Stock compensation plans

We maintain stock option plans for both employees and for non-employee directors. Information related to the active plans as of December 31, 2011 is as follows:



Plan Name	Shares Authorized	Shares Available for Grant
Employee Plans
PulteGroup, Inc. 2004 Stock Incentive Plan	22,000,000	7,935,519
PulteGroup, Inc. 2002 Stock Incentive Plan	12,000,000	64,655

The plans provide for the grant of a variety of equity awards, including options (generally non-qualified options), restricted stock, performance shares, and restricted stock units ("RSUs") to key employees (as determined by the Compensation Committee of the Board of Directors) for periods not exceeding ten years. Options granted to employees generally vest incrementally over four years. Restricted stock generally cliff vests after three years. Performance shares vest upon attainment of the stated performance goals and are converted into shares of common stock at distribution. RSUs represent the right to receive an equal number of shares of common stock and are converted into shares of common stock upon distribution.

Non-employee directors are entitled to an annual distribution of stock options, common stock, or restricted stock units. All options and RSUs granted to non-employee directors vest immediately and are exercisable on the grant date for ten years.

A summary of stock option activity for the three years ended December 31, 2011 is presented below (000’s omitted except per share data):



	2011					2010					2009
	Shares			Weighted- Average Per Share Exercise Price		Shares			Weighted- Average Per Share Exercise Price		Shares			Weighted- Average Per Share Exercise Price
Outstanding, beginning of year	24,004			$	21	26,193			$	21	20,059			$	19
Granted (a)	441			$	8	1,128			$	11	8,235			$	27
Exercised	—			$	—	(902		)	$	10	(756		)	$	6
Forfeited	(2,804		)	$	15	(2,415		)	$	21	(1,345		)	$	45
Outstanding, end of year	21,641			$	21	24,004			$	21	26,193			$	21
Options exercisable at year end	18,845			$	23	19,400			$	23	20,336			$	23
Weighted-average per share fair value of options granted during the year	$	4.46				$	6.43				$	2.19


(a)	2009 includes 5.3 million options issued in conjunction with the Centex merger.

The following table summarizes information about the weighted-average remaining contractual lives of stock options outstanding and exercisable at December 31, 2011:



	Options Outstanding				Options Exercisable
	Number Outstanding (000's omitted)	Weighted- Average Remaining Contract Life (in years)	Weighted- Average Per Share Exercise Price		Number Exercisable (000's omitted)	Weighted- Average Per Share Exercise Price
$0.01 to $11.00	2,683	6.5	$	10	2,242	$	11
$11.01 to $18.00	8,314	4.9	$	12	5,959	$	12
$18.01 to $25.00	3,830	1.9	$	22	3,830	$	22
$25.01 to $35.00	3,949	3.9	$	31	3,949	$	31
$35.01 to $60.00	2,865	3.1	$	44	2,865	$	44
	21,641	4.1	$	21	18,845	$	23

The fair value of each option grant is estimated on the date of grant using primarily the Black-Scholes option pricing model with the following weighted-average assumptions:



	Weighted-Average Assumptions Year Ended December 31,
	2011		2010		2009
Expected life of options in years	6.2		6.0		3.1
Expected stock price volatility	58	%	58	%	60	%
Expected dividend yield	0.0	%	0.0	%	0.0	%
Risk-free interest rate	2.7	%	2.7	%	1.2	%

We estimate the expected life of stock options using employees’ historical exercise behavior and the contractual terms of the instruments. Volatility is estimated using historical volatility with consideration for implied volatility.

In connection with stock option awards, we recognized compensation expense of $5.2 million, $15.0 million, and $22.1 million for the years ended December 31, 2011, 2010, and 2009, respectively. Total compensation cost related to non-vested stock option awards not yet recognized was $3.2 million at December 31, 2011. These costs will be expensed over a weighted-average vesting period of approximately two years. The stock option participant agreements provide continued vesting for certain eligible employees who have achieved a predetermined level of service based on their combined age and years of service. We record the related compensation cost for these awards over the period through the date the employee first achieves the minimum level of service that would no longer require them to provide services to earn the award, which is reflected in the weighted-average vesting period.

No stock options were exercised during 2011. The aggregate intrinsic value of stock options that were exercised during 2010 and 2009 was $1.8 million and $3.3 million, respectively. The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option. As of December 31, 2011, there were no outstanding options with intrinsic value.

A summary of restricted stock activity for the three years ended December 31, 2011 is presented below (000’s omitted, except per share data):



	2011				2010				2009
	Shares		Weighted- Average Per Share Grant Date Fair Value		Shares		Weighted- Average Per Share Grant Date Fair Value		Shares		Weighted- Average Per Share Grant Date Fair Value
Non-vested at beginning of year	2,775		$	12	3,539		$	16	3,932		$	23
Granted	1,032		$	8	1,552		$	11	2,182		$	12
Vested	(1,242	)	$	13	(1,541	)	$	21	(1,957	)	$	25
Forfeited	(243	)	$	11	(775	)	$	12	(618	)	$	14
Non-vested at end of year	2,322		$	10	2,775		$	12	3,539		$	16

During 2011, 2010, and 2009, the total fair value of shares vested during the year was $15.9 million, $32.2 million, and $48.1 million, respectively. In connection with the restricted stock awards, we recorded compensation expense of $11.2 million, $17.1 million, and $24.2 million during 2011, 2010, and 2009, respectively. Total compensation cost related to restricted stock awards not yet recognized was $10.0 million at December 31, 2011. These costs will be expensed over a weighted-average period of approximately two years.

A summary of share unit (performance shares and RSUs) activity for the three years ended December 31, 2011 is presented below (000’s omitted, except per share data):



	2011				2010				2009
	Shares		Weighted- Average Grant Date Fair Value		Shares		Weighted- Average Grant Date Fair Value		Shares		Weighted- Average Grant Date Fair Value
Outstanding, beginning of year	140		$	12	123		$	12	—		$	—
Granted	772		$	7	133		$	12	632		$	12
Forfeited	—		$	—	—		$	—	(269	)	$	12
Distributed	(192	)	$	9	(116	)	$	12	(240	)	$	12
Outstanding, end of year	720		$	7	140		$	12	123		$	12
Vested, end of year	120		$	11	140		$	12	123		$	12

During 2011, we granted performance shares to certain individuals but did not recognize any expense as the applicable performance goals were not considered probable of achievement. The fair value of each performance share and RSU was calculated using the closing stock price on the date of grant. At December 31, 2011, there were 119,799 RSUs outstanding that had vested but had not yet been paid out because the payout date had been deferred by the holder.