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Jarden Corporation
Notes to Consolidated Financial Statements (cont’d)
December 31, 2004
Had compensation cost for the Company’s stock option plans been determined based on the fair
value at the grant dates for awards under those plans, the Company’s net income and earnings per share
would have been adjusted to the pro forma amounts indicated:
Year Ended December 31,
(thousands of dollars, except per share amounts) 2004 2003 2002
Net income, as reported .......................................... $42,434 $31,778 $36,309
Deduct: Total stock-based employee compensation expense
determined under fair value based method for all awards, net of
related tax effects .......................................... 2,795 2,042 1,037
Pro forma net income ............................................ $39,639 $29,736 $35,272
Basic earnings per share:
As reported ............................................. $ 1.55 $ 1.40 $ 1.74
Pro forma ............................................... 1.45 1.31 1.69
Diluted earnings per share:
As reported ............................................. $ 1.49 $ 1.35 $ 1.68
Pro forma ............................................... 1.39 1.26 1.63
The fair value of each option granted is estimated on the date of grant using the Black-Scholes
option-pricing model with the following weighted-average assumptions used for grants in 2004, 2003 and
2002, respectively: no dividend yield for all years, expected volatility of 32, 37 and 44 percent, risk-free
interest rates of 2.8, 1.6 and 2.0 percent and expected lives of 7.6, 7.6 and 7.5 years. The average fair
value of each option granted in 2004, 2003 and 2002 was $14.36, $9.11 and $6.19, respectively.
2. Adoption of New Accounting Pronouncements
In December 2004, the Financial Accounting Standards Board (“FASB”) issued FASB Statement
No. 123 (revised 2004) (“Statement 123 (R)”), Share-Based Payment, which is a revision of FASB
Statement No. 123, Accounting for Stock-Based Compensation. Statement 123 (R) supersedes APB
Opinion No. 25, Accounting for Stock Issued to Employees, and amends FASB Statement No. 95,
Statement of Cash Flows. Generally, the approach in Statement 123 (R) is similar to the approach
described in Statement 123. However, Statement 123 (R) requires all shared-based payments to
employees, including grants of employee stock options, to be recognized in the income statement based
on their fair values. Pro forma disclosure is no longer an alternative.
Statement 123 (R) must be adopted no later than July 1, 2005. Early adoption will be permitted in
periods in which financial statements have not yet been issued. The Company expects to adopt
Statement 123 (R) on July 1, 2005.
Statement 123 (R) permits public companies to adopt its requirements using one of two methods:
1. A “modified prospective” method in which compensation cost is recognized beginning with the
effective date (a) based on the requirements of Statement 123 (R) for all share–based payments
granted after the effective date and (b) based on the requirements of Statement 123 for all
awards granted to employees prior to the effective date of Statement 123 (R) that remain
unvested on the effective date; or
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