Intel 1998 Annual Report Download - page 51

Page 25
The following tables summarize information about options outstanding at December 26, 1998:
These options will expire if not exercised at specific dates ranging from January 1999 to December 2008. Option exercise prices for options
exercised during the three-year period ended December 26, 1998 ranged from $0.78 to $48.97.
Stock Participation Plan. Under this plan, eligible employees may purchase shares of Intel's Common Stock at 85% of fair market value at
specific, predetermined dates. Of the 472 million shares authorized to be issued under the plan, 79.7 million shares remained available for
issuance at December 26, 1998. Employees purchased 6.3 million shares in 1998 (9 million in 1997 and 14 million in 1996) for $229 million
($191 million and $140 million in 1997 and 1996, respectively).
Pro forma information. The Company has elected to follow APB Opinion No. 25, "Accounting for Stock Issued to Employees," in accounting
for its employee stock options because, as discussed below, the alternative fair value accounting provided for under SFAS No. 123,
"Accounting for Stock-Based Compensation," requires the use of option valuation models that were not developed for use in valuing employee
stock options. Under APB No. 25, because the exercise price of the Company's employee stock options equals the market price of the
underlying stock on the date of grant, no compensation expense is recognized in the Company's financial statements.
Pro forma information regarding net income and earnings per share is required by SFAS No. 123. This information is required to be determined
as if the Company had accounted for its employee stock options (including shares issued under the Stock Participation Plan, collectively called
"options") granted subsequent to December 31, 1994 under the fair value method of that statement. The fair value of options granted in 1998,
1997 and 1996 reported below has been estimated at the date of grant using a Black-Scholes option pricing model with the following weighted
average assumptions:
The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options that have no vesting restrictions
and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, including the expected stock
OUTSTANDING OPTIONS
-----------------------------------------------
WEIGHTED
NUMBER OF AVERAGE WEIGHTED
SHARES CONTRACTUAL AVERAGE
(IN LIFE EXERCISE
RANGE OF EXERCISE PRICES MILLIONS) (IN YEARS) PRICE
-----------------------------------------------------------------------------------------------------------
$1.46-$5.55 55.8 2.2 $ 2.83
$5.62-$11.10 70.2 4.9 $ 7.18
$11.42-$34.75 89.2 6.9 $15.16
$34.85-$60.80 97.3 8.8 $37.51
------
TOTAL 312.5 6.2 $18.13
======
EXERCISABLE OPTIONS
--------------------------
NUMBER OF WEIGHTED
SHARES AVERAGE
(IN MILLIONS) EXERCISE
RANGE OF EXERCISE PRICES PRICE
------------------------------------------------------------------------------------------
$1.46-$5.55 55.8 $ 2.83
$5.62-$11.10 37.6 $ 6.16
$11.42-$34.75 7.0 $16.82
$34.85-$60.80 3.4 $37.53
------
TOTAL 103.8 $ 6.11
======
EMPLOYEE STOCK OPTIONS 1998 1997 1996
------------------------------------------------------------------------------------------------------------
Expected life (in years) 6.5 6.5 6.5
Risk-free interest rate 5.3% 6.6% 6.5%
Volatility .36 .36 .36
Dividend yield .2% .1% .2%
STOCK PARTICIPATION PLAN SHARES 1998 1997 1996
------------------------------------------------------------------------------------------------------------
Expected life (in years) .5 .5 .5
Risk-free interest rate 5.2% 5.3% 5.3%
Volatility .42 .40 .36
Dividend yield .2% .1% .2%