, as such employees may retain their options for the 10 year
contractual term in the event they retire prior to the end of the vesting period stipulated in the grant.
Employee Stock Purchase Plan: The Employee Stock Purchase Plan (“ESPP”) enables eligible employees
in the United States and Canada to subscribe at any time to purchase shares of common stock on a monthly
basis at the lower of 85% of the fair market value of the shares on the grant date ($37.53 per share for fiscal
year 2010 purchases) or 85% of the fair market value of the shares on the last business day of each month. A
maximum of 6,000,000 shares are authorized for subscription. During 2010, 2009 and 2008 shares totaling
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