Eversource 2004 Annual Report Download - page 73

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Exercise Price Per Share
Options Range Weighted Average
Outstanding — December 31, 2001 3,009,916 $ 9.6250 — $22.2500 $16.4467
Granted 1,337,345 $16.5500 — $19.8700 $17.8284
Exercised (262,800) $10.0134 — $19.5000 $15.4666
Forfeited and cancelled (247,152) $14.9375 — $22.2500 $18.3473
Outstanding — December 31, 2002 3,837,309 $ 9.6250 — $22.2500 $16.8738
Exercised (562,982) $ 9.6250 — $19.5000 $14.6223
Forfeited and cancelled (151,005) $14.9375 — $21.0300 $19.0227
Outstanding — December 31, 2003 3,123,322 $ 9.6250 — $22.2500 $17.1270
Exercised (612,666) $ 9.6250 — $19.5000 $12.3181
Forfeited and cancelled (516,914) $16.5500 — $19.5000 $16.6139
Outstanding — December 31, 2004 1,993,742 $14.9375 — $22.2500 $18.7370
Exercisable — December 31, 2002 1,956,555 $ 9.6250 — $22.2500 $15.3758
Exercisable — December 31, 2003 2,027,413 $ 9.6250 — $22.2500 $16.6969
Exercisable — December 31, 2004 1,877,595 $14.9375 — $22.2500 $18.7778
For certain options that were granted in 2002, the vesting schedule for
these options is ratably over three years from the date of grant. Additionally,
certain options granted in 2002 vest 50 percent at the date of grant and
50 percent one year from the date of grant, while other options granted
in 2002 vest 100 percent after five years.
The fair value of each stock option grant has been estimated on the date
of grant using the Black-Scholes option pricing model with the following
weighted average assumptions. No stock options were granted during
2004 or 2003.
2002
Risk-free interest rate 4.86%
Expected life 10 years
Expected volatility 23.71%
Expected dividend yield 2.11%
The weighted average grant date fair values of options granted during
2002 was $5.64. The weighted average remaining contractual lives for
the options outstanding at December 31, 2004 is 6.03 years.
In January 2005, 490,600 options that were outstanding and exercisable at
December 31, 2004 with exercise prices ranging from $18.4375 to $21.03
were forfeited. This forfeiture resulted in outstanding and exercisable
options in January 2005 of 1,503,142 and 1,386,995, respectively.
For additional information regarding equity-based compensation, see
Note 1N, “Summary of Significant Accounting Policies — Equity-Based
Compensation.”
E. Supplemental Executive Retirement and Other Plans
NU has maintained a SERP since 1987. The SERP provides its participants,
who are executives of NU, with benefits that would have been provided
to them under NU’s retirement plan if certain Internal Revenue Code and
other limitations were not imposed. The SERP liability of $24.2 million
and $22.1 million at December 31, 2004 and 2003, respectively, represents
NU’s actuarially-determined obligation under the SERP. During 2004,
2003 and 2002, $4 million, $3.9 million, and $3.8 million, respectively,
was expensed related to the SERP.
The SERP is the only NU retirement plan for which a minimum pension
liability has been recorded. Recording this minimum pension liability
resulted in a reduction of $0.1 million to accumulated other comprehensive
income.
NU maintains a plan for retirement and other benefits for certain current
and past company officers. The actuarially-determined liability for this
plan was $36.7 million and $35.5 million at December 31, 2004 and 2003,
respectively. During 2004, 2003 and 2002, $4.5 million, $6.3 million and
$7.8 million, respectively, was expensed related to this plan.
For further information regarding SERP investments, see Note 8,
“Marketable Securities,” to the consolidated financial statements.
5. Goodwill and Other Intangible Assets
SFAS No. 142, “Goodwill and Other Intangible Assets,” requires that
goodwill and intangible assets deemed to have indefinite useful lives be
reviewed for impairment at least annually by applying a fair value-based
test. NU uses October 1st as the annual goodwill impairment testing
date. Goodwill impairment is deemed to exist if the net book value of a
reporting unit exceeds its estimated fair value and if the implied fair
value of goodwill based on the estimated fair value of the reporting unit
is less than the carrying amount. Excluding adjustments to the purchase
price allocation related to the acquisition of Woods Electrical Co., Inc.
(Woods Electrical) and Woods Network recorded in 2003, there were no
impairments or adjustments to the goodwill balances during 2004 or
2003. The Woods Electrical and Woods Network adjustments primarily
related to the reclassification between goodwill and intangible assets.
NU’s reporting units that maintain goodwill are generally consistent with
the operating segments underlying the reportable segments identified in
Note 15, “Segment Information,” to the consolidated financial statements.
Consistent with the way management reviews the operating results of
its reporting units, NU’s reporting units under the NU Enterprises
reportable segment include: 1) the merchant energy reporting unit and
2) the energy services reporting unit. The merchant energy reporting
unit is comprised of the operations of Select Energy, NGC and the
generation operations of HWP, while the energy services reporting unit