Johnson Controls 2010 Annual Report Download - page 78

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78
A summary of stock option activity at September 30, 2010, and changes for the year then ended, is presented below:
Weighted
Average
Aggregate
Weighted
Shares
Remaining
Intrinsic
Average
Subject to
Contractual
Value
Option Price
Option
Life (years)
(in millions)
Outstanding, September 30, 2009
$
23.62
33,244,637
Granted
24.89
5,382,100
Exercised
18.97
(3,095,823)
Forfeited or expired
28.58
(372,805)
Outstanding, September 30, 2010
$
24.17
35,158,109
5.8
$
253
Exercisable, September 30, 2010
$
22.23
24,386,551
4.6
$
217
The weighted-average grant-date fair value of options granted during the fiscal years ended September 30, 2010,
2009 and 2008 was $7.70, $6.68 and $9.08, respectively.
The total intrinsic value of options exercised during the fiscal years ended September 30, 2010, 2009 and 2008 was
approximately $33 million, $4 million and $45 million, respectively.
In conjunction with the exercise of stock options granted, the Company received cash payments for the fiscal years
ended September 30, 2010, 2009 and 2008 of approximately $52 million, $8 million and $34 million, respectively.
The Company has elected to utilize the alternative transition method for calculating the tax effects of stock-based
compensation. The alternative transition method includes computational guidance to establish the beginning balance
of the additional paid-in capital pool (APIC Pool) related to the tax effects of employee stock-based compensation,
and a simplified method to determine the subsequent impact on the APIC Pool for employee stock-based
compensation awards that are vested and outstanding upon adoption of ASC 718. The tax benefit from the exercise
of stock options, which is recorded in capital in excess of par value, was $7 million, $1 million and $19 million for
the fiscal years ended September 30, 2010, 2009 and 2008. The Company does not settle equity instruments granted
under share-based payment arrangements for cash.
At September 30, 2010, the Company had approximately $26 million of total unrecognized compensation cost
related to nonvested share-based compensation arrangements granted under the Plan. That cost is expected to be
recognized over a weighted-average period of 0.8 years.
Stock Appreciation Rights (SARs)
The Plan also permits SARs to be separately granted to certain employees. SARs vest under the same terms and
conditions as option awards; however, they are settled in cash for the difference between the market price on the
date of exercise and the exercise price. As a result, SARs are recorded in the Company’s consolidated statements of
financial position as a liability until the date of exercise.
The fair value of each SAR award is estimated using a similar method described for option awards. The fair value of
each SAR award is recalculated at the end of each reporting period and the liability and expense adjusted based on
the new fair value.
The assumptions used to determine the fair value of the SAR awards at September 30, 2010 were as follows:
Expected life of SAR (years)
0.1 - 3.0
Risk-free interest rate
0.14% - 0.64%
Expected volatility of the Company's stock
40.00%
Expected dividend yield on the Company's stock
1.74%