Ford 2010 Annual Report Download - page 152

Notes to the Financial Statements
150 Ford Motor Company | 2010 Annual Report
NOTE 21. SHARE-BASED COMPENSATION (Continued)
The fair value of the awards under the two plans is calculated differently:
1998 LTIP - Fair value is the average of the high and low market price of our Common Stock on the grant date.
2008 LTIP - Fair value is the closing price of our Common Stock on the grant date.
Outstanding RSU-stock are either strictly time-based or a combination of performance and time-based awards.
Expenses associated with RSU-stock are recorded in Selling, administrative, and other expense.
• Time-based RSU-stock issued in 2006 and prior vest at the end of the restriction period and the expense is taken equally
over the restriction period.
• Time-based RSU-stock issued in and after 2007 generally have a graded vesting feature whereby one-third of each RSU-
stock vests after the first anniversary of the grant date, one-third after the second anniversary, and one-third after the third
anniversary. The expense is recognized using the graded vesting method.
• Performance RSU-stock have a performance period (usually 1-3 years) and usually a restriction period (usually 1-3
years). Compensation expense for performance RSU-stock is not recognized until it is probable and estimable as
measured against the performance metrics. Expense is then recognized over the performance and restriction periods, if
any, based on the fair market value of Ford Common Stock at grant date.
We also grant stock options to our employees. We measure the fair value of the majority of our stock options using the
Black-Scholes option-pricing model, using historical volatility and our determination of the expected term. The expected
term of stock options is the time period that the stock options are expected to be outstanding. Historical data are used to
estimate option exercise behaviors and employee termination experience. Based on our assessment of employee
groupings and observable behaviors, we determined that a single grouping is appropriate. Stock options generally have a
graded vesting feature whereby one-third of the stock options are exercisable after the first anniversary of the grant date,
one-third after the second anniversary, and one-third after the third anniversary. Stock options expire ten years from the
grant date and are expensed in Selling, administrative, and other expenses using a three-year graded vesting methodology.
Upon stock-settled compensation exercises and awards, we issued new shares of Common Stock. We do not expect
to repurchase a significant number of shares for treasury stock during 2011.
Restricted Stock Units
RSU-stock activity during 2010 was as follows:
Shares
Shares Shares
Shares
(millions)
(millions)(millions)
(millions)
Weighted
WeightedWeighted
Weighted-
---
Averag
AveragAverag
Average Grant
e Grante Grant
e Grant-
---
Date Fair Value
Date Fair ValueDate Fair Value
Date Fair Value
Aggregate
Aggregate Aggregate
Aggregate
Intrinsic Value
Intrinsic Value Intrinsic Value
Intrinsic Value
(millions)
(millions)(millions)
(millions)
Outstanding, beginning of year ................................................................
....................
94.5 $ 2.90
Granted................................................................................................
........................
10.2 12.69
Vested ................................................................................................
.........................
(31.1) 3.61
Forfeited................................................................................................
.......................
(1.2) 3.28
Outstanding, end of year................................................................
..............................
72.4 3.96 $ 1,216.2
RSU-stock expected to vest................................................................
.........................
69.9 N/A 1,174.0
Intrinsic value of RSU-stock is measured by applying the closing stock price as of December 31 to the applicable
number of units. The fair value and intrinsic value of RSU-stock during 2010, 2009, and 2008 were as follows (in millions,
except RSU per unit amounts):
2010
20102010
2010
2009
20092009
2009
2008 20082008
2008
Fair value
Fair valueFair value
Fair value
Granted................................................................................................
................................
$ 130 $ 171 $ 115
Weighted average for multiple grant dates (per unit)................................
................................
12.69 2.13 6.04
Vested ................................................................................................
................................
112 66 40
Intrinsic value
Intrinsic valueIntrinsic value
Intrinsic value
Vested ................................................................................................
................................
522 95 12