E-Z-GO 2012 Annual Report Download - page 82

Download and view the complete annual report

Please find page 82 of the 2012 E-Z-GO annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 106

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106

70 Textron Inc. Annual Report ● 2012
Compensation expense included approximately $23 million, $17 million and $7 million in 2012, 2011 and 2010, respectively,
representing the attribution of the fair value of options issued and the portion of previously granted options for which the requisite
service has been rendered.
Compensation cost for awards subject only to service conditions that vest ratably are recognized on a straight-line basis over the
requisite service period for each separately vesting portion of the award. As of December 29, 2012, we had not recognized $62
million of total compensation costs associated with unvested awards subject only to service conditions. We expect to recognize
compensation expense for these awards over a weighted-average period of approximately 3 years.
Stock Options
Options to purchase our shares have a maximum term of 10 years and generally vest ratably over a three-year period. The stock
option compensation cost calculated under the fair value approach is recognized over the vesting period of the stock options. We
estimate the fair value of options granted on the date of grant using the Black-Scholes option-pricing model. Expected volatilities
are based on implied volatilities from traded options on our common stock, historical volatilities and other factors. The expected
term is based on historical option exercise data, which is adjusted to reflect any anticipated changes in expected behavior.
The weighted-average fair value of options granted during the past three years and the assumptions used in our option-pricing
model for such grants are as follows:
2012 2011 2010
Fair value of options at grant date $ 10.19 $ 9.84 $ 7.39
Dividend yield 0.3% 0.3% 0.4%
Expected volatility 40.0% 38.0% 37.0%
Risk-free interest rate 0.9% 2.4% 2.6%
Expected term (in years) 5.5 5.5 5.5
The stock option activity under the Plan in 2012 is provided below:
(Options in thousands)
Number of
Options
Weighted-
Average
Exercise
Price
Outstanding at beginning of year 8,860 $ 27.68
Granted 3,016 27.75
Exercised (1,159) (16.03)
Canceled, expired or forfeited (1,233) (36.49)
Outstanding at end of year 9,484 $ 27.98
Exercisable at end of year 4,475 $ 29.12
At December 29, 2012, our outstanding options had an aggregate intrinsic value of $12 million and a weighted-average remaining
contractual life of 7 years. Our exercisable options had an aggregate intrinsic value of $10 million and a weighted-average
remaining contractual life of 5 years at December 29, 2012. The total intrinsic value of options exercised during 2012, 2011 and
2010 amounted to $11 million, $2 million and $1 million, respectively.
Restricted Stock Units
In 2012, we issued restricted stock units settled in both cash and stock (vesting one-third each in the third, fourth and fifth year
following the year of the grant), which included the right to receive dividend equivalents. The fair value of these units is based
solely on the trading price of our common stock on the grant date and is recognized ratably over the vesting period. During 2009
through 2011, we issued restricted stock units settled in cash that vested in equal installments over five years. In 2008, restricted
stock unit awards generally were payable in shares of common stock (vesting one-third each in the third, fourth and fifth year
following the year of the grant). The 2012 activity for restricted stock units is provided below: