Costco 2004 Annual Report Download - page 46

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(dollars in thousands, except per share data) (Continued)
Note 5—Stock Options (Continued)
The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing
model with the following weighted average assumptions used for grants in 2004, 2003 and 2002:
2004 2003 2002
Risk free interest rate .................................. 3.38% 3.30% 4.45%
Expected life ......................................... 6years 6 years 5 years
Expected volatility .................................... 44% 46% 46%
Expected dividend yield ................................ 1.04% 0% 0%
Stock option transactions relating to the aggregate of the 1993 and 2002 plans are summarized below
(shares in thousands):
2004 2003 2002
Shares Price(1) Shares Price(1) Shares Price(1)
Outstanding at beginning of fiscal year ...... 48,790 $31.93 42,961 $31.49 39,578 $29.15
Granted(2) ............................. 7,781 37.19 8,480 30.47 7,641 38.10
Exercised .............................. (5,153) 24.23 (2,154) 16.13 (3,571) 18.77
Cancelled .............................. (884) 36.27 (497) 37.14 (687) 37.12
Outstanding at end of fiscal year ............ 50,534 $33.45 48,790 $31.93 42,961 $31.49
(1) Weighted-average exercise price/grant price.
(2) The weighted-average fair value based on the Black-Scholes model of options granted during fiscal 2004,
2003 and 2002, were $16.01, $14.84 and $17.83, respectively.
The following table summarizes information regarding stock options outstanding at August 29, 2004
(number of options in thousands):
Options Outstanding Options Exercisable
Range of Prices Number
Remaining
Contractual
Life(1) Price(1) Number Price(1)
$6.66–$32.87 ............................... 16,851 5.72 $24.18 9,723 $19.45
$33.54–$37.35 .............................. 20,878 7.05 36.10 10,131 35.87
$37.44–$52.50 .............................. 12,805 6.55 41.30 7,659 42.25
50,534 6.48 $33.44 27,513 $31.84
(1) Weighted-average.
At August 31, 2003 and September 1, 2002, there were 25,147 and 19,843 options exercisable at weighted
average exercise prices of $29.02 and $25.40, respectively.
Note 6—Retirement Plans
The Company has a 401(k) Retirement Plan that is available to all U.S. employees who have completed 90
days of employment. For all U.S. employees, with the exception of California union employees, the plan allows
pre-tax deferral against which the Company matches 50% of the first one thousand dollars of employee con-
tributions. In addition, the Company will provide each eligible participant a contribution based on salary and
years of service.
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