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1.0.0.3 false Stock-Based Compensation false 1 $ false false iso4217_USD Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 iso4217_USD_per_shares Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares 0 5 Stock-Based Compensation 3 us-gaap_DisclosureOfShareBasedCompensationArrangementsByShareBasedPaymentAwardTextBlock us-gaap true na duration string No definition available. false false false false false false false false false 1 false false 0 0 <div> Note 12 – Stock-Based Compensation During 2009, 2008, and 2007, we recorded non-cash compensation cost related to stock options and restricted stock totaling $154 million, $155 million, and $149 million, which is included on our Statement of Earnings in cost of sales. The net impact to earnings for the respective years was $99 million ($0.26 per share), $100 million ($0.24 per share), and $96 million ($0.22 per share).   Stock-Based Compensation Plans We had two stock-based compensation plans in place at December 31, 2009: the Lockheed Martin Amended and Restated 2003 Incentive Performance Award Plan (the Award Plan) and the Lockheed Martin Directors Equity Plan (the Directors Plan). Under the Award Plan, we have the right to grant key employees stock-based incentive awards, including options to purchase common stock, stock appreciation rights, restricted stock, or stock units. Employees also may receive cash-based incentive awards. We evaluate the types and mix of stock-based incentive awards on an ongoing basis and may vary the mix based on our overall strategy regarding compensation. Under the Award Plan, the exercise price of options to purchase common stock may not be less than 100% of the market value of our stock on the date of grant. No award of stock options may become fully vested prior to the second anniversary of the grant, and no portion of a stock option grant may become vested in less than one year (except for 1.5 million stock options that are specifically exempted from vesting restrictions). The minimum vesting period for restricted stock or stock units payable in stock is three years. Award agreements may provide for shorter vesting periods or vesting following termination of employment in the case of death, disability, divestiture, retirement, change of control, or layoff. The Award Plan does not impose any minimum vesting periods on other types of awards. The maximum term of a stock option or any other award is 10 years. We generally recognize compensation cost for stock options ratably over the three-year vesting period for active, non-retirement eligible employees. For active, retirement-eligible employees (i.e., those who have attained age 55 with five years of service), we generally recognize expense over the initial one-year vesting period. When an option holder becomes retirement eligible, we accelerate the recognition of any expense not previously recognized for options held for at least one year. We use the Black-Scholes option pricing model to estimate the fair value of stock options. We record restricted stock awards (RSAs) and restricted stock units (RSUs) issued under the Award Plan based on the market value of our common stock on the date of the award. We recognize the related compensation expense over the vesting period. Employees who are granted RSAs receive the restricted shares and the related cash dividends. They may vote their shares, but may not sell or transfer shares prior to vesting. The RSAs generally vest over three to five years from the grant date. Employees who are granted RSUs also receive dividend-equivalent cash payments; however, the shares are not issued and the employees have no voting rights until the RSUs vest, generally three years from the date of the award. Otherwise, the accounting treatment for RSUs is similar to the accounting for RSAs. Under the Directors Plan, directors receive approximately 50% of their annual compensation in the form of equity-based compensation. Each director may elect to receive his or her equity-based compensation in the form of stock units that track investment returns to changes in value of our common stock with dividends reinvested, options to purchase common stock, or a combination of the two. Under the Directors Plan, options to purchase common stock have an exercise price of 100% of the market value of the underlying stock on the date of grant. Stock options and stock units issued under the Directors Plan vest 50% on June 30 following the date of grant and 50% on December 31 following the date of grant, except in certain circumstances. The maximum term of a stock option is 10 years. Our stockholders have approved the Award Plan and the Directors Plan, as well as the number of shares of our common stock authorized for issuance under these plans. At December 31, 2009, inclusive of the shares reserved for outstanding stock options and RSUs, we had 37 million shares reserved for issuance under our stock option and award plans. At December 31, 2009, 12 million of the shares reserved for issuance remained available for grant under the plans. We issue new shares upon the exercise of stock options or when restrictions on RSUs have been satisfied.   2009 Activity Stock Options The following table summarizes stock option activity during 2009:   <table border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr> <td width="57%"></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> <td valign="bottom" width="7%"></td> <td></td> <td valign="bottom" width="7%"></td> <td></td> <td></td> </tr> <tr> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center"> Number of Stock Options (In thousands) </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"> Weighted Average Exercise Price </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center"> Weighted Average Remaining Contractual Life (In years) </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"> Aggregate Intrinsic Value (In millions) </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Outstanding at December 31, 2008 </td> <td valign="bottom">  </td> <td valign="bottom" align="right">19,149</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">70.44</td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td valign="top"> Granted </td> <td valign="bottom">  </td> <td valign="bottom" align="right">4,494</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">82.46</td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Exercised </td> <td valign="bottom">  </td> <td valign="bottom" align="right">(987</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">40.71</td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr> <td style="BORDER-BOTTOM: #000000 1px solid" valign="top"> Terminated </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="right">(106</td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">91.44</td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom">  </td> <td valign="bottom"></td> <td valign="bottom"></td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Outstanding at December 31, 2009 </td> <td valign="bottom">  </td> <td valign="bottom" align="right">22,550</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">74.04</td> <td valign="bottom">  </td> <td valign="bottom" align="right">6.2</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">238.9</td> </tr> <tr> <td valign="top"> Vested and unvested-expected-to-vest at December 31, 2009 </td> <td valign="bottom">  </td> <td valign="bottom" align="right">22,431</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">73.97</td> <td valign="bottom">  </td> <td valign="bottom" align="right">6.2</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">238.9</td> </tr> <tr bgcolor="#CCEEFF"> <td style="BORDER-BOTTOM: #000000 2px solid" valign="top"> Exercisable at December 31, 2009 </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" align="right">14,672</td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" nowrap="nowrap">  </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" align="right">64.60</td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" align="right">4.9</td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" align="right">238.8</td> </tr> </table> Stock options vest over three years and have 10-year terms. Exercise prices of stock options awarded for all periods were equal to the market price of the stock on the date of grant. The following table pertains to stock options that were granted, vested, and exercised in 2009, 2008, and 2007:   <table border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr> <td width="74%"></td> <td valign="bottom" width="4%"></td> <td></td> <td></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> </tr> <tr> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">     (In millions, except for grant-date fair value of stock options)</td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">2009</td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">2008</td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center">2007</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Weighted average grant-date fair value of stock options granted </td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">14.91</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">19.31</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">23.99</td> </tr> <tr> <td valign="top"> Aggregate fair value of all the stock options that vested </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">72</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">78</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">86</td> </tr> <tr bgcolor="#CCEEFF"> <td style="BORDER-BOTTOM: #000000 2px solid" valign="top"> Aggregate intrinsic value of all of the stock options exercised </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" align="right">37</td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" align="right">263</td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" align="right">361</td> </tr> </table> We estimate the fair value for stock options at the date of grant using the Black-Scholes option pricing model, which requires us to make certain assumptions. We estimate volatility based on the historical volatility of our daily stock price over the past five years, which is commensurate with the expected life of the options. We base the average expected life on the contractual term of the stock option, historical trends in employee exercise activity, and post-vesting employment termination trends. We base the risk-free interest rate on U.S. Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant. We estimate forfeitures at the date of grant based on historical experience. The impact of forfeitures is not material. We used the following weighted average assumptions in the Black-Scholes option pricing model to determine the fair values of stock-based compensation awards during 2009, 2008, and 2007:   <table border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr> <td width="73%"></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> <td valign="bottom" width="5%"></td> <td></td> <td></td> </tr> <tr> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center">2009</td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center">2008</td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center">2007</td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">  </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Risk-free interest rate </td> <td valign="bottom">  </td> <td valign="bottom" align="right">1.69</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2.83</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom" align="right">4.83</td> <td valign="bottom" nowrap="nowrap">% </td> </tr> <tr> <td valign="top"> Dividend yield </td> <td valign="bottom">  </td> <td valign="bottom" align="right">2.30</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1.70</td> <td valign="bottom" nowrap="nowrap">% </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1.70</td> <td valign="bottom" nowrap="nowrap">% </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Volatility factors </td> <td valign="bottom">  </td> <td valign="bottom" align="right">0.244</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0.195</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">0.234</td> <td valign="bottom" nowrap="nowrap">  </td> </tr> <tr> <td style="BORDER-BOTTOM: #000000 2px solid" valign="top"> Expected option life </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" align="right">5 years</td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" nowrap="nowrap">  </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" align="right">5 years</td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" nowrap="nowrap">  </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" align="right">5 years</td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" nowrap="nowrap">  </td> </tr> </table> RSU and RSA Activity The following table summarizes activity related to nonvested RSUs and RSAs during 2009:   <table border="0" cellspacing="0" cellpadding="0" width="100%" align="center"> <tr> <td width="70%"></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> <td valign="bottom" width="11%"></td> <td></td> <td></td> </tr> <tr> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="center"> Number of RSUs / RSAs (In thousands) </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" colspan="2" align="center"> Weighted Average Grant-Date Fair Value Per Share </td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Nonvested at December 31, 2008 </td> <td valign="bottom">  </td> <td valign="bottom" align="right">2,464</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom">$</td> <td valign="bottom" align="right">90.13</td> </tr> <tr> <td valign="top"> Granted </td> <td valign="bottom">  </td> <td valign="bottom" align="right">1,608</td> <td valign="bottom" nowrap="nowrap">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">82.49</td> </tr> <tr bgcolor="#CCEEFF"> <td valign="top"> Vested </td> <td valign="bottom">  </td> <td valign="bottom" align="right">(1,004</td> <td valign="bottom" nowrap="nowrap">) </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom" align="right">74.68</td> </tr> <tr> <td style="BORDER-BOTTOM: #000000 1px solid" valign="top"> Terminated </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="right">(99</td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" nowrap="nowrap">) </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 1px solid" valign="bottom" align="right">95.46</td> </tr> <tr bgcolor="#CCEEFF"> <td style="BORDER-BOTTOM: #000000 2px solid" valign="top"> Nonvested at December 31, 2009 </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom">   </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" align="right">2,969</td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" nowrap="nowrap">  </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom">  </td> <td style="BORDER-BOTTOM: #000000 2px solid" valign="bottom" align="right">91.06</td> </tr> </table>   Summary of 2009 Activity As of December 31, 2009, we had $159 million of unrecognized compensation cost related to nonvested stock options, RSUs, and RSAs. We expect that cost to be recognized over a weighted average period of 1.6 years. We received cash from the exercise of stock options totaling $40 million, $248 million, and $350 million during 2009, 2008, and 2007. In addition, we realized tax benefits of $56 million, $111 million, and $133 million from stock-based compensation activities during 2009, 2008, and 2007. We classified $21 million, $92 million, and $124 million of those benefits as a financing cash inflow with a corresponding operating cash outflow in the Statement of Cash Flows. The remainder is classified as cash from operations. </div> Note 12 – Stock-Based Compensation During 2009, 2008, and 2007, we recorded non-cash compensation cost related to stock options and restricted stock false false No definition available. No authoritative reference available. false false 1 1 false UnKnown UnKnown UnKnown false true