Black & Decker 2012 Annual Report Download - page 94

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During 2012, the Company received $97.3 million in cash from the exercise of stock options. The related tax benefit from the
exercise of these options is $17.7 million. During 2012, 2011 and 2010, the total intrinsic value of options exercised was $69.1
million, $68.7 million and $46.5 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 2012, 2011 and 2010, the Company reported $15.1 million,
$14.1 million and $10.8 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 29, 2012 follows:
Outstanding Stock Options Exercisable Stock Options
Exercise Price Ranges Options
Weighted
-
average
Remaining
Contractual Li
fe
Weighted-
average
Exercise Price Options
Weighted
-
average
Remaining
Contractual L
ife
Weighted-
average
Exercise Price
$35.00 and below………………. 1,356,621 3.97 $ 31.39 1,261,445 3.80 $ 31.49
$35.01 — 50.00………………… 1,167,090 3.65 46.41 1,055,715 3.34 46.18
$50.01 — higher………………... 6,532,782 6.41 64.07 3,198,457 4.14 63.68
9,056,493 5.69 $ 56.90 5,515,617 1.55 $ 52.97
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 85.0% of the
fair market value of the shares on the grant date ($48.94 per share for fiscal year 2012 purchases) or 85.0% 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 2012, 2011 and 2010 shares totaling 222,123 shares, 147,776 shares and 143,624 shares respectively, were issued under
the plan at average prices of $49.15, $49.63, and $37.53 per share, respectively and the intrinsic value of the ESPP purchases
was $4.7 million, $2.6 million and $3.1 million, respectively. For 2012, the Company received $10.9 million in cash from
ESPP purchases, and there is no related tax benefit. The fair value of ESPP shares was estimated using the Black-Scholes
option pricing model. ESPP compensation cost is recognized ratably over the one-year term based on actual employee stock
purchases under the plan. The fair value of the employees’ purchase rights under the ESPP was estimated using the following
assumptions for 2012, 2011 and 2010, respectively: dividend yield of 2.4%, 2.1% and 2.5%; expected volatility of 34.0%,
30.0% and 38.0%; risk-free interest rates of 0.1%, 0.2% and 0.1%; and expected lives of one year. The weighted average fair
value of those purchase rights granted in 2012, 2011 and 2010 was $25.2, $21.0 and $20.8, respectively. Total compensation
expense recognized for ESPP amounted to $5.5 million, $2.6 million and $3.4 million for 2012, 2011 and 2010, respectively.
Restricted Share Units and Awards: Compensation cost for restricted share units and awards, including restricted shares
granted to French employees in lieu of RSU’s, (collectively “RSU’s”) granted to employees is recognized ratably over the
vesting term, which varies but is generally 4 years. RSU grants totaled 445,958 shares, 413,330 shares and 1,532,107 shares in
2012, 2011 and 2010, respectively. The weighted-average grant date fair value of RSU’s granted in 2012, 2011 and 2010 was
$70.30, $65.20 and $59.32 per share, respectively. Additionally, the Company assumed 0.4 million restricted stock units and
awards as part of the Merger in March of 2010. These restricted stock units and awards had a fair value of $57.86 per share or
$25.0 million in total, with $12.2 million recorded as consideration paid and $12.8 million recognized as future compensation
cost.