E-Z-GO 2005 Annual Report Download - page 81

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61
Stock Options
The stock option compensation cost calculated under the fair value approach is recognized over the vesting period of the stock options. The
weighted-average fair value of options granted per share was $20, $14 and $10 for 2005, 2004 and 2003, respectively. The fair values of options
granted are estimated on the date of grant using the Black-Scholes option-pricing model. Expected volatilities are based on implied volatilities
from traded options on Textron common stock, historical volatilities and other factors. Textron uses historical data to estimate option exercise
behavior, adjusted to reflect anticipated increases in expected life.
The weighted-average assumptions used in Textron’s Black-Scholes option-pricing model for awards issued during the respective periods are as
follows:
2005 2004 2003
Dividend yield 2% 2% 3%
Expected volatility 25% 37% 38%
Risk-free interest rate 4% 3% 3%
Expected term (In years) 6.0 3.7 3.6
The following table summarizes information related to stock option activity for the respective periods:
(In millions)
2005 2004 2003
Intrinsic value of options exercised $ 59 $ 81 $ 20
Cash received from option exercises $ 106 $ 187 $ 67
Actual tax benefit realized for tax deductions from option exercises $ 18 $ 26 $ 7
Stock option activity under the Plan is summarized as follows:
2005 2004 2003
Weighted- Weighted- Weighted-
Average Average Average
Number of Exercise Number of Exercise Number of Exercise
(Shares in thousands)
Options Price Options Price Options Price
Outstanding at beginning of year 9,261 $ 52.05 13,158 $ 49.24 14,140 $ 49.62
Granted 1,208 76.69 1,532 54.07 1,905 39.67
Exercised (2,151) 48.62 (4,363) 42.48 (1,797) 39.59
Canceled, expired or forfeited (172) 70.09 (1,066) 59.52 (1,090) 53.29
Outstanding at end of year 8,146 $ 56.23 9,261 $ 52.05 13,158 $ 49.24
Exercisable at end of year 6,206 $ 52.41 7,176 $ 52.70 9,115 $ 53.02
Options that were outstanding and exercisable as of December 31, 2005 are as follows:
Weighted-
Average
Remaining Aggregate
Number of Weighted- Contractual Intrinsic
Options Average Life Value
(In thousands)
Exercise Price
(In years) (In millions)
Outstanding 8,146 $ 56.23 5.99 $ 169
Exercisable 6,206 $ 52.41 5.13 $ 152
Restricted Stock
The fair value of restricted stock is based on the trading price of Textron common stock on the date of grant, less required adjustments to reflect
the fair value of the award as dividends are not paid or accrued until the restricted stock vests. The weighted-average grant-date fair value of
restricted stock granted in 2005, 2004 and 2003 was approximately $71, $57 and $40 per share, respectively.
Notes to the Consolidated Financial Statements