Walmart 2009 Annual Report Download - page 46

44 Wal-Mart 2009 Annual Report
Notes to Consolidated Financial Statements
7 Share-Based Compensation Plans
As of January 31, 2009, the Company has awarded share-based
compensation to executives and other associates of the Company
through various share-based compensation plans. The compensa-
tion cost recognized for all plans was $302 million, $276 million and
$271 million for  scal 2009, 2008 and 2007, respectively. The total
income tax bene t recognized for all share-based compensation
plans was $112 million, $102 million and $101 million for  scal 2009,
2008 and 2007, respectively.
The Company’s Stock Incentive Plan of 2005 (the “Plan”), which is
shareholder-approved, was established to grant stock options,
restricted (non-vested) stock, performance share and other equity
compensation awards to its associates, and 210 million shares of
common stock to be issued under the Plan have been registered
under the Securities Act of 1933. The Company believes that such
awards better align the interests of its associates with those of
its shareholders.
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 gen-
erally have a contractual term of 10 years.
The Company’s United Kingdom subsidiary, ASDA, also o ers two
other stock option plans to its colleagues. The  rst plan, The ASDA
Colleague Share Ownership Plan 1999 (“CSOP”), grants options to cer-
tain colleagues. The initial CSOP grant is a three-year and a six-year
vesting with six-year vesting granted thereafter. CSOP shares have
an exercise period of two months immediately following the vesting
date. The second plan, The ASDA Sharesave Plan 2000 (“Sharesave”),
grants options to certain colleagues at 80% of the average market
value of the three days preceding 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 CSOP
and Sharesave Plan were registered to grant stock options to its col-
leagues 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 exercise
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 over the vesting period
is based on the annual dividend rate at the time of grant. The follow-
ing 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,
2009 2008 2007
Dividend yield 1.9% 2.1% 2.3%
Volatility 16.7% 18.6% 19.4%
Risk-free interest rate 2.0% 4.5% 4.8%
Expected life in years 3.4 5.6 5.3
A summary of the stock option award activity for  scal 2009 is presented below:
Weighted-Average Weighted-Average Aggregate
Stock Options Shares Exercise Price Remaining Life in Years Intrinsic Value
Outstanding at January 31, 2008 68,860,000 $49.01
Granted 1,712,000 39.51
Exercised (18,043,000) 48.14
Forfeited or expired (3,807,000) 48.62
Outstanding at January 31, 2009 48,722,000 49.11 4.5 $59,706,000
Exercisable at January 31, 2009 28,539,000 $51.34 4.4 $ 7,321,000