Staples 2012 Annual Report Download - page 141

C-29
STAPLES, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (continued)
Stock Award Plans
The Amended and Restated 2004 Stock Incentive Plan (the “2004 Plan”) was implemented in July 2004 and replaced
the amended and restated 1992 Equity Incentive Plan (the "1992 Plan") and the amended and restated 1990 Director Stock Option
Plan (the "1990 Plan"). Unexercised options under both the 1992 Plan and the 1990 Plan remain outstanding. Under the 2004
Plan, Staples may issue up to 97.4 million shares of common stock to management and employees using various forms of awards,
including, restricted stock and restricted stock units (collectively, "Restricted Shares"), nonqualified stock options and performance
shares. Shares issued pursuant to restricted stock awards are restricted in that they are subject to forfeiture and are not transferable
until they vest. Shares underlying awards of restricted stock units are not issued until the units vest. Nonqualified stock options
cannot be exercised until they vest. Options outstanding are exercisable at various percentages of the total shares subject to the
option starting one year after the grant. Options outstanding under the Company's plans have an exercise price equal to the fair
market value of the common stock on the date of grant. All options expire ten years after the grant date, subject to earlier termination
in the event of employment termination.
Stock Options
Information with respect to stock options granted under the above plans is as follows:
Number of
Shares
Weighted-Average
Exercise Price
Per Share
Weighted-Average
Remaining
Contractual Term
in Years
Aggregate Intrinsic
Value (1)
(in thousands)
Outstanding at January 28, 2012 45,995,348 $ 19.89
Granted 2,990,051 12.79
Exercised (2,007,635) 11.32
Cancelled (5,230,065) 19.63
Outstanding at February 2, 2013 41,747,699 $ 19.83 5.01 $ 3,600
Exercisable at February 2, 2013 32,333,756 $ 20.90 4.06 $ 1,557
Vested or expected to vest at February 2, 2013 40,835,224 $ 19.89 4.94 $ 3,498
(1) The intrinsic value of the nonqualified stock options is the amount by which the market value of the underlying stock
exceeds the exercise price of an option.
The total intrinsic value of options exercised during 2012, 2011 and 2010 were $5.2 million, $14.6 million and $24.0
million, respectively.
The weighted-average fair values of options and employee stock purchase plan shares granted during 2012, 2011 and
2010 were $2.97, $3.58 and $4.75, respectively.
For stock options granted on or after May 1, 2005, the fair value of each award is estimated on the date of grant using a
binomial valuation model. The binomial model considers characteristics of fair value option pricing that are not available under
the Black-Scholes model. Similar to the Black-Scholes model, the binomial model takes into account variables such as volatility,
dividend yield rate and risk free interest rate. However, in addition, the binomial model considers the contractual term of the
option, the probability that the option will be exercised prior to the end of its contractual life, and the probability of termination
or retirement of the option holder in computing the value of the option. For these reasons, the Company believes that the binomial
model provides a fair value that is more representative of actual experience and future expected experience than that value calculated
using the Black-Scholes model.
The fair value of options granted in each year was estimated at the date of grant using the following weighted-average
assumptions:
2012 2011 2010
Risk free interest rate 1.0% 2.1% 2.3%
Expected dividend yield 1.7% 1.4% 1.3%
Expected stock volatility 30% 28% 31%
Expected life of options 5.6 years 5.5 years 5.4 years
The risk free interest rate was based on the implied yield curve for zero coupon U.S. Treasury securities over the expected
term of the options. The expected dividend yield was calculated as the average of the dividend yields for each period the Company