Dominion Power 2000 Annual Report Download - page 59

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swap facility. These shares were repurchased at a cost of approxi-
mately $145 million. For additional information on the total return
swap, see Note 24.
Immediately before the CNG acquisition, Dominion concluded a
first step transaction in which 33 million shares of Dominion com-
mon stock were exchanged for approximately $1.4 billion.
Basic earnings per common share are calculated by dividing net
income by the average number of common shares outstanding dur-
ing the year. Diluted earnings per share are computed similar to
basic earnings per share except that the weighted average shares
outstanding are increased to include additional shares from the
assumed exercise of stock options, if dilutive. The number of
additional shares is calculated by assuming that outstanding stock
options were exercised and that the proceeds from such exercises
were used to acquire shares of common stock at the average mar-
ket price during the reporting period. In 1999, diluted earnings per
share includes an adjustment to reflect the cost incurred under a
total return equity swap associated with Dominion’s repurchase of
common stock. A reconciliation of income before extraordinary item
and cumulative effect of a change in accounting principle and basic
to diluted share amounts follows:
2000 EPS 1999 EPS 1998 EPS
Numerator:
Income before extraordinary item and cumulative effect
of a change in accounting principle — basic $415 $552 $548
Income effect of total return equity swap, net of taxes (12)
Income before extraordinary item and cumulative effect
of a change in accounting principle — dilutive $415 $540 $548
Denominator:
Weighted average shares — basic 235.2 $1.76 191.4 $2.88 194.9 $2.81
Effect of dilutive securities — stock options .7 (0.07)
Weighted average shares — dilutive 235.9 $1.76 191.4 $2.81 194.9 $2.81
Under SFAS No. 123, Accounting for Stock Based Compensation,
compensation cost is measured at the grant date based on the fair
value of the award and is recognized over the service (or vesting)
period. However, as permitted under SFAS No. 123, the Company
instead measures compensation cost in accordance with
Accounting Principles Board Opinion No. 25, Accounting for Stock
Issued to Employees, and related interpretations. Under this stan-
dard, compensation cost is measured as the difference between
Restricted Weighted Stock Weighted Options
Shares Average Price Options Average Price Exercisable
Balance at December 31, 1997 105,264 $38.88 4,826 $29.38 4,826
Awards granted — 1998 75,866 $39.78
Exercised/distributed/forfeited (83,162) $38.37 (2,700) $29.29
Balance at December 31, 1998 97,968 $40.02 2,126 $29.49 2,126
Awards granted — 1999 24,758 $43.51 7,146,383 $41.38
Exercised/distributed/forfeited (94,113) $40.71 (1,113) $29.37
Balance at December 31, 1999 28,613 $42.29 7,147,396 $41.37 7,147,396
Awards granted — 2000 169,886 $41.88 5,388,822 $43.87
Exercised/distributed/forfeited (108,077) $42.25 (2,204,765) $40.07
Balance at December 31, 2000 90,422 $41.56 10,331,453 $41.77 6,966,695
Note 20 Stock Compensation Plans
The Dominion Resources Incentive Compensation Plan (Incentive
Plan) provides for the granting of stock options, restricted stock and
performance shares to employees of Dominion and its affiliates.
The aggregate number of shares of common stock that may be
issued under the Incentive Plan is 30 million. The Dominion
Resources Leadership Stock Option Plan (Leadership Stock Option
Plan), adopted by the Board of Directors in 2000, provides for the
granting of non-statutory stock options to salaried employees of
Dominion. The aggregate number of common shares that may be
issued under the Leadership Stock Option Plan is 10 million.
The changes in restricted share incentives and option awards under
the combined plans were as follows:
the market price of the Company’s common stock and the exercise
price of the option at the grant date. Accordingly, no compensation
expense has been recognized for the stock option grants.
Had compensation cost associated with the stock options been
determined under SFAS No. 123 based on the fair market value of
the options at the grant date, such cost, net of related income
taxes, would have been approximately $6 million for the year ended
December 31, 2000. Basic and diluted earnings per share for the