Hess 2008 Annual Report Download - page 76

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The table below summarizes information regarding the outstanding and exercisable stock options as of
December 31, 2008:
Range of
Exercise Prices Options
Weighted-
Average
Remaining
Contractual
Life
Weighted-
Average
Exercise Price
per Share Options
Weighted-
Average
Exercise Price
per Share
Outstanding Options Exercisable Options
(Thousands) (Years) (Thousands)
$10.00 – $40.00 ................. 2,514 5 $25.78 2,512 $25.77
$40.01 – $70.00 ................. 4,749 8 51.65 1,996 50.77
$70.01 – $120.00 ................ 2,437 9 82.62 14 73.06
9,700 7 52.73 4,522 36.95
The intrinsic value (or the amount by which the market price of the Corporation’s Common Stock exceeds the
exercise price of an option) for outstanding options and exercisable options at December 31, 2008 was $80 million
and $76 million, respectively. At December 31, 2008, assuming forfeitures of 2% per year, 9,500,000 outstanding
options are expected to vest at a weighted average exercise price of $52.45 per share. At December 31, 2008 the
weighted average remaining term of exercisable options was 6 years.
The Corporation uses the Black-Scholes model to estimate the fair value of employee stock options. The
following weighted average assumptions were utilized for stock options awarded:
2008 2007 2006
Risk free interest rate ..................................... 2.70% 4.70% 4.50%
Stock price volatility ...................................... .294 .316 .321
Dividend yield .......................................... .50% .75% .80%
Expected term in years .................................... 5 5 5
Weighted average fair value per option granted .................. $24.09 $18.07 $16.50
The assumption above for the risk free interest rate is based on the expected terms of the options and is obtained
from published sources. The stock price volatility is determined from historical experience using the same period as
the expected terms of the options. The expected stock option term is based on historical exercise patterns and the
expected future holding period.
In May 2008, shareholders approved the 2008 Long-Term Incentive Plan. The Corporation also has stock
options outstanding under a former plan. At December 31, 2008, the number of common shares reserved for
issuance under the 2008 Long-Term Incentive Plan is as follows (in thousands):
Total common shares reserved for issuance ..................................... 12,884
Less: stock options outstanding ............................................. 80
Available for future awards of restricted stock and stock options ..................... 12,804
9. Foreign Currency Translation
Foreign currency gains (losses) before income taxes amounted to $(212) million in 2008, $17 million in 2007
and $21 million in 2006. The foreign currency loss in 2008 reflects the effect of significant exchange rate
movements in the fourth quarter of 2008 on the remeasurement of assets, liabilities and foreign currency forward
contracts by certain foreign businesses. The balances in accumulated other comprehensive income (loss) related to
60
HESS CORPORATION AND CONSOLIDATED SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)