Dominion Power 2001 Annual Report Download - page 75

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under the plans and 15 million of those are available for new
grants as of December 31, 2001.
Dominion recognized compensation expense of $13 mil-
lion, $8 million, and $2 million in 2001, 2000, and 1999,
respectively, for the issuance of stock-based awards, primarily
restricted stock. If compensation cost associated with the stock-
based awards had been measured based on the fair market value
of the options at the date of grant, 2001 net income, basic EPS,
and diluted EPS would have been $520 million, $2.08 and
$2.06, respectively; 2000 net income, basic EPS, and diluted
EPS would have been $430 million, $1.82 and $1.82, respec-
tively; and 1999 net income, basic EPS, and diluted EPS would
have been $277 million, $1.45 and $1.38.
The adjacent table provides a summary of changes in
amounts of Dominion stock options outstanding as of and for
the years ended December 31, 2001, 2000, and 1999. In con-
nection with the acquisition of Louis Dreyfus, employee stock
options of Louis Dreyfus were converted into employee stock
options of Dominion. Based on the conversion formula, certain
converted stock options had exercise prices that either exceeded
or were less than the market price of Dominion common stock
on the date of grant. The fair value of all converted stock options
were included in the purchase price of Louis Dreyfus, see
Note 5. Generally, the exercise price of Dominion employee
stock options equals the market price of Dominion common
stock on the date of grant.
Weighted-
average Weighted-
Stock Exercise average
Options Price Fair Value
(thousands)
Outstanding at December 31, 1998 2 $29.49
Granted—1999 7,146 $41.38 $4.35(2)
Exercised, cancelled and forfeited (1) $29.37
Outstanding at December 31, 1999 7,147 $41.37
Exercisable at December 31, 1999 7,147 $41.37
Granted—2000 5,389 $43.87 $6.86(2)
Exercised, cancelled and forfeited (2,205) $40.07
Outstanding at December 31, 2000 10,331 $41.77
Exercisable at December 31, 2000 6,967 $41.51
Granted—2001 480(1) $33.21(1) $23.69(1)
11,471(2) $61.20(2) $11.24(2)
194(3) $62.27(3) $9.43
(3)
Exercised, cancelled and forfeited (1,484) $41.23
Outstanding at December 31, 2001 20,992 $52.90
Exercisable at December 31, 2001 7,955 $42.68
(1), (2), (3) The exercise price for these stock options (1) was less than, (2) equaled, or
(3) exceeded the market price on the date of grant.
The following table provides certain information about stock options outstanding as of December 31, 2001:
Options Outstanding Options Exercisable
Weighted-average
Shares Remaining Weighted-average Shares Weighted-average
Exercise Price Outstanding Contractual Life Exercise Price Exercisable Exercise Price
(thousands) (thousands)
$ 0-$19.99 13 7.0 $19.15 13 $19.15
$20-$30.99 186 5.8 $25.76 186 $25.76
$31-$40.99 266 7.5 $38.42 165 $38.16
$41-$50.99 8,537 7.5 $42.40 7,070 $41.87
$51-$60.99 9,546 7.1 $59.91 216 $58.83
$61-$69 2,444 9.3 $66.00 305 $63.90
Tot al 20,992 7.5 $52.90 7,955 $42.68
The fair value of the options was estimated on the dates of
grant using the Black-Scholes option pricing model with the fol-
lowing weighed-average assumptions for 2001, 2000, and 1999,
respectively: expected dividend yield of 4.22 percent, 5.22 per-
cent, 6.25 percent; expected volatility of 22.19 percent, 21.54
percent, 15.14 percent; contractual life of 10 years (all periods);
risk free interest rate of 5.15 percent, 5.18 percent, 6.52 percent;
and expected lives of six years (all periods).
In the fourth quarter of 2001, Dominion modified the
stock options of certain executives in connection with the
restructuring activities discussed in Note 7. The options were
modified to extend the period, after separation from employ-
ment, that the executives may exercise their options but not
beyond the options’ original contractual lives. Dominion re-
measured compensation expense associated with these options
on the modification date and recognized a pre-tax charge of
$18 million included in restructuring charges in 2001.
During 2001, 2000, and 1999, respectively, Dominion
awarded 332,884 shares, 169,886 shares and 24,758 shares of
restricted stock with weighted-average fair values of $63.49,
$41.88 and $43.51.