Black & Decker 2011 Annual Report Download - page 87

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75
All options had fully vested as of the Merger date. The fair value of the 5.8 million options exchanged as part of the merger was
$105.8 million, with $91.7 million recorded as consideration paid and $14.1 million recognized as future compensation cost. Under
ASC 805, the fair value of vested options and the earned portion of unvested options are recognized as consideration paid. The
remaining value relating to the unvested and unearned options are recognized as future stock based compensation.
Stock Options:
The number of stock options and weighted-average exercise prices are as follows:
2011
2010
2009
Options
Price
Options
Price
Options
Price
Outstanding, beginning of year ................................
.
11,641,564
$ 48.69 5,839,417
$ 39.75 7,082,224
$ 37.08
Granted ................................................................
.....
1,150,577
65.05 2,055,942
60.69 502,500
48.46
Options assumed from merger ................................
..
—
— 5,843,623
44.41 —
—
Exercised ................................................................
...
(2,166,269) 40.34 (1,720,507) 34.81 (1,603,205) 30.13
Forfeited ................................................................
....
(181,212) 52.19 (376,911) 54.95 (142,102) 44.65
Outstanding, end of year ................................
...........
10,444,660
$ 52.47 11,641,564
$ 48.69 5,839,417
$ 39.75
Exercisable, end of year ................................
............
6,853,838
$ 49.74 8,100,566
$ 46.70 4,364,180
$ 38.50
At December 31, 2011, the range of exercise prices on outstanding stock options was $15.06 to $74.11. Stock option expense was
$22.0 million, $17.7 million, and $6.1 million for the years ended December 31, 2011, January 1, 2011 and January 2, 2010,
respectively. At December 31, 2011, the Company had $39.1 million of unrecognized pre-tax compensation expense for stock options.
This expense will be recognized over the remaining vesting periods which are 3.0 years on a weighted average basis.
During 2011, the Company received $93.9 million in cash from the exercise of stock options. The related tax benefit from the exercise
of these options is $18.9 million. During 2011, 2010 and 2009 the total intrinsic value of options exercised was $68.7 million,
$46.5 million and $16.5 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 2011, 2010 and 2009, the Company reported $14.1 million, $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 December 31, 2011 follows:
Outstanding Stock Options
Exercisable
Stock
Options
Exercise Price Ranges
Options
Weighted
-
average
Remaining
Contractual Life
Weighted-
average
Exercise Price
Options
Weighted-
average
Exercise Price
$35.00 and below .....................................................
2,346,200 3.88 $ 31.34 1,959,457 $ 31.28
$35.01 — 50.00 .......................................................
1,858,059 3.74 44.79 1,593,883 44.17
$50.01 — higher ......................................................
6,240,401 6.44 62.70 3,300,498 63.39
10,444,660 5.39 $ 52.47 6,853,838 $ 49.74
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.