The Gap 2011 Annual Report Download - page 77

Download and view the complete annual report

Please find page 77 of the 2011 The Gap annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 100

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100

At the end of each reporting period, we evaluate the probability that Stock Units will be granted. We record share-
based compensation expense based on the probability that the performance metrics will be achieved, with an
offsetting increase to current liabilities. We revalue the liability at the end of each reporting period and record an
adjustment to share-based compensation expense as required, based on the probability that the performance
metrics will be achieved. Upon achievement of the performance metrics, a Stock Unit is granted. At that time, the
associated liability is reclassified to stockholders’ equity.
Out of 3,336,517, 3,431,422, and 4,992,213 Stock Units granted in fiscal 2011, 2010, and 2009, respectively, 157,125,
930,081, and 703,146 Stock Units, respectively, were granted based on satisfaction of performance metrics.
The liability related to potential Stock Units based on performance metrics, which is recorded in accrued expenses
and other current liabilities in the Consolidated Balance Sheets, was $1 million as of January 28, 2012 and
January 29, 2011.
Stock Options
We have stock options outstanding under the 2011 Plan and the 2002 Plan. Stock options generally expire 10 years
from the grant date, three months after employee termination, or one year after the date of an employee’s
retirement or death, if earlier. Vesting generally occurs over a period of four years of continued service by the
employee, with 25 percent vesting on each of the four anniversary dates.
The fair value of stock options issued during fiscal 2011, 2010, and 2009 was estimated on the date of grant using
the following assumptions:
Fiscal Year
2011 2010 2009
Expected term (in years) .............................................................. 4.9 4.8 5.0
Expected volatility ................................................................... 30.6% 29.0% 51.3%
Dividendyield ....................................................................... 2.1% 1.8% 1.9%
Risk-free interest rate ................................................................. 2.3% 2.7% 1.9%
A summary of stock option activity under the 2011 Plan and the 2002 Plan for fiscal 2011 is as follows:
Shares
Weighted-
Average
Exercise Price
Balance as of January 29, 2011 ..................................................... 24,169,323 $18.48
Granted ........................................................................ 2,863,538 $21.75
Exercised ....................................................................... (4,157,545) $16.63
Forfeited/Expired................................................................ (2,277,778) $20.41
Balance as of January 28, 2012 ..................................................... 20,597,538 $19.10
63