Amgen 2000 Annual Report Download - page 37

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At December 31, 2000, 1999 and 1998, employee stock options
to purchase 55.5 million, 61.7 million and 66.1 million shares were
exercisable at weighted-average prices of $15.35, $11.80 and
$9.76, respectively.
Fair Value Disclosures of Employee Stock Options
Employee stock option grants are set at the closing price of the
Company’s common stock on the date of grant and the related
number of shares granted are fixed at that point in time. Therefore,
under the principles of APB 25, the Company does not recognize
compensation expense associated with the grant of employee
stock options. SFAS No. 123, “Accounting for Stock-Based
Compensation,” requires the use of option valuation models to
provide supplemental information regarding options granted after
1994. Pro forma information regarding net income and earnings
per share shown below was determined as if the Company had
accounted for its employee stock options and shares sold under
its employee stock purchase plan under the fair value method of
that statement.
The fair value of the options was estimated at the date of grant
using a Black-Scholes option pricing model with the following
weighted-average assumptions for 2000, 1999 and 1998, respec-
tively: risk-free interest rates of 5.9%, 5.8% and 5.4%; dividend
yields of 0%, 0% and 0%; volatility factors of the expected market
price of the Company’s common stock of 45%, 38% and 34%;
and expected life of the options of 3.4 years, 3.4 years and 3.4
years. These assumptions resulted in weighted-average fair values
of $25.87, $10.55 and $5.11 per share for employee stock options
granted in 2000, 1999 and 1998, respectively.
The Black-Scholes option valuation model was developed for use
in estimating the fair value of traded options. The Company’s
employee stock options have characteristics significantly different
from those of traded options such as vesting restrictions and
extremely limited transferability. In addition, the assumptions used
in option valuation models (see above) are highly subjective, par-
ticularly the expected stock price volatility of the underlying stock.
Because changes in these subjective input assumptions can
materially affect the fair value estimate, in management’s opinion,
existing valuation models do not provide a reliable single measure
of the fair value of its employee stock options.
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Notes to Consolidated Financial Statements
Exercise Price
Shares Low High Weighted-Average
Balance unexercised at December 31, 1997 141.9 $ 0.58 $ 16.97 $ 10.02
Granted 33.5 $ 11.78 $ 26.22 $ 16.53
Exercised (42.4) $ 0.58 $ 20.77 $ 8.14
Forfeited (6.8) $ 4.48 $ 18.52 $ 13.57
Balance unexercised at December 31, 1998 126.2 $ 0.66 $ 26.22 $ 12.18
Granted 19.0 $ 26.25 $ 57.69 $ 31.48
Exercised (26.9) $ 0.66 $ 39.44 $ 9.45
Forfeited (2.5) $ 5.48 $ 44.97 $ 17.76
Balance unexercised at December 31, 1999 115.8 $ 0.92 $ 57.69 $ 15.88
Granted 13.1 $ 51.31 $ 78.00 $ 67.40
Exercised (28.2) $ 0.92 $ 72.75 $ 11.03
Forfeited (2.0) $ 4.48 $ 74.86 $ 26.02
Balance unexercised at December 31, 2000 98.7 $ 2.55 $ 78.00 $ 23.89
Stock option information with respect to all of the Company’s
employee stock option plans follows (shares in millions):