Lowe's 2013 Annual Report Download - page 58

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General terms and methods of valuation for the Company’s share-based awards are as follows:
Stock Options
Stock options have terms of seven or 10 years, with one-third of each grant vesting each year for three years, and are assigned
an exercise price equal to the closing market price of a share of the Company’s common stock on the date of grant. Options are
expensed on a straight-line basis over the grant vesting period, which is considered to be the requisite service period.
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model. When
determining expected volatility, the Company considers the historical performance of the Company’s stock, as well as implied
volatility. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant, based on the
options’ expected term. The expected term of the options is based on the Company’s evaluation of option holders’ exercise
patterns and represents the period of time that options are expected to remain unexercised. The Company uses historical data to
estimate the timing and amount of forfeitures. The weighted average assumptions used in the Black-Scholes option-pricing
model and weighted-average grant date fair value for options granted in 2013, 2012 and 2011 are as follows:
2013
2012
2011
Weighted-average assumptions used:
Expected volatility
34.2
%
38.6
%
39.9
%
Dividend yield
1.45
%
1.76
%
1.39
%
Risk-free interest rate
1.31
%
0.75
%
1.83
%
Expected term, in years
7.39
4.41
4.44
Weighted-average grant date fair value
$
12.24
$
7.84
$
7.93
The total intrinsic value of options exercised, representing the difference between the exercise price and the market price on the
date of exercise, was approximately $48 million, $84 million and $8 million in 2013, 2012 and 2011, respectively.
Transactions related to stock options for the year ended January 31, 2014 are summarized as follows:
Shares
(In thousands)
Weighted-Average
Exercise Price Per
Share
Weighted-
Average
Remaining Term
(In years)
Aggregate
Intrinsic Value (In
thousands)
Outstanding at February 1, 2013
8,718
$
26.58
Granted
2,112
38.39
Canceled, forfeited or expired
(260
)
32.09
Exercised
(3,214
)
27.40
Outstanding at January 31, 2014
7,356
$
29.42
5.43
$
124,128
Vested and expected to vest at
January 31, 20141
7,271
$
29.35
5.40
$
123,178
Exercisable at January 31, 2014
3,071
$
24.88
3.48
$
65,749
1 Includes outstanding vested options as well as outstanding nonvested options after a forfeiture rate is applied.
Restricted Stock Awards
Restricted stock awards are valued at the market price of a share of the Company’s common stock on the date of grant. In
general, these awards vest at the end of a three year period from the date of grant and are expensed on a straight-line basis over
that period, which is considered to be the requisite service period. The Company uses historical data to estimate the timing and
amount of forfeitures. The weighted-average grant-date fair value per share of restricted stock awards granted was $41.78,
$28.25 and $25.29 in 2013, 2012, and 2011, respectively. The total fair value of restricted stock awards vested was
approximately $98 million, $118 million and $61 million in 2013, 2012 and 2011, respectively.