Best Buy 2011 Annual Report Download - page 107

Download and view the complete annual report

Please find page 107 of the 2011 Best Buy 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 138

  • 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
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138

$ in millions, except per share amounts or as otherwise noted
Stock Options
Stock option activity was as follows in fiscal 2011:
Weighted-
Weighted- Average
Average Remaining
Stock Exercise Price Contractual Aggregate
Options per Share Term (in years) Intrinsic Value
Outstanding at February 27, 2010 36,588,000 $38.18
Granted 4,924,000 38.85
Exercised (4,355,000) 30.83
Forfeited/Canceled (1,570,000) 42.88
Outstanding at February 26, 2011 35,587,000 $38.97 6.4 $41
Vested or expected to vest at February 26, 2011 32,438,000 $39.21 6.2 $39
Exercisable at February 26, 2011 21,717,000 $40.14 5.1 $30
The weighted-average grant-date fair value of stock options granted during fiscal 2011, 2010 and 2009 was $11.97,
$12.69 and $13.04, respectively, per share. The aggregate intrinsic value of our stock options (the amount by which the
market price of the stock on the date of exercise exceeded the exercise price of the option) exercised during fiscal 2011,
2010 and 2009, was $52, $28 and $26, respectively. At February 26, 2011, there was $127 of unrecognized
compensation expense related to stock options that is expected to be recognized over a weighted-average period of
1.7 years.
Net cash proceeds from the exercise of stock options were $134, $96 and $34 in fiscal 2011, 2010 and 2009,
respectively.
The actual income tax benefit realized from stock option exercises was $19, $10 and $7, in fiscal 2011, 2010 and 2009,
respectively.
In fiscal 2011, 2010 and 2009, we estimated the fair value of each stock option on the date of grant using a lattice
model with the following assumptions:
Valuation Assumptions(1) 2011 2010 2009
Risk-free interest rate(2) 0.2% - 3.9% 0.2% - 3.8% 0.9% - 4.0%
Expected dividend yield 1.5% 1.6% 1.6%
Expected stock price volatility(3) 36% 42% 45%
Expected life of stock options (in years)(4) 6.1 6.1 6.1
(1) Forfeitures are estimated using historical experience and projected employee turnover.
(2) Based on the U.S. Treasury constant maturity interest rate whose term is consistent with the expected life of our stock options.
(3) We use an outside valuation advisor to assist us in projecting expected stock price volatility. We consider both the historical volatility
of our stock price as well as implied volatilities from exchange-traded options on our stock.
(4) We estimate the expected life of stock options based upon historical experience.
107