McDonalds 2007 Annual Report Download - page 61

SHARE-BASED COMPENSATION
The Company maintains a share-based compensation plan
which authorizes the granting of various equity-based incen-
tives including stock options and restricted stock units (RSUs)
to employees and nonemployee directors. The number of
shares of common stock reserved for issuance under the plans
was 116.8 million at December 31, 2007, including 45.8 million
available for future grants.
Stock options
Stock options to purchase common stock are granted with an
exercise price equal to the closing market price of the Compa-
ny’s stock on the date of grant. Substantially all of the options
become exercisable in four equal installments, beginning a year
from the date of the grant, and generally expire 10 years from
the grant date. Options granted between May 1, 1999 and
December 31, 2000 (approximately 16 million options outstanding
at December 31, 2007) expire 13 years from the date of grant.
Intrinsic value for stock options is defi ned as the difference
between the current market value and the exercise price. During
2007, 2006 and 2005, the total intrinsic value of stock options
exercised was $815.3 million, $412.6 million and $290.9 million,
respectively. Cash received from stock options exercised
during 2007 was $1.1 billion and the actual tax benefi t realized
for tax deductions from stock options exercised totaled
$245.2 million. The Company uses treasury shares purchased
under the Company’s share repurchase program to satisfy
share-based exercises.
A summary of the status of the Company’s stock option
grants as of December 31, 2007, 2006 and 2005, and changes
during the years then ended, is presented in the following table:
RSUs
RSUs generally vest 100% on the third anniversary of the grant
and are payable in either shares of McDonald’s common stock
or cash, at the Company’s discretion. Certain executives have
been awarded RSUs that are performance-based vesting. The
fair value of each RSU granted is equal to the market price of
the Company’s stock at date of grant less the present value of
expected dividends over the vesting period.
A summary of the Company’s RSU activity during the years
ended December 31, 2007, 2006 and 2005 is presented in the
following table:
The Company realized tax deductions of $1.6 million from RSUs vested during 2007. The total fair value of RSUs vested during
2007, 2006 and 2005 was $12.6 million, $43.8 million and $6.0 million, respectively.
Options
Outstanding at beginning of year 101.9 $30.03 136.3 $28.90 166.9 $ 27.80
Granted 5.7 45.02 7.0 36.36 7.1 32.59
Exercised (38.4) 28.89 (37.7) 26.86 (32.7) 23.87
Forfeited/expired (1.7) 33.63 (3.7) 32.51 (5.0) 30.44
Outstanding at end of year 67.5 $31.85 5.48 $1,827.2 101.9 $30.03 136.3 $28.90
Exercisable at end of year 52.6 $30.54 4.78 $1,491.3 78.7 103.3
Shares
IN
MILLIONS
Weighted-
average
exercise
price
Weighted-
average
remaining
contractual
life IN YEARS
Aggregate
intrinsic
value IN
MILLIONS
Shares
IN
MILLIONS
Weighted-
average
exercise
price
Shares
IN
MILLIONS
Weighted-
average
exercise
price
2007 2006 2005
RSUs
Nonvested at beginning of year 2.6 $33.00 2.6 $23.60 1.7 $16.01
Granted 1.2 41.73 1.4 34.12 1.2 32.58
Vested (0.2) 32.78 (1.3) 15.24 (0.1) 14.70
Forfeited (0.2) 35.97 (0.1) 31.78 (0.2) 19.65
Nonvested at end of year 3.4 $35.94 2.6 $33.00 2.6 $23.60
Shares
IN
MILLIONS
2007 2006 2005
Weighted-average
grant date
fair value
Shares
IN
MILLIONS
Weighted-average
grant date
fair value
Shares
IN
MILLIONS
Weighted-average
grant date
fair value
59