v2.4.0.6
Share-based Compensation
 12 Months Ended
Dec. 31, 2011
Share-based Compensation

Share-based Compensation

 

The Company maintains a share-based compensation plan which authorizes the granting of various equity-based incentives including stock options and restricted stock units (RSUs) to employees and nonemployee directors. The number of shares of common stock reserved for issuance under the plans was 61.4 million at December 31, 2011, including 27.6 million available for future grants.

STOCK OPTIONS

Stock options to purchase common stock are granted with an exercise price equal to the closing market price of the Company’s stock on the date of grant. Substantially all of the options become exercisable in four equal installments, beginning a year from the date of the grant, and generally expire 10 years from the grant date. Options granted between May 1, 1999 and December 31, 2000 (approximately 3.5 million options outstanding at December 31, 2011) expire 13 years from the date of grant.

Intrinsic value for stock options is defined as the difference between the current market value of the Company’s stock and the exercise price. During 2011, 2010 and 2009, the total intrinsic value of stock options exercised was $416.5 million, $500.8 million and $302.5 million, respectively. Cash received from stock options exercised during 2011 was $334.0 million and the actual tax benefit realized for tax deductions from stock options exercised totaled $110.6 million. The Company uses treasury shares purchased under the Company’s share repurchase program to satisfy share-based exercises.

A summary of the status of the Company’s stock option grants as of December 31, 2011, 2010 and 2009, and changes during the years then ended, is presented in the following table:

 

 

 

     2011           2010           2009  
Options    Shares in
millions		     Weighted-
average
exercise
price		      Weighted-
average
remaining
contractual
life in years		      Aggregate
intrinsic
value in
millions		            Shares in
millions		     Weighted-
average
exercise
price		            Shares in
millions		     Weighted-
average
exercise
price		  

Outstanding at beginning of year

      37.4      $ 42.47                  47.8      $ 38.16            53.4      $ 34.88   

Granted

      3.9        75.97                  4.5        63.26            5.6        56.94   

Exercised

      (9.0 )      37.46                  (13.6 )      33.84            (10.7 )      31.17   

Forfeited/expired

      (0.6 )      55.00                                (1.3 )      46.03              (0.5 )      47.22   

Outstanding at end of year

      31.7      $ 47.77         5.1       $ 1,667.6              37.4      $ 42.47              47.8      $ 38.16   

Exercisable at end of year

      21.9      $ 39.53         3.7       $ 1,328.8              26.4                      35.4           

RSUs

RSUs generally vest 100% on the third anniversary of the grant and are payable in either shares of McDonald’s common stock or cash, at the Company’s discretion. Certain executives have been awarded RSUs that vest based on Company performance. The fair value of each RSU granted is equal to the market price of the Company’s stock at date of grant less the present value of expected dividends over the vesting period.

A summary of the Company’s RSU activity during the years ended December 31, 2011, 2010 and 2009 is presented in the following table:

 

 

 

     2011           2010           2009  
RSUs    Shares in
millions		     Weighted-
average
grant date
fair value		            Shares in
millions		     Weighted-
average
grant date
fair value		            Shares in
millions		     Weighted-
average
grant date
fair value		  

Nonvested at beginning of year

      2.3      $ 51.17            2.8      $ 46.33            3.0      $ 40.88   

Granted

      0.6        67.96            0.7        56.09            0.9        50.34   

Vested

      (0.7 )      49.88            (1.1 )      42.08            (1.0 )      34.56   

Forfeited

      (0.1 )      50.16              (0.1 )      49.61              (0.1 )      43.87   

Nonvested at end of year

      2.1      $ 56.78              2.3      $ 51.17              2.8      $ 46.33   

The Company realized tax deductions of $6.1 million from RSUs vested during 2011. The total fair value of RSUs vested during 2011, 2010 and 2009 was $55.5 million, $66.8 million and $59.9 million, respectively.