TNB » Topics » Stock Options

These excerpts taken from the TNB 10-K filed Feb 17, 2009.
Stock Options
 
The Corporation’s option grants qualify for classification as equity and such grants contain no provisions to allow an employee to force cash settlement by the Corporation. The Corporation’s options do not contain future market or performance conditions. The fair value of grants has been estimated on the grant date using a Black-Scholes-Merton option-pricing model. The measurement date is the grant date. The Corporation has elected a straight-line amortization method over the requisite service period (vesting period). The Corporation’s current estimate of forfeitures ranges from 1.5% to 5.0%. Compensation expense associated with option grants was recorded as selling, general and administrative (SG&A) expense and cost of sales, similar to other compensation expense.
 
The Corporation has three homogenous groups which are expected to have different option exercise behaviors: executive management, non-executive management and the Board of Directors. Expected lives of share options were derived from historical data. The risk-free rate is based on the U.S. Treasury yield curve for the expected terms. Expected volatility is based on a combination of historical volatility of the Corporation’s common stock and implied volatility from traded options in the Corporation’s common stock.
 
The following are assumptions used in Black-Scholes-Merton valuations:
 
                         
    2008     2007     2006  
 
Weighted-average volatility
    30%-45%       30%       30%  
Expected dividends
    —%       —%       —%  
Expected lives in years
    4.0-5.0       4.5-5.5       4.5-6.0  
Risk-free rate
    1.50%-3.00%       4.50%-4.75%       4.50%-5.00%  
 
Stock
Options



 



The Corporation’s option grants qualify for classification
as equity and such grants contain no provisions to allow an
employee to force cash settlement by the Corporation. The
Corporation’s options do not contain future market or
performance conditions. The fair value of grants has been
estimated on the grant date using a Black-Scholes-Merton
option-pricing model. The measurement date is the grant date.
The Corporation has elected a straight-line amortization method
over the requisite service period (vesting period). The
Corporation’s current estimate of forfeitures ranges from
1.5% to 5.0%. Compensation expense associated with option grants
was recorded as selling, general and administrative (SG&A)
expense and cost of sales, similar to other compensation expense.


 



The Corporation has three homogenous groups which are expected
to have different option exercise behaviors: executive
management, non-executive management and the Board of Directors.
Expected lives of share options were derived from historical
data. The risk-free rate is based on the U.S. Treasury
yield curve for the expected terms. Expected volatility is based
on a combination of historical volatility of the
Corporation’s common stock and implied volatility from
traded options in the Corporation’s common stock.


 



The following are assumptions used in Black-Scholes-Merton
valuations:


 































































































                         

 

 

2008

 

 

2007

 

 

2006

 
 


Weighted-average volatility


 

 

30%-45%

 

 

 

30%

 

 

 

30%

 


Expected dividends


 

 

—%

 

 

 

—%

 

 

 

—%

 


Expected lives in years


 

 

4.0-5.0

 

 

 

4.5-5.5

 

 

 

4.5-6.0

 


Risk-free rate


 

 

1.50%-3.00%

 

 

 

4.50%-4.75%

 

 

 

4.50%-5.00%

 






 




This excerpt taken from the TNB DEF 14A filed Mar 14, 2008.
Stock Options
 
The administrator may award incentive stock options and nonqualified stock options. Incentive stock options offer employees certain tax advantages that are not available for nonqualified stock options. The administrator determines the terms of the options, including the number of shares of our common stock subject to the options, the exercise price and when the option becomes exercisable. It is the Company’s historic practice to provide for the vesting of options to employees essentially over three years beginning on the first anniversary of the date of the grant. However, the option term may not exceed ten years and the exercise price per share may not be less than the fair market value of a share of our common stock on the date the option is granted.
 
When an employee or a nonemployee director terminates service, his or her option may expire before the end of the otherwise applicable option term. For example, if an employee or nonemployee director terminates his or her service for a reason other than retirement, death, or disability, his or her options generally remain exercisable for up to 90 days after termination of service, unless the award agreement provides for a different exercise period. In the case of retirement, options generally become fully exercisable and may be exercised up to three years after retirement (in the case of an employee) or during the term of the option (in the case of a nonemployee director), unless the award agreement provides otherwise. Termination of service by reason of death or disability may also cause the option to terminate before the end of the otherwise applicable option term. If, however, the last day on which the option may be exercised falls within a quiet period, the exercise period will be automatically extended for up to 90 days after the quiet period ends (but not beyond the term of the option).
 
The exercise price may be paid in cash. The administrator may also permit payment of the exercise price in any of the following ways: (i) in shares of our common stock previously acquired by the individual, (ii) by decreasing the number of shares for which the option is exercisable, (iii) through a so-called broker financed transaction, or (iv) in any combination of such methods.
 
These excerpts taken from the TNB 10-K filed Feb 22, 2008.
Stock Options
 
The Corporation’s option grants qualify for classification as equity and such grants contain no provisions to allow an employee to force cash settlement by the Corporation. The Corporation’s options do not contain future market or performance conditions. The fair value of grants has been estimated on the grant date using a Black-Scholes option-pricing model. The measurement date is the grant date. The Corporation has elected a straight-line amortization method over the requisite service period (vesting period). The Corporation’s current estimate of forfeitures ranges from 0% to 3.5%. Compensation expense associated with option grants was recorded, similar to other compensation expense, to selling, general and administrative (SG&A) expense and cost of sales.
 
The Corporation has three homogenous groups which are expected to have different option exercise behaviors: executive management, non-executive management and the Board of Directors. Expected lives of share options were derived from historical data. The risk-free rate is based on the U.S. Treasury yield curve for the expected terms. Expected volatility is based on a combination of historical volatility of the Corporation’s common stock and implied volatility from traded options in the Corporation’s common stock.
 
The following are assumptions used in Black-Scholes valuations during 2007 and 2006.
 
                 
    2007   2006
 
Weighted-average volatility
    30%       30%  
Expected dividends
    —%       —%  
Expected lives in years
    4.5-5.5       4.5-6.0  
Risk-free rate
    4.5%-4.75%       4.5%-5.0%  
 
Stock
Options



 



The Corporation’s option grants qualify for classification
as equity and such grants contain no provisions to allow an
employee to force cash settlement by the Corporation. The
Corporation’s options do not contain future market or
performance conditions. The fair value of grants has been
estimated on the grant date using a Black-Scholes option-pricing
model. The measurement date is the grant date. The Corporation
has elected a straight-line amortization method over the
requisite service period (vesting period). The
Corporation’s current estimate of forfeitures ranges from
0% to 3.5%. Compensation expense associated with option grants
was recorded, similar to other compensation expense, to selling,
general and administrative (SG&A) expense and cost of sales.


 



The Corporation has three homogenous groups which are expected
to have different option exercise behaviors: executive
management, non-executive management and the Board of Directors.
Expected lives of share options were derived from historical
data. The risk-free rate is based on the U.S. Treasury
yield curve for the expected terms. Expected volatility is based
on a combination of historical volatility of the
Corporation’s common stock and implied volatility from
traded options in the Corporation’s common stock.


 



The following are assumptions used in Black-Scholes valuations
during 2007 and 2006.


 






































































                 

 

 

2007

 

2006
 


Weighted-average volatility


 

 

30%

 

 

 

30%

 


Expected dividends


 

 

—%

 

 

 

—%

 


Expected lives in years


 

 

4.5-5.5

 

 

 

4.5-6.0

 


Risk-free rate


 

 

4.5%-4.75%

 

 

 

4.5%-5.0%

 






 




This excerpt taken from the TNB DEF 14A filed Mar 13, 2007.
B. Stock Options
 
Our company awards stock option grants under the 2004 Plan as an important part of our long-term incentive compensation package. The option grants are intended to provide a significant equity form of


22


Table of Contents

compensation that will reward our Executive Officers and others for company stock price appreciation while they maintain a continuing proprietary interest in our company. The Committee authorizes all stock option grants under the 2004 Plan to eligible employees. Scheduled grants are made each year at the Committee’s first scheduled meeting. Unscheduled grants may be authorized by the Committee through the same process if the Committee determines additional grants are appropriate for our business purposes (new hires, special projects, etc.). In determining grants under the 2004 Plan, the Committee establishes for each Executive Officer an award value based on a target percentage of the midpoint of their salary grade. In 2006, the exercise price of stock option grants was priced by averaging the high and low sales prices of the company’s stock as traded on the New York Stock Exchange on the day the grant was authorized by the Committee. Beginning with the 2007 grants, we have set the exercise price of all options at the closing sales price on the day of authorization.
 
In February 2006, the Committee approved a stock option grant of 68,178 shares under the Equity Compensation Plan to Dominic J. Pileggi. The terms of these options and restricted stock are described in the Supplement Grants of Plan-Based Awards Table. Included in the February 2006 grants, the Committee approved the following grants to each Executive Officer: 17,922 options granted to Kenneth W. Fluke; 7,345 options granted to Imad Hajj; 12,837 options granted to J.N. Raines; and 17,922 options granted to Christopher P. Hartmann. The grants to Executive Officers in the aggregate represented 4% of the shares of common stock authorized to be awarded under the 2004 Plan.
 
Separately in February 2006, the Committee approved grants under the 2004 Plan to certain management personnel excluding the Executive Officers that aggregated 489,932 shares of common stock. This approximated 16% of the shares authorized to be awarded under the 2004 Plan. The stock options granted for 2006 are subject to vesting over a period of three years.
 
This excerpt taken from the TNB 10-K filed Feb 23, 2007.
Stock Options
 
The Corporation’s option grants qualify for classification as equity and such grants contain no provisions to allow an employee to force cash settlement by the Corporation. The Corporation’s options do not contain future market or performance conditions. The fair value of grants has been estimated on the grant date using a Black-Scholes option-pricing model. The measurement date is the grant date. The Corporation has elected a straight-line amortization method over the requisite service period (vesting period). The Corporation’s current estimate of forfeitures ranges from 0% to 5%. Compensation expense associated with option grants was recorded, similar to other compensation expense, to selling, general and administrative (SG&A) expense and cost of sales.
 
The Corporation has three homogenous groups which are expected to have different option exercise behaviors: executive management, non-executive management and the Board of Directors. Expected lives of share options were derived from historical data. The risk-free rate is based on the U.S. Treasury yield curve for the expected terms. Expected volatility is based on a combination of historical volatility of the Corporation’s common stock and implied volatility from traded options in the Corporation’s common stock.
 
The following are assumptions used in Black-Scholes valuations during 2006.
 
         
    2006  
 
Weighted-average volatility
    30 %
Expected dividends
    %
Expected lives in years
    4.5-6.0  
Risk-free rate
    4.5%-5.0 %
 
This excerpt taken from the TNB 10-Q filed Nov 6, 2006.
Stock Options
 
The Corporation’s option grants qualify for classification as equity and such grants contain no provisions to allow an employee to force cash payment by the Corporation. The Corporation’s options do not contain future market or performance conditions. The fair value of grants has been


8


Table of Contents

THOMAS & BETTS CORPORATION AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS (UNAUDITED) — (Continued)

estimated on the grant date using a Black-Scholes option-pricing model. The initial measurement date is the grant date. The Corporation has elected a straight-line amortization method over the requisite service period (vesting period). The Corporation’s current estimate of forfeitures ranges from 0% to 5%. Compensation expense associated with option grants was recorded to selling, general and administrative (SG&A) expenses and cost of sales.
 
The Corporation has three homogenous groups which are expected to have different option exercise behaviors: executive management, non-executive management and the board of directors. Expected lives of share options were derived from historical data. The risk-free rate is based on the U.S. Treasury yield curve for the expected terms. Expected volatility is based on a combination of historical volatility of the Corporation’s common stock and implied volatility from traded options in the Corporation’s common stock.
 
The following are assumptions used in Black-Scholes valuations during the period ended September 30, 2006.
 
         
    Nine Months
    Ended September 30,
    2006
 
Weighted-average volatility
  30%
Expected dividends
  —%
Expected lives in years
  4.5-6.0
Risk-free rate
  4.5%-5.0%
 
Note: No options were granted during the quarter ended September 30, 2006.
 
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