Boeing 2012 Annual Report Download - page 107

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95
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
Expected
Dividend
Yield
Risk Free
Interest Rate
Weighted-Average
Grant Date Fair
Value Per Share
2012 2/27/2012 6 years 29.9% 2.4% 1.1% $16.89
2011 2/22/2011 6 years 29.8% 2.3% 2.5% $17.96
2010 2/22/2010 6 years 31.5% 3.0% 2.9% $15.70
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 six years, calculated using the “simplified”
method in accordance with the SEC Staff Accounting Bulletin 110. We use 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 and we do not have enough option exercise data from our grants issued subsequent to
2006 to support our own estimate.
Restricted Stock Units
In February 2012, 2011 and 2010, we granted to our executives 1,369,810, 1,364,440 and 1,459,256
restricted stock units (RSUs) as part of our long-term incentive program with grant date fair values of
$75.40, $71.44 and $63.83 per share, respectively. The RSUs granted under this program will vest and
settle in common stock (on a one-for-one basis) on the third anniversary of the grant date. If an executive
terminates employment because of retirement, involuntary layoff, disability, or death, the employee (or
beneficiary) will immediately vest on a proration of stock units based on active employment during the
three-year service period. In all other cases, the RSUs will not vest and all rights to the stock units will
terminate completely.
In addition to RSUs awarded under our long-term incentive program, we grant RSUs to certain executives
and employees to encourage retention or to reward various achievements. These RSUs are labeled other
restricted stock units in the table below. The fair values of all RSUs are estimated using the average stock
price on the date of grant. Stock units settle in common stock on a one-for-one basis and are not contingent
upon stock price.
Stock unit activity for the year ended December 31, 2012 is as follows:
Incentive Program
Restricted Stock Units
Other Restricted Stock
Units
Number of units:
Outstanding at beginning of year 4,687,234 1,494,168
Granted 1,402,642 357,006
Dividends 100,269 31,576
Forfeited (230,338) (84,578)
Distributed (2,062,358) (546,983)
Outstanding at end of year 3,897,449 1,251,189
Unrecognized compensation cost $101 $29
Weighted average remaining contractual life (years) 1.8 2.7