Emerson 2009 Annual Report Download - page 44

Emerson 200942
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The Company’s stock-based compensation plans include stock options, performance shares and restricted stock.
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The Company’s stock option plans permit key ofcers and employees to purchase common stock at specied prices.
Options are granted at 100 percent of the average of the high and low prices of the Company’s common stock on the
date of grant, generally vest one-third each year and expire 10 years from the date of grant. Compensation expense is
recognized ratably over the vesting period based on the number of options expected to vest. At September 30, 2009,
approximately 7.9 million options remained available for grant under these plans.
Changes in shares subject to option during the year ended September 30, 2009, follow:
   A v e R A G e t o t A l A v e R A G e 
   e x e R C i s e p R i C e in t R i n s iCv A l u e R e m A i n i n G 
(s h A R e s in t h o u s A n d s )   p e R s h A R e s h A R e s o f A w A R d s l i f e (y e A R s )
Beginning of year $36.31 14,351
Options granted $31.51 3,636
Options exercised $26.32 (1,516)
Options canceled $41.98 (226)
End of year $36.09 16,245 $117 6.1
Exercisable at year end $33.13 9,845 $ 86 4.3
The weighted-average grant date fair value per share of options granted was $4.45, $10.59 and $9.31 for 2009, 2008
and 2007, respectively. The total intrinsic value of options exercised was $10, $75 and $53 in 2009, 2008 and 2007,
respectively. Cash received for option exercises under share option plans was $33, $73 and $60, and the actual tax benet
realized from tax deductions related to option exercises was $7, $19 and $14 for 2009, 2008 and 2007, respectively.
The grant date fair value of each award is estimated using the Black-Scholes option-pricing model. Weighted-average
assumptions used in the Black-Scholes valuations for 2009, 2008 and 2007 are as follows: risk-free interest rate based
on the U.S. Treasury yield of 2.4 percent, 4.1 percent and 4.6 percent; dividend yield of 4.2 percent, 2.0 percent and
2.4 percent; and expected volatility based on historical volatility of 22 percent, 17 percent and 20 percent. The
expected life of an option is seven years based on historical experience and expected future exercise patterns.
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The Company’s incentive shares plans include performance share awards which distribute common stock to key
management personnel subject to certain conditions and restrictions. Distributions are made primarily in shares of
common stock and partially in cash. Compensation expense is recognized over the service period based on the number
of awards expected to be ultimately earned. Performance share awards are accounted for as liabilities in accordance
with FAS No. 123 (R), “Share-Based Payment” (now part of ASC 718, Compensation – Stock Compensation), with
compensation expense adjusted at the end of each period to reect the change in the fair value of the awards.
In 2008, as a result of the Company achieving its performance objective at the end of 2007 and participants meeting
service requirements, 4,647,888 rights to receive common shares vested and were distributed as follows: 2,693,922
issued in shares, 1,562,045 withheld for income taxes, 313,222 paid in cash and 78,699 deferred by participants for
future distribution. As of September 30, 2009 and 2008, 5,055,800 and 5,008,800 rights to receive common shares
(awarded primarily in 2007) were outstanding, respectively, contingent on the Company achieving its performance
objective through 2010 and continued service by participants.
Incentive shares plans also include restricted stock awards, which involve distribution of common stock to key manage-
ment personnel subject to cliff vesting at the end of service periods ranging from three to 10 years. The fair value of
these awards is determined based on the average of the high and low price of the Company’s common stock on the
date of grant, with compensation expense recognized ratably over the applicable service period. In 2009, 74,000
shares of restricted stock vested as a result of participants fullling the applicable service requirements and were
distributed as follows: 58,576 issued in shares and 15,424 withheld for income taxes. As of September 30, 2009, there
were 1,913,000 shares of restricted stock awards outstanding.