Entergy 2009 Annual Report Download - page 134

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Entergy Corporation and Subsidiaries
Notes to Financial Statements
130
NOTE 12. STOCK-BASED COMPENSATION
Entergy grants stock options and long-term incentive and restricted liability awards to key employees of the
Entergy subsidiaries under its Equity Ownership Plans which are shareholder-approved stock-based compensation
plans. The Equity Ownership Plan, as restated in February 2003 (2003 Plan), had 706,950 authorized shares
remaining for long-term incentive and restricted liability awards as of December 31, 2009. Effective January 1,
2007, Entergy's shareholders approved the 2007 Equity Ownership and Long-Term Cash Incentive Plan (2007 Plan).
The maximum aggregate number of common shares that can be issued from the 2007 Plan for stock-based awards is
7,000,000 with no more than 2,000,000 available for non-option grants. The 2007 Plan, which only applies to
awards made on or after January 1, 2007, will expire after 10 years. As of December 31, 2009, there were
2,569,926 authorized shares remaining for stock-based awards, including 2,000,000 for non-option grants.
Stock Options
Stock options are granted at exercise prices that equal the closing market price of Entergy Corporation
common stock on the date of grant. Generally, stock options granted will become exercisable in equal amounts on
each of the first three anniversaries of the date of grant. Unless they are forfeited previously under the terms of the
grant, options expire ten years after the date of the grant if they are not exercised.
The following table includes financial information for stock options for each of the years presented:
2009 2008 2007
(in Millions)
Compensation expense included in Entergy's Consolidated Net Income $17.0 $17.0 $15.0
Tax benefit recognized in Entergy's Consolidated Net Income $6.0 $7.0 $6.0
Compensation cost capitalized as part of fixed assets and inventory $3.0 $3.0 $3.0
Entergy determines the fair value of the stock option grants by considering factors such as lack of
marketability, stock retention requirements, and regulatory restrictions on exercisability in accordance with
accounting standards. The stock option weighted-average assumptions used in determining the fair values are as
follows:
2009 2008 2007
Stock price volatility 24.39% 18.9% 17.0%
Expected term in years 5.33 4.64 4.59
Risk-free interest rate 2.22% 2.77% 4.85%
Dividend yield 3.50% 2.96% 3.0%
Dividend payment per share $3.00 $3.00 $2.16
Stock price volatility is calculated based upon the weekly public stock price volatility of Entergy Corporation
common stock over the last four to five years. The expected term of the options is based upon historical option
exercises and the weighted average life of options when exercised and the estimated weighted average life of all
vested but unexercised options. In 2008, Entergy implemented stock ownership guidelines for its senior executive
officers. These guidelines require an executive officer to own shares of Entergy common stock equal to a specified
multiple of his or her salary. Until an executive officer achieves this ownership position the executive officer is
required to retain 75% of the after-tax net profit upon exercise of the option to be held in Entergy Corporation
common stock. The reduction in fair value of the stock options due to this restriction is based upon an estimate of the
call option value of the reinvested gain discounted to present value over the applicable reinvestment period.
132