Walmart 2008 Annual Report Download - page 43

Notes to Consolidated Financial Statements
WAL-MART 2008 ANNUAL REPORT 41
Under the Plan and prior plans, substantially all stock option awards
have been granted with an exercise price equal to the market price
of the Company’s stock at the date of grant. Generally, outstanding
options granted before scal 2001 vest over seven years. Options
granted after scal 2001 generally vest over ve years. Shares issued
upon the exercise of options are newly issued. Options granted
generally have a contractual term of 10 years.
The Company’s United Kingdom subsidiary, Asda, also oers two
other stock option plans to its associates. The rst plan, The Asda
Colleague Share Ownership Plan 1999 (“CSOP”), grants options to
certain associates. Options granted under the CSOP generally expire
six years from the date of grant, with half vesting on the third anniversary
of the grant and the other half on the sixth anniversary of the date
of grant. Shares in the money at the vesting date are exercised while
shares out of the money at the vesting date expire. The second plan,
The Asda Sharesave Plan 2000 (“Sharesave”), grants options to certain
associates at 80% of market value on the date of grant. Sharesave
options become exercisable after either a three-year or ve-year period
and generally expire six months after becoming exercisable. The
shares were registered under the Securities Act for issuance under
CSOP and Sharesave Plans to grant stock options to its colleagues
for up to a combined 34 million shares of common stock.
The fair value of each stock option award is estimated on the date of
grant using the Black-Scholes-Merton option valuation model that
uses various assumptions for inputs, which are noted in the following
table. Generally, the Company uses expected volatilities and risk-free
interest rates that correlate with the expected term of the option
when estimating an option’s fair value. To determine the expected
life of the option, the Company bases its estimates on historical exer-
cise and expiration activity of grants with similar vesting periods.
Expected volatility is based on historical volatility of our stock and
the expected risk-free interest rate is based on the U.S. Treasury yield
curve at the time of the grant. The expected dividend yield is based
on the annual dividend rate at the time of grant. The following table
represents a weighted-average of the assumptions used by the
Company to estimate the fair values of the Company’s stock options
at the grant dates:
Fiscal Year Ended January 31,
2008 2007 2006
Dividend yield 2.1% 2.3% 1.6%
Volatility 18.6% 19.4% 20.8%
Risk-free interest rate 4.5% 4.8% 4.0%
Expected life in years 5.6 5.3 4.1
A summary of the stock option award activity for scal 2008 is presented below:
Weighted-Average Aggregate
Options Shares Exercise Price Remaining Life in Years Instrinsic Value
Outstanding at January 31, 2007 71,376,000 $48.65
Granted 8,933,000 42.85
Exercised (3,134,000) 29.35
Forfeited or expired (8,315,000) 45.31
Outstanding at January 31, 2008 68,860,000 $49.01 5.2 $198,674,000
Exercisable at January 31, 2008 38,902,000 $50.55 4.7 $ 72,429,000
As of January 31, 2008, there was $292 million of total unrecognized
compensation cost related to stock options granted under the Plan,
which is expected to be recognized over a weighted-average period
of 2.4 years. The total fair value of options vested during the fiscal
years ended January 31, 2008, 2007 and 2006, was $102 million,
$160 million and $197 million, respectively.
The weighted-average grant-date fair value of options granted during
the scal years ended January 31, 2008, 2007 and 2006, was $11.00,
$9.20 and $11.82, respectively. The total intrinsic value of options
exercised during the years ended January 31, 2008, 2007 and 2006,
was $60 million, $103 million and $125 million, respectively.
In scal 2007, the Company began issuing restricted stock rights to
most associates in lieu of stock option awards. Restricted stock rights
are associate rights to Company stock after a specied service period.
The rights typically vest over ve years with 40% vesting three years
from grant date and the remaining 60% vesting ve years from grant
date. The fair value of each restricted stock right is determined on the
date of grant using the stock price less the expected dividend yield
through the vesting period. Expected dividend yield is based on the
annual dividend rate at the time of grant. The weighted average divi-
dend yield for restricted stock rights granted in scal 2008 and 2007
was 8.4% and 6.9%, respectively.
A summary of the Company’s restricted stock rights activity for scal
2008 presented below represents the maximum number of shares
that could be earned or vested under the Plan:
Weighted-Average
Restricted Stock Rights Shares Grant-Date Fair Value
Restricted stock rights
at January 31, 2007 3,508,000 $42.57
Granted 3,604,000 43.42
Vested (4,000) 42.66
Forfeited (467,000) 43.05
Restricted stock rights
at January 31, 2008 6,641,000 $43.00