Boeing 2009 Annual Report Download - page 107

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Stock option activity for the year ended December 31, 2009 is as follows:
(Shares in thousands) Shares
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life (years)
Aggregate
Intrinsic
Value
(in millions)
Number of shares under option:
Outstanding at beginning of year 20,577 $73.42
Granted 7,546 35.71
Exercised (253) 40.84
Forfeited (857) 62.00
Expired (676) 48.81
Outstanding at end of year 26,337 $63.93 7.09 $179
Exercisable at end of year 13,940 $70.33 5.61 $ 47
The total intrinsic value of options exercised was $2, $22, and $192 during the years ended
December 31, 2009, 2008 and 2007, respectively. Cash received from options exercised for the years
ended December 31, 2009, 2008 and 2007 was $10, $44, and $209 with a related tax benefit of $1, $6,
and $65, respectively, derived from the compensation deductions resulting from these option
exercises. At December 31, 2009, there was $98 of total unrecognized compensation cost related to
the Stock Option plan which is expected to be recognized over a weighted average period of 1.6 years.
The total fair value of stock options vested during the years ended December 31, 2009, 2008 and 2007
was $114, $82, and $43, respectively.
The fair values of options were estimated using the Black-Scholes option-pricing model with the
following assumptions:
Grant
Year
Grant
Date
Expected
Life
Expected
Volatility
Dividend
Yield
Risk Free
Interest Rate
Weighted-Average
Grant Date Fair
Value
2009 2/23/09 6 years 39.0% 2.4% 2.03% $11.12
2008 2/25/08 6 years 28.8% 1.7% 3.20% 23.47
2007 2/26/07 6 years 28.4% 1.7% 4.62% 27.31
The expected volatility of the stock options is based on a combination of our historical stock volatility
and the volatility levels implied on the grant date by actively traded option contracts on our common
stock. We determined the expected term of the stock option grants to be 6 years, calculated using the
“simplified” method in accordance with the SEC Staff Accounting Bulletin 107, Valuation of Share-
Based Payment Arrangements for Public Companies. We used the “simplified” method since we
changed the vesting terms, tax treatment and the recipients of our stock options beginning in 2006
such that we believe our historical data no longer provides a reasonable basis upon which to estimate
expected term.
Restricted Stock Units and Other Awards
In 2009, we modified the components of our long-term incentive program while maintaining
substantially the same total award value as in prior years. Prior to the modification, Performance
Awards and options each comprised 50% of the total award value. Beginning in 2009, Performance
Awards still represent 50% of the value and stock options and restricted stock units (RSUs) each
represent 25% of the total value.
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