Hess 2000 Annual Report Download - page 40

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38
The Corporation uses the Black-Scholes model to estimate
the fair value of employee stock options for pro forma
disclosure of the effects on net income and earnings per
share. The Corporation used the following weighted-
average assumptions in the Black-Scholes model for 2000,
1999 and 1998, respectively: risk-free interest rates of 5.4%,
5.9% and 5.6%; expected stock price volatility of .225, .207
and .218; dividend yield of 1.0%, 1.1% and 1.1%; and an
expected life of seven years. The Corporation’s net income
would have been reduced by approximately $17 million in
2000, $6 million in 1999 and $19 million in 1998 ($.19 per
share in 2000, $.07 per share in 1999 and $.21 per share in
1998, diluted) if option expense were recorded using the
fair value method.
The weighted-average fair values of options granted for
which the exercise price equaled the market price on the
date of grant were $20.04 in 2000, $18.45 in 1999 and
$17.50 in 1998.
Total compensation expense for nonvested common
stock was $7 million in 2000, $10 million in 1999 and
$16 million in 1998. Awards of nonvested common stock
were as follows:
Shares of
nonvested Weighted-
common stock average
awarded price on date
(thousands) of grant
Granted in 1998 18 $ 53.08
Granted in 1999 24 56.07
Granted in 2000 519 59.65
At December 31, 2000, the number of common shares
reserved for issuance is as follows (in thousands):
1995 Long-Term Incentive Plan
Future awards 2,549
Stock options outstanding 4,295
Stock appreciation rights 31
Warrants* 1,061
Total 7,936
*Issued in connection with an insurance company financing, exercisable
through June 27, 2001 at $64.08 per share. In February 2001, the parties
agreed that upon exercise, the warrants will be settled in cash with no
shares issued.
9. Foreign Currency Translation
Worldwide foreign currency gains amounted to $45 mil-
lion, after income taxes, including the $53 million gain
related to the special item on termination of the proposed
acquisition. After-tax foreign currency gains in 1999 and
1998 amounted to $17 million and $3 million, respec-
tively. Effective January 1, 1999, the Corporation changed
the functional currency of its United Kingdom operations
from the British pound sterling to the U.S. dollar.