Safeway 2012 Annual Report Download - page 73

Download and view the complete annual report

Please find page 73 of the 2012 Safeway 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 106

  • 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
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106

SAFEWAY INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
61
million in expense related to these awards in 2012 based on the expected achievement of the performance
target. The payouts related to all active awards, if earned, will be settled in the Company’s common stock
after the end of each performance period.
Activity in the Company’s stock option plans for the year ended December 29, 2012 was as follows:
Options
Weighted-
average
exercise price
Aggregate
intrinsic
value
(in millions)
Outstanding, beginning of year 28,935,453 $ 26.37 $ 16.5
2012 Activity:
Granted 2,233,139 19.85
Canceled (6,863,572) 26.17
Exercised (207,627) 18.34
Outstanding, end of year 24,097,393 $ 25.92 $ 0.9
Exercisable, end of year (1) 15,116,752 $ 28.27 $ —
Vested and expected to vest, end of year (2) 21,933,588 $ 26.38 $ 0.5
(1) The remaining weighted-average contractual life of these options is 2.5 years.
(2) The remaining weighted-average contractual life of these options is 3.8 years.
Weighted-average fair value of options granted during the year:
2010 $ 6.88
2011 5.87
2012 4.50
The total intrinsic value of options exercised was $0.7 million in 2012, $9.7 million in 2011 and $26.3 million
in 2010. As of year-end 2012, there was $32.4 million of total unrecognized compensation cost related to
nonvested stock-based compensation arrangements granted under the Company’s stock option plans. That
cost is expected to be recognized over a weighted-average period of 2.3 years.
Additional Stock Plan Information Safeway accounts for stock-based employee compensation in
accordance with generally accepted accounting principles for stock compensation. The Company determines
fair value of such awards using the Black-Scholes option pricing model. The following weighted-average
assumptions used, by year, to value Safeway’s grants are as follows:
2012 2011 2010
Expected life (in years) 6.25 – 6.5 6.5 6.5
Expected stock volatility 30.6% – 33.9% 29.8% – 34.1% 30.3% – 31.2%
Risk-free interest rate 0.9% – 1.3% 1.5% – 2.7% 1.8% – 3.1%
Expected dividend yield during the
expected term 2.8% – 3.7% 2.2% – 2.7% 1.8% – 2.2%
The expected term of the awards was determined utilizing the “simplified method” outlined in SEC Staff
Accounting Bulletin No. 107 that utilizes the following formula: (vesting term + original contract
term)/2. Expected stock volatility was determined based upon a combination of historical volatility for periods
preceding the measurement date and estimates of implied volatility based upon open interests in traded
option contracts on Safeway common stock. The risk-free interest rate was based on the yield curve in effect