Fluor 2011 Annual Report Download - page 134

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FLUOR CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
1.4 years. Expense associated with stock options for the years ended December 31, 2011, 2010 and 2009,
which is included in corporate general and administrative expense in the accompanying Consolidated
Statement of Earnings, totaled $12 million, $15 million and $11 million, respectively.
The fair value on the grant date and the significant assumptions used in the Black-Scholes option-
pricing model are as follows:
December 31,
2011 2010
Weighted average grant date fair value $23.41 $14.51
Expected life of options (in years) 4.5 4.3
Risk-free interest rate 2.2% 2.1%
Expected volatility 38.8% 40.6%
Expected annual dividend per share $ 0.50 $ 0.50
The computation of the expected volatility assumption used in the Black-Scholes calculations is based
on a 50/50 blend of historical and implied volatility.
Information related to options outstanding as of December 31, 2011 is summarized below:
Options Outstanding Options Exercisable
Weighted Weighted
Average Weighted Average Weighted
Remaining Average Remaining Average
Number Contractual Exercise Price Number Contractual Exercise Price
Range of Exercise Prices Outstanding Life (In Years) Per Share Exercisable Life (In Years) Per Share
$30.46 - $41.77 506,226 7.2 $30.57 239,387 7.2 $30.46
$42.11 - $49.25 1,408,421 7.1 43.24 611,549 6.1 43.55
$68.36 - $80.12 984,854 7.8 69.66 465,146 6.2 68.42
2,899,501 7.3 $50.00 1,316,082 6.3 $49.96
As of December 31, 2011, options outstanding and options exercisable had an aggregate intrinsic
value of approximately $20 million and $9 million, respectively.
10. Earnings Per Share
Basic earnings per share (‘‘EPS’’) is calculated by dividing net earnings attributable to Fluor
Corporation by the weighted average number of common shares outstanding during the period. Potentially
dilutive securities include employee stock options, restricted stock units and shares, and the 1.5%
Convertible Senior Notes (see ‘‘7. Financing Arrangements’’ above for information about the Convertible
Senior Notes).
In 2009, the company applied the provisions of FSP Emerging Issues Task Force (‘‘EITF’’) 03-6-1,
‘‘Determining Whether Instruments Granted in Share-Based Payment Transactions Are Participating
Securities’’ (ASC 260-10-45). ASC 260-10-45 clarified that all outstanding unvested share-based payment
awards that contain rights to nonforfeitable dividends participate in undistributed earnings with common
shareholders. The company’s unvested restricted stock units and unvested restricted shares of stock were
considered to be participating securities since the quarterly dividends paid were nonforfeitable.
ASC 260-10-45 required that the two-class method of computing basic EPS be applied. Under the two-class
method, the company’s stock options were not considered to be participating securities.
Starting in the first quarter of 2010, dividends on unvested restricted stock units and unvested
restricted stock were accumulated and became payable only when the units and shares vest. As a result, the
company’s unvested restricted stock units and unvested restricted shares are no longer considered to be
F-33