N O T E S T O T H E F I N A N C I A L S T A T E M E N T S
| 10. Stock Options and Other
Options The Corporation applies Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its stock plans. Pursuant to the Corporation's stock option and retention stock plans for officers and key employees, 5,541,561; 4,807,783 and 4,493,578 common shares were available for grant at December 31, 2000, 1999 and 1998, respectively. Options are granted at market value on the grant date and are exercisable for a period of 10 years from the grant date. Options generally become exercisable no earlier than one year after grant.
Retention and Restricted Stock The plans provide for awarding retention shares of common stock or stock units (the right to receive shares of common stock) to eligible employees. These awards are subject to forfeiture if employment terminates during the prescribed retention period or, in some cases, if certain prescribed stock price or other financial criteria are not met. Restricted stock awards are issued to non-employee directors and are subject to forfeiture if certain service requirements are not met. During the year ended December 31, 2000, 283,059 retention shares, restricted shares and stock units were issued at a weighted-average fair value of $41.21. During 1999, 26,300 retention shares and stock units were issued at a weighted-average fair value of $52.41. During 1998, 322,025 retention and restricted shares were issued at a weighted-average fair value of $51.77. A portion of the retention awards issued in 1999 and 1998 are subject to stock price or performance targets. The cost of retention shares is amortized to expense over the vesting period. In 2000, 1999 and 1998, UPC expensed $6 million, $3 million and $16 million, respectively, to amortize retention and restricted stock awards.
Long-Term Plans During the year ended December 31, 2000, the 1996 Long-Term Performance Plan (LTPP) expired. The performance criteria set forth in the LTPP were not satisfied and all retention stock and units awarded under the LTPP were cancelled. In November 2000, the Corporation approved the 2001 Long-Term Plan (LTP). The LTP includes certain performance criteria and a retention requirement.
Executive Stock Purchase Incentive Plan The Corporation adopted the Executive Stock Purchase Incentive Plan (ESPIP) effective October 1, 1999, in order to encourage and facilitate ownership of common stock by officers and other key executives of the Corporation and its subsidiaries and allow ESPIP participants to share in the same risks and rewards as the Corporation's other shareholders.
Under the ESPIP, the participants purchased a total of one million shares of the Corporation's common stock with the proceeds of 6.02% interest-bearing, full recourse loans from the Corporation. Loans totaled $47 million. Deferred cash payments will be awarded to the participants to repay interest and the loan principal if certain performance and retention criteria are met within a 40-month period ending January 31, 2003. The cost of the ESPIP is amortized to expense over the 40-month period. During the years ended December 31, 2000 and 1999, UPC expensed $9 million and $2 million, respectively, to amortize the deferred cash payments.
Determination of Fair Value of Options The fair value of each stock option granted is estimated for the determination of pro forma expense using a Black-Scholes option-pricing model. The following table details the number of options granted, weighted-average option price of the options granted, weighted-average assumptions utilized in determining the pro forma expense and the weighted-average fair value of options for the years ended December 31, 2000, 1999 and 1998:
The expense impact of the option grant is determined as of the date of the grant and is reflected in pro forma results over the options' vesting period.
Pro forma net income (loss) and EPS for 2000, 1999 and 1998, including compensation expense for options that vested in each year, were as follows:
Changes in common stock options outstanding were as follows:
Stock options outstanding at December 31, 2000 were as follows:
Stock options exercisable at December 31, 2000 were as follows:
|9. Retirement Plans | 11. Earnings Per Share|