DuPont 2012 Annual Report Download - page 86

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(Dollars in millions, except per share)
The company's contributions to the U.S. parent company's defined contribution plans were $212, $210 and $195 for the years ended December 31, 2012,
2011 and 2010, respectively. The company's matching contributions vest immediately upon contribution. The 3 percent nonmatching company contribution
vests for employees with at least three years of service. In addition, the company made contributions to other defined contribution plans of $124, $84 and
$59 for the years ended December 31, 2012, 2011 and 2010, respectively. Included in the company's contributions are amounts related to discontinued
operations of $30, $29 and $32 for the years ended December 31, 2012, 2011 and 2010, respectively. The company expects to contribute about $320 to its
defined contribution plans in 2013.
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The total stock-based compensation cost included in the Consolidated Income Statements was $105, $113 and $108 for 2012, 2011 and 2010, respectively.
The income tax benefits related to stock-based compensation arrangements were $35, $37 and $36 for 2012, 2011 and 2010, respectively.
In April 2011, the shareholders approved amendments to the DuPont Equity and Incentive Plan (EIP). The EIP provides for equity-based and cash incentive
awards to certain employees, directors, and consultants. Under the amended EIP, the maximum number of shares reserved for the grant or settlement of
awards is 110 million shares, provided that each share in excess of 30 million that is issued with respect to any award that is not an option or stock
appreciation right will be counted against the 110 million share limit as four and one-half shares. At December 31, 2012, approximately 60 million shares were
authorized for future grants under the company's EIP. The company satisfies stock option exercises and vesting of time-vested restricted stock units (RSUs)
and performance-based restricted stock units (PSUs) with newly issued shares of DuPont common stock.
The company's Compensation Committee determines the long-term incentive mix, including stock options, RSUs and PSUs and may authorize new grants
annually.
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The exercise price of shares subject to option is equal to the market price of the company's stock on the date of grant. Options granted prior to 2004 expire
10 years from date of grant; options granted between 2004 and 2008 serially vested over a three-year period and carry a six-year option term. Stock option
awards granted between 2009 and 2012 expire seven years after the grant date. The plan allows retirement eligible employees to retain any granted awards upon
retirement provided the employee has rendered at least six months of service following grant date.
For purposes of determining the fair value of stock options awards, the company uses the Black-Scholes option pricing model and the assumptions set forth
in the table below. The weighted-average grant-date fair value of options granted in 2012, 2011 and 2010 was $11.81, $12.32 and $6.44, respectively.
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Dividend yield 3.2%3.2%4.9%
Volatility 34.87%33.26%32.44%
Risk-free interest rate 0.9%2.3%2.6%
Expected life (years) 5.3 5.3 5.3
The company determines the dividend yield by dividing the current annual dividend on the company's stock by the option exercise price. A historical daily
measurement of volatility is determined based on the expected life of the option granted. The risk-free interest rate is determined by reference to the yield on an
outstanding U.S. Treasury note with a term equal to the expected life of the option granted. Expected life is determined by reference to the company's historical
experience.
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