Johnson and Johnson 2009 Annual Report Download - page 56

The average fair value of options granted was $8.35, $7.66, and
$11.67 in 2009, 2008, and 2007, respectively. The fair value was
estimated based on the weighted average assumptions of:
2009 2008 2007
Risk-free rate 2.71% 2.97% 4.78%
Expected volatility 19.5% 15.0% 14.7%
Expected life 6.0 yrs 6.0 yrs 6.0 yrs
Dividend yield 3.30% 2.90% 2.50%
A summary of option activity under the Plan as of January 3, 2010,
December 28, 2008, and December 30, 2007 and changes during
the years ending on those dates is presented below:
Aggregate
Weighted Intrinsic
Outstanding Average Value
(Shares in Thousands) Shares Exercise Price (Dollars in Millions)
Shares at December 31, 2006 242,927 $54.57 $2,788
Options granted 26,789 65.61
Options exercised (33,224) 45.92
Options canceled/forfeited (7,863) 63.00
Shares at December 30, 2007 228,629 56.83 $2,411
Options granted 22,428 61.80
Options exercised (30,033) 50.27
Options canceled/forfeited (5,525) 61.90
Shares at December 28, 2008 215,499 58.14 $ 597
Options granted 21,576 58.32
Options exercised (18,225) 50.97
Options canceled/forfeited (6,131) 61.85
Shares at January 3, 2010 212,719 $58.66 $1,310
The total intrinsic value of options exercised was $184 million, $506
million, and $625 million in 2009, 2008 and 2007, respectively. The
total unrecognized compensation cost was $612 million as of Janu-
ary 3, 2010, $632 million as of December 28, 2008 and $652 mil-
lion as of December 30, 2007. The weighted average period for this
cost to be recognized was 1.16 years, 1.06 years and 1.01 years for
2009, 2008, and 2007, respectively.
The following table summarizes stock options outstanding and
exercisable at January 3, 2010:
(Shares in Thousands) Outstanding Exercisable
_______________________________________________________ __________________
Average Average
Exercise Average Exercise Exercise
Price Range Options Life(1) Price Options Price
$ 7.33-$28.09 104 1.5 $22.89 104 $22.89
$31.27-$40.08 131 0.3 35.83 131 35.83
$41.26-$49.86 1,024 1.2 47.09 1,024 47.09
$50.52-$52.11 17,328 0.8 50.70 17,328 50.70
$52.13-$53.77 22,193 3.1 52.22 22,152 52.22
$53.93-$54.89 26,155 4.0 53.93 26,156 53.93
$55.01-$58.25 26,332 2.1 57.30 26,328 57.30
$58.33-$65.10 63,805 7.7 59.48 21,367 58.48
$65.62-$68.37 55,647 5.8 65.97 33,759 66.19
212,719 5.0 $58.66 148,349 $57.26
(1) Average contractual life remaining in years.
Stock options exercisable at December 28, 2008 and December 30,
2007 were 144,962 at an average price of $56.25 and an average
life of 5.3 years and 137,310 at an average price of $52.33 and an
average life of 5.6 years, respectively.
RESTRICTED SHARE UNITS
The Company grants restricted share units with a vesting period
of three years. The Company settles employee stock issuance with
treasury shares. Treasury shares are replenished throughout the
year for the number of shares used for employee stock issuances.
A summary of share activity under the Plan as of January 3, 2010:
Outstanding
(Shares in Thousands) Shares
Shares at December 31, 2006 6,885
Shares granted 8,029
Shares issued (33)
Shares canceled/forfeited (1,220)
Shares at December 30, 2007 13,661
Shares granted 10,105
Shares issued (40)
Shares canceled/forfeited (1,468)
Shares at December 28, 2008 22,258
Shares granted 11,172
Shares issued (5,714)
Shares canceled/forfeited (1,392)
Shares at January 3, 2010 26,324
The average fair value of the restricted share units granted was
$52.79, $56.70 and $60.86 in 2009, 2008 and 2007, respectively,
using the fair market value at the date of grant. The fair value of
restricted share units was discounted for dividends, which are not
paid on the restricted share units during the vesting period. The fair
value of restricted share units settled was $308.4 million, $2.5 mil-
lion and $1.8 million in 2009, 2008 and 2007, respectively.
54 J O H N S O N & J O H N S O N 2 0 0 9 A N N U A L R E P O R T