Ford 2005 Annual Report Download - page 84

Download and view the complete annual report

Please find page 84 of the 2005 Ford annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 108

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108

Notes to the Financial Statements
NOTE 18. CAPITAL STOCK AND AMOUNTS PER SHARE (Continued)
Amounts Per Share of Common and Class B Stock
The calculation of diluted income per share of Common Stock and Class B Stock takes into account the effect of obligations,
such as stock options and convertible securities, considered to be potentially dilutive. Basic and diluted income/(loss) per share
were calculated using the following number of shares (in millions):
2005 2004 2003
Basic and Diluted Income/(Loss)
Basic income/(loss) from continuing operations attributable to Common Stock and Class B Stock...................................... $ 2,228 $ 3,633 $ 902
Effect of dilutive convertible preferred securities .................................................................................................................... 213 199 —
Diluted income/(loss) from continuing operations attributable to Common Stock and Class B Stock ................................ $ 2,441 $ 3,832 $ 902
Diluted Shares
Average shares outstanding ...................................................................................................................................................... 1,846 1,830 1,832
Restricted and uncommitted-ESOP shares ............................................................................................................................... (3) (4) (2)
Basic shares............................................................................................................................................................................. 1,843 1,826 1,830
Net dilutive options and restricted and uncommitted ESOP shares......................................................................................... 10 18 13
Dilutive convertible preferred securities *................................................................................................................................ 282 282 —
Diluted shares.......................................................................................................................................................................... 2,135 2,126 1,843
__________
* In 2003, not included in calculation of diluted earnings per share due to their antidilutive effect are 282 million shares and the related income effect for
convertible preferred securities.
NOTE 19. SHARE-BASED COMPENSATION
We have been recording employee compensation expense in net income since January 1, 2003 under the provisions of SFAS
123, Accounting for Stock-Based Compensation. Effective December 31, 2005, we adopted the provisions of SFAS 123R, Share-
Based Payment under the modified prospective method. This statement will be applied to new awards in 2006 and to any awards
that are modified, repurchased, or cancelled after the date of adoption.
We continue to measure the fair value of our stock-based compensation using the Black-Scholes option-pricing model, using
historical volatility and the simplified method of calculating the expected term. Our expected term is calculated by averaging the
vesting term (3 years) and the contractual term of the option (10 years). Historical data is also used to estimate option exercise
behaviors and employee termination experience within the valuation model. Based on our assessment of employee groupings and
observable behaviors, we determined that a single grouping is appropriate. We expense compensation cost for stock options using
a three year cliff vesting methodology. Shares needed for stock based compensation are issued from treasury stock. We expect to
repurchase 26 million shares for treasury stock during 2006.
At December 31, 2005, Ford has outstanding a variety of stock-based compensation to employees (including Officers and
members of the Board of Directors). All stock-based compensation plans are approved by the shareholders.
Description of Stock Option Plans
We have stock options outstanding under two Long-term Incentive Plans ("LTIP"), the 1990 LTIP and the 1998 LTIP. No
further grants may be made under the 1990 LTIP and all outstanding options under this plan are exercisable. All outstanding
options under the 1990 LTIP continue to be governed by the terms and conditions of the existing option agreements for those
grants. Grants may continue to be made under the 1998 LTIP through April 2008. Under the 1998 LTIP, 33% of the options are
generally exercisable after the first anniversary of the date of grant, 66% after the second anniversary, and 100% after the third
anniversary. Stock options expire ten years from the grant date.
Under the 1998 LTIP, 2% of our issued Common Stock as of December 31 becomes available for granting plan awards in the
succeeding calendar year. Any unused portion is available for later years. The limit may be increased up to 3%
in any year, with a corresponding reduction in shares available for grants in future years. At December 31, 2005, the number of
unused shares carried forward aggregated to 79.6 million shares.
Ford Motor Company Annual Report 2005 82 Ford Motor Company Annual Report 2005 83