Ford 2002 Annual Report Download - page 82

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NOTES TO FINANCIAL STATEMENTS
NOTE 16. STOCK OPTIONS
We have stock options outstanding under the 1990 Long-Term Incentive Plan (LTIP) and the 1998 LTIP. No further grants
may be made under the 1990 LTIP and all outstanding options are exercisable. Grants may be made under the 1998 LTIP
through April 2008. All outstanding options under the 1990 LTIP continue to be governed by the terms and conditions of the
existing option agreements for those grants. Under the 1998 LTIP, 33% of the options are generally exercisable after the first
anniversary of the date of grant, 66% after the second anniversary, and 100% after the third anniversary. Stock options
expire 10 years from the grant date. Performance stock rights (PSRs) and restricted stock units (RSUs) are based on per-
formance achievement. At December 31, 2002, 6.2 million PSRs and 2.6 million RSUs were outstanding. Stock options and
PSRs are described in our proxy statement.
Under the 1998 LTIP, 2% of our issued common stock as of December 31 becomes available for granting plan awards in the
succeeding calendar year. Any unused portion is available for later years. The limit may be increased up to 3% in any year,
with a corresponding reduction in shares available for grants in future years. At December 31, 2002, the number of unused
shares carried forward aggregated to 28.7 million shares.
2002 2001 2000
Weighted- Weighted- Weighted-
Average Average Average
Exercise Exercise Exercise
Stock Option Activity (in millions) Shares Price Shares Price Shares Price
Outstanding, beginning of period 172.1 $ 22.01 153.7 $ 19.16 75.3 $ 32.66
Granted 50.6 16.29 35.3 30.49 15.8 41.02
Adjustment a/ --- - 71.4 -
Exercised b/ (4.3) 7.63 (14.0) 12.07 (6.9) 15.15
Terminated/expired or surrendered (5.5) 24.37 (2.9) 25.91 (1.9) 32.94
Outstanding, end of period 212.9 20.88 172.1 22.01 153.7 19.16
Exercisable, end of period 134.0 21.02 113.2 18.74 100.3 15.59
a/ Outstanding stock options and related exercise prices were adjusted to preserve the intrinsic
value of options as a result of the Visteon spin-off and Value Enhancement Plan in 2000.
b/ Exercised at option prices ranging from $7.09 to $12.53 during 2002,
$5.75 to $26.59 during 2001, and $5.75 to $23.87 during 2000.
Details on various option exercise price ranges are as follows:
Outstanding Options Exercisable Options
Weighted- Weighted- Weighted-
Range of Shares Average Life Average Shares Average
Exercise Prices (millions) (years) Exercise Price (millions) Exercise Price
$ 7.09 – $10.58 3.6 9.9 $9.77 0.0 $ -
10.76 – 15.81 56.4 3.4 12.29 52.2 12.07
16.19 – 23.88 93.6 7.5 20.07 44.1 22.60
23.97 – 35.79 58.6 7.2 30.85 37.0 31.40
41.03 – 42.52 0.7 5.3 41.42 0.7 41.42
Total options 212.9 134.0
The estimated fair value of stock options at the time of grant using the Black-Scholes option pricing model was as follows:
2002 2001 2000
Fair value per option $ 5.76 $ 8.88 $ 6.27*
Assumptions:
Annualized dividend yield 2.5% 4.0% 4.9%
Expected volatility 35.0% 43.9% 38.8%
Risk-free interest rate 5.1% 5.1% 6.3%
Expected option term (in years) 765
* Adjusted for the Value Enhancement Plan.
See Note 1 for a discussion of the impact on earnings of our adoption of SFAS No. 123 in respect of stock option awards,
effective January 1, 2003.