Black & Decker 2010 Annual Report Download - page 110

Long-Term Performance Awards: Two LTIP grants were made in 2009 and 2010. Both the grants have
separate annual performance goals for each year within the respective three year performance period. Earnings
per share and return on capital employed represent 75% of the share payout of each grant. There is a third
market-based element, representing 25% of the total grant, which measures the Company’s common stock
return relative to peers over the performance period. The ultimate delivery of shares will occur in 2012 and
2013 for the 2009 and 2010 grants, respectively. Total payouts are based on actual performance in relation to
these goals.
Working capital incentive plan: In 2010, the Company initiated a bonus program under its 2009 Long Term
Incentive Plan. The program provides executives the opportunity to receive stock in the event certain working
capital turn objectives are achieved by June of 2013 and are sustained for a period of at least six months. The
ultimate issuances of shares, if any, will be determined based on achievement of objectives during the
performance period.
Expense recognized for the various performance-contingent grants amounted to $10.3 million in 2010,
$3.4 million in 2009 and $1.9 million in 2008. With the exception of the market-based award, in the event
performance goals are not met compensation cost is not recognized and any previously recognized compensa-
tion cost is reversed.
A summary of the activity pertaining to the maximum number of shares that may be issued is as follows:
Share Units
Weighted Average
Grant
Date Fair Value
Non-vested at January 2, 2010 . . . ............................. 721,648 $33.88
Granted ................................................ 571,724 48.56
Vested ................................................. — —
Forfeited ................................................ (216,882) 44.22
Non-vested at January 1, 2011 . . . ............................. 1,076,490 $39.59
EQUITY OPTION In November 2010, the Company purchased from financial institutions over the counter
5-year capped call options on 8.43 million shares of its common stock for an aggregate premium of
$50.3 million, or an average of $5.97 per option. In accordance with ASC 815-40 the premium paid was
recorded as a reduction to equity. The gain or loss on the options will depend on the actual market price of the
Company’s stock on exercise dates which occur in December 2015. The contracts for each of the three series
of options generally provide that the options may, at the Company’s election, be cash settled, physically settled
or net-share settled (the default settlement method). Each series of options has various expiration dates within
the month of December 2015. The options will be automatically exercised if the market price of the
Company’s common stock on the relevant expiration date is greater than the applicable lower strike price (i.e.
the options are “in-the-money”). If the market price of the Company’s common stock at the expiration date is
below the applicable lower strike price, the relevant options will expire with no value. If the market price of
the Company’s common stock on the relevant expiration date is between the applicable lower and upper strike
prices, the value per option to the Company will be the then-current market price less that lower strike price.
If the market price of the Company’s common stock is above the applicable upper strike price, the value per
option to the Company will be the difference between the applicable upper strike price and lower strike price.
The aggregate fair value of the options at January 1, 2011 was $51.2 million.
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