Walmart 2010 Annual Report Download - page 48

Restricted Stock Rights
In fiscal 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 specified service period. Grants
issued before fiscal 2009 typically vest over five years with 40% vesting
three years from grant date and the remaining 60% vesting five years
from grant date. Beginning in fiscal 2009, the vesting schedule was
adjusted for new grants to 50% vesting three years from grant date and
the remaining 50% vesting five years from grant date. The fair value of
each restricted stock right is determined on the date of grant using the
stock price discounted for the expected dividend yield through the
vesting period and is recognized ratably over the vesting period.
Expected dividend yield over the vesting period is based on the
expected dividend yield rate over the life of the grant. The weighted-
average discount for dividend yield used to determine the fair value of
restricted stock rights granted in fiscal 2010, 2009 and 2008 was 8.5% ,
6.8% and 8.4% , respectively.
A summary of the company’s restricted stock rights activity for fiscal
2010 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, 2009 11,154,000 $46.28
Granted 5,061,000 46.34
Vested (1,181,000) 41.86
Forfeited (1,010,000) 46.57
Restricted Stock Rights
at January 31, 2010 14,024,000 $46.50
As of January 31, 2010, there was $335 million of total unrecognized
compensation cost related to restricted stock rights granted under the
Plan, which is expected to be recognized over a weighted-average
period of 2.1 years.
Restricted Stock and Performance Share Awards
Under the Plan, the company grants various types of awards of restricted
(non-vested) stock to certain associates. These grants include awards for
shares that vest based on the passage of time, performance criteria, or both.
Vesting periods vary. Restricted stock awards granted before January 1,
2008 may be settled in stock, or deferred as stock or cash, based upon the
associate’s election. Consequently, these awards are classified as liabilities
in the accompanying Consolidated Balance Sheets unless the associate
has elected for the award to be settled or deferred in stock. Restricted
stock awards issued in fiscal 2009 and later generally are settled or
deferred in stock.
During fiscal 2006, the company began issuing performance share awards
under the Plan that vest based on the passage of time and achievement of
performance criteria. Based on the extent to which the targets are achieved,
vested shares may range from 0% to 150% of the original award amount.
Because the performance shares issued before January 1, 2008 may be
settled in stock or cash, the performance shares are included in accrued
liabilities and deferred income taxes and other in the accompanying
Consolidated Balance Sheets unless the associate has elected for the award
to be settled or deferred in stock. Beginning in fiscal 2009, performance
shares issued are settled or deferred in stock; therefore, they are accounted
for as equity in the accompanying Consolidated Balance Sheets. The fair
value of performance share awards accounted for as equity are determined
on the date of grant using the stock price discounted for the expected
dividend yield through the vesting period and is recognized ratably over
the vesting period.
The fair value of the restricted stock and performance share liabilities
is remeasured each reporting period. The total liability for restricted
stock and performance share awards at January 31, 2010 and 2009 was
$63 million and $126 million, respectively.
A summary of the company’s non-vested restricted stock and performance
share award activity for fiscal 2010 presented below represents the maxi-
mum number of shares that could be earned or vested under the Plan:
Non-Vested Restricted Stock Weighted-Average
and Performance Share Awards Shares Grant-Date Fair Value
Restricted Stock and
Performance Share Awards
at January 31, 2009 13,705,000 $49.28
Granted 4,422,000 51.59
Vested (2,067,000) 48.23
Forfeited (1,736,000) 49.03
Restricted Stock and
Performance Share Awards
at January 31, 2010 14,324,000 $50.18
As of January 31, 2010, there was $334 million of total unrecognized
compensation cost related to restricted stock and performance share
awards granted under the Plan, which is expected to be recognized
over a weighted-average period of 2.5 years. The total fair value of
shares vested during the fiscal years ended January 31, 2010, 2009 and
2008, was $110 million, $55 million and $24 million, respectively.
11 Legal Proceedings
The company is involved in a number of legal proceedings. The company
has made accruals with respect to these matters, where appropriate, which
are reflected in the company’s Consolidated Financial Statements. For
some matters, the amount of liability is not probable or the amount
cannot be reasonably estimated and therefore accruals have not been
made. However, where a liability is reasonably possible and material, such
matters have been disclosed. The company may enter into discussions
regarding settlement of these matters, and may enter into settlement
agreements, if it believes settlement is in the best interest of the company’s
shareholders. The matters, or groups of related matters, discussed below,
if decided adversely to or settled by the company, individually or in the
aggregate, may result in liability material to the company’s financial
condition or results of operations.
Notes to Consolidated Financial Statements
46 Walmart 2010 Annual Report