Kodak 2002 Annual Report Download - page 72

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Financials
72
As allowed by SFAS No. 123, “Accounting for Stock-Based
Compensation,” the Company has elected to continue to follow
APB Opinion No. 25, “Accounting for Stock Issued to Employees,”
in accounting for its stock option plans. Under APB No. 25, the
Company does not recognize compensation expense upon the
issuance of its stock options because the option terms are fixed
and the exercise price equals the market price of the underlying
stock on the grant date. The Company has determined the pro
forma information as if the Company had accounted for stock
options granted under the fair value method of SFAS No. 123. The
Black-Scholes option pricing model was used with the following
weighted-average assumptions for options issued in each year:
Exchange 2000
Program Plan
2002 2002
Risk-free interest rates 2.9% 3.8%
Expected option lives 4 years 7 years
Expected volatilities 37% 34%
Expected dividend yields 5.76% 5.76%
2001 2001
Risk-free interest rates N/A 4.2%
Expected option lives N/A 6 years
Expected volatilities N/A 34%
Expected dividend yields N/A 4.43%
2000 2000
Risk-free interest rates N/A 6.2%
Expected option lives N/A 7 years
Expected volatilities N/A 29%
Expected dividend yields N/A 3.19%
The weighted-average fair value of options granted in 2002
was $5.99 for the exchange program and $8.22 for the 2000
Plan. The exchange program generally had no effect on the
vesting term or life of the old options exchanged as these
provisions were carried forward with the new options. However,
the vesting term and option life were recast to the original period
amounts for approximately 0.6 million of the 16.0 million new
options granted through the exchange program. The weighted-
average assumptions related to the 2000 Plan were applied to
the 0.6 million of recast exchange options because its underlying
characteristics were similar to new options granted under the
2000 Plan. The weighted-average fair value of options granted
was $8.37 and $16.79 for 2001 and 2000, respectively.
For purposes of pro forma disclosures, the estimated fair
value of the options is amortized to expense over the options’
vesting period (1– 3 years). See Note 1 under “Stock-Based
Compensation” for the disclosure of the Company’s pro forma
information.
The following table summarizes information about stock options at December 31, 2002:
(Number of options in thousands) Options Outstanding Options Exercisable
Range of Exercise Prices Weighted-Average Weighted-Average
At Less Remaining Weighted-Average Exercise
Least Than Options Contractual Life Exercise Price Options Price
$25 — $40 20,097 7.54 $ 32.37 11,029 $ 31.38
$40 — $55 6,510 2.95 $ 46.99 5,921 $ 47.14
$55 — $70 8,655 5.13 $ 62.71 8,030 $ 62.92
$70 — $85 4,712 4.05 $ 73.30 4,530 $ 73.32
Over $85 2,303 4.16 $ 90.02 2,303 $ 90.02
42,277 31,813