Proctor and Gamble 2013 Annual Report Download - page 67

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The Procter & Gamble Company 65
Amounts in millions of dollars except per share amounts or as otherwise specified.
Assumptions utilized in the model, which are evaluated and
revised, as necessary, to reflect market conditions and
experience, were as follows:
Years ended June 30 2013 2012 2011
Interest rate 0.2-2.0% 0.2-2.1% 0.3-3.7%
Weighted average
interest rate 1.8% 1.9% 3.4%
Dividend yield 2.9% 2.6% 2.4%
Expected volatility 14-15% 12-18% 14-18%
Weighted average
volatility 15% 15% 16%
Expected life in
years 8.9 8.5 8.8
Lattice-based option valuation models incorporate ranges of
assumptions for inputs and those ranges are disclosed in the
preceding table. Expected volatilities are based on a
combination of historical volatility of our stock and implied
volatilities of call options on our stock. We use historical
data to estimate option exercise and employee termination
patterns within the valuation model. The expected life of
options granted is derived from the output of the option
valuation model and represents the average period of time
that options granted are expected to be outstanding. The
interest rate for periods within the contractual life of the
options is based on the U.S. Treasury yield curve in effect at
the time of grant.
A summary of options, RSUs and PSUs outstanding under
the plans as of June 30, 2013, and activity during the year
then ended is presented below:
Options in thousands Options
Weighted
Avg.
Exercise
Price
Weighted
Avg.
Remaining
Contract-
ual Life in
Years
Aggregate
Intrinsic
Value
(in
millions)
Outstanding,
beginning of year 353,093 $ 53.83
Granted 24,818 75.41
Exercised (69,933) 47.09
Canceled (1,739) 60.97
OUTSTANDING,
END OF YEAR 306,239 57.07 4.9 $ 6,100
EXERCISABLE 223,154 52.97 3.6 5,367
The weighted average grant-date fair value of options
granted was $8.19, $8.05 and $11.09 per share in 2013, 2012
and 2011, respectively. The total intrinsic value of options
exercised was $1,759, $820 and $628 in 2013, 2012 and
2011, respectively. The total grant-date fair value of options
that vested during 2013, 2012 and 2011 was $352, $435 and
$445, respectively. At June 30, 2013, there was $233 of
compensation cost that has not yet been recognized related
to stock option grants. That cost is expected to be
recognized over a remaining weighted average period of 1.8
years. Cash received from options exercised was $3,294,
$1,735 and $1,237 in 2013, 2012 and 2011, respectively.
The actual tax benefit realized for the tax deductions from
option exercises totaled $575, $239 and $188 in 2013, 2012
and 2011, respectively.
RSUs PSUs
Other Stock-
Based Awards in
thousands Units
Weighted
-Average
Grant-
Date Fair
Value Units
Weighted-
Average
Grant-
Date Fair
Value
Non-vested at
July 1, 2012 3,670 $ 55.53 1,261 $ 58.79
Granted 1,951 62.69 626 67.70
Vested (952) 59.50 — —
Forfeited (79) 55.31 — —
Non-vested at
June 30, 2013 4,590 56.88 1,887 61.75
At June 30, 2013, there was $195 of compensation cost that
has not yet been recognized related to restricted stock, RSUs
and PSUs. That cost is expected to be recognized over a
remaining weighted average period of 3.1 years. The total
fair value of shares vested was $51, $38 and $30 in 2013,
2012 and 2011, respectively.
We have no specific policy to repurchase common shares to
mitigate the dilutive impact of options, RSUs and PSUs.
However, we have historically made adequate discretionary
purchases, based on cash availability, market trends and
other factors, to offset the impacts of such activity.
NOTE 9
POSTRETIREMENT BENEFITS AND EMPLOYEE
STOCK OWNERSHIP PLAN
We offer various postretirement benefits to our employees.
Defined Contribution Retirement Plans
We have defined contribution plans which cover the majority
of our U.S. employees, as well as employees in certain other
countries. These plans are fully funded. We generally make
contributions to participants' accounts based on individual
base salaries and years of service. Total global defined
contribution expense was $314, $353 and $347 in 2013,
2012 and 2011, respectively.
The primary U.S. defined contribution plan (the U.S. DC
plan) comprises the majority of the expense for the
Company's defined contribution plans. For the U.S. DC
plan, the contribution rate is set annually. Total
contributions for this plan approximated 15% of total
participants' annual wages and salaries in 2013, 2012 and
2011.
We maintain The Procter & Gamble Profit Sharing Trust
(Trust) and Employee Stock Ownership Plan (ESOP) to
provide a portion of the funding for the U.S. DC plan and
other retiree benefits (described below). Operating details of
the ESOP are provided at the end of this Note. The fair
value of the ESOP Series A shares allocated to participants