Kodak 2009 Annual Report Download - page 107

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At December 31, 2009, the weighted-average remaining contractual term of all options outstanding and exercisable was 2.62 years
and 2.05 years respectively. There was no intrinsic value of options outstanding and exercisable due to the fact that the market price
of the Company's common stock as of December 31, 2009 was below the weighted-average exercise price of options. The total
intrinsic value of options exercised during the year ended December 31, 2007 was $1 million. There were no option exercises during
2008 or 2009.
In November 2005, the FASB issued authoritative guidance related to the 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 this guidance for
calculating the tax effects of stock-based compensation. The alternative transition method included 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. The adoption of this guidance did not have a material impact on the Company’s cash flows or
results of operations for the years ended December 31, 2009, 2008 and 2007, or its financial position as of December 31, 2009 and
2008.
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
2009 2008 2007
Weighted-average risk-free interest rate 2.63% 1.83% 3.5%
Risk-free interest rates 1.9% - 2.7% 1.8% - 2.9% 3.2% - 5.0%
Weighted-average expected option lives 6 years 6 years 5 years
Expected option lives 6 years 4 - 6 years 4 - 7 years
Weighted-average volatility 45% 32% 32%
Expected volatilities 45% 30% - 32% 31% - 35%
Weighted-average expected dividend yield 0.4% 7.4% 2.0%
Expected dividend yields 0.0% - 7.1% 3.1% - 7.4% 1.9% - 2.1%
The weighted-average fair value per option granted in 2009, 2008, and 2007 was $2.06, $0.93, and $6.19, respectively.
As of December 31, 2009, there was $5 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 year ended December 31, 2007 was $6 million. The actual tax benefit realized for the tax deductions from option exercises
was not material for 2007. There were no option exercises during 2008 or 2009.
NOTE 21: ACQUISITIONS
2009
In the third quarter of 2009, the Company acquired the scanner division of BÖWE BELL + HOWELL, which markets a portfolio of
production document scanners that complements the products currently offered within the GCG segment. Through this acquisition,
Kodak expects to expand customer value by providing a wider choice of production scanners. Since Kodak has provided field
service to BÖWE BELL + HOWELL scanners since 2001, this acquisition is also expected to enhance global access to service and
support for channel partners and end-user customers worldwide. This acquisition was immaterial to the Company’s financial position
as of December 31, 2009, and its results of operations and cash flows for the year ended December 31, 2009.
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 GCG 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 GCG segment.