Kodak 2008 Annual Report Download - page 98

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In November 2005, the FASB issued Staff Position (“FSP”) No. FAS 123(R)-3, “Transition Election Related to Accounting for Tax
Effects of Share-Based Payment Awards.” During the third quarter of 2007, the Company elected to adopt the alternative transition
method provided in FSP No. FAS 123(R)-3 for calculating the tax effects of stock-based compensation. The alternative transition
method includes simplified methods to determine the beginning balance of the additional paid-in capital (“APIC”) pool related to the
tax effects of stock-based compensation, and to determine the subsequent impact on the APIC pool and the statement of cash flows
of the tax effects of stock-based awards that were fully vested and outstanding upon the adoption of SFAS No. 123R, “Share-Based
Payment.” The adoption of FSP No. FAS 123(R)-3 did not have a material impact on the Company’s cash flows or results of
operations for the years ended December 31, 2008 and 2007, or its financial position as of December 31, 2008 and 2007.
The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model that uses the
assumptions noted in the following table. Expected volatilities are based on historical volatility of the Company's stock,
management's estimate of implied volatility of the Company's stock, and other factors. The expected term of options granted is
derived from the vesting period of the award, as well as historical exercise behavior, and represents the period of time that options
granted are expected to be outstanding. The risk-free rate is calculated using the U.S. Treasury yield curve, and is based on the
expected term of the option. The Company uses historical data to estimate forfeitures.
The Black-Scholes option pricing model was used with the following weighted-average assumptions for options issued in each year:
For the Year Ended
2008 2007
2006
Weighted-average risk-free interest rate 1.83% 3.5%
4.6%
Risk-free interest rates 1.8% - 2.9% 3.2% - 5.0%
4.5% - 5.1%
Weighted-average expected option lives 6 years 5 years
6 years
Expected option lives 4 - 6 years 4 - 7 years
3-7years
Weighted-average volatility 32% 32%
34%
Expected volatilities 30% - 32% 31% - 35%
29% - 36%
Weighted-average expected dividend yield 7.4% 2.0%
1.9%
Expected dividend yields 3.1% - 7.4% 1.9% - 2.1%
1.8% - 2.3%
The weighted-average fair value per option granted in 2008, 2007, and 2006 was $.93, $6.19, and $8.18, respectively.
As of December 31, 2008, there was $8 million of total unrecognized compensation cost related to unvested options. The cost is
expected to be recognized over a weighted-average period of 1.8 years.
The Company has a policy of issuing shares of treasury stock to satisfy share option exercises. Cash received for option exercises
for the years ended December 31, 2008, 2007 and 2006 was $0, $6 million, and $0, respectively. The actual tax benefit realized for
the tax deductions from option exercises was not material for 2008, 2007 or 2006.
NOTE 21: ACQUISITIONS
2008
On April 4, 2008, the Company completed the acquisition of Design2Launch (“D2L”), a developer of collaborative end-to-end digital
workflow solutions for marketers, brand owners and creative teams. D2L is part of the Company’s Graphic Communications Group
segment.
On April 10, 2008, the Company completed the acquisition of Intermate A/S, a global supplier of remote monitoring and print
connectivity solutions used extensively in transactional printing. Intermate A/S is part of the Company’s Graphic Communications
Group segment.
The two acquisitions had an aggregate purchase price of approximately $37 million and were individually immaterial to the
Company’s financial position as of December 31, 2008, and its results of operations and cash flows for the year ended December
31, 2008.
2007
There were no significant acquisitions in 2007.
2006
There were no significant acquisitions in 2006.