Safeway 2002 Annual Report Download - page 43

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SAFEWAY INC. 2002 ANNUAL REPORT 41
The following table summarizes stock option information at year-end 2002:
Options Outstanding Options Exercisable
Range of Number Weighted-Average Weighted-Average Number Weighted-Average
Exercise Prices of Options Remaining Contractual Life Exercise Price of Options Exercise Price
$ 1.57 to $ 4.50 4,321,815 4.20 years $ 3.06 4,321,815 $ 3.06
4.56 to 7.34 4,424,963 1.80 6.30 4,424,963 6.30
7.50 to 26.41 4,359,606 4.09 17.18 3,558,905 16.39
26.72 to 35.63 4,041,737 7.29 30.75 1,235,149 31.85
35.75 to 40.94 4,102,147 6.81 37.58 1,543,506 37.81
41.00 to 42.94 4,201,174 7.17 42.20 1,384,961 41.91
43.19 to 48.38 4,187,179 8.40 45.86 798,305 46.05
48.44 to 52.20 4,066,353 7.85 50.10 1,131,850 50.06
52.56 to 62.50 4,238,536 7.46 55.58 1,561,006 55.30
1.57 to 62.50 37,943,510 6.07 31.70 19,960,460 21.79
ADDITIONAL STOCK PLAN INFORMATION The Company
accounts for its stock-based awards using the intrinsic value
method in accordance with Accounting Principles Board
Opinion No. 25, “Accounting for Stock Issued to
Employees,” and its related interpretations. Accordingly, no
compensation expense has been recognized in the financial
statements for employee stock option awards granted at fair
market value.
SFAS No. 123, “Accounting for Stock-Based Compen-
sation,” as amended by SFAS No. 148, requires the disclo-
sure of pro forma net income and earnings per share as if
the Company had adopted the fair value method as of the
beginning of fiscal 1995. Under SFAS No. 123, the fair
value of stock-based awards to employees is calculated
through the use of option pricing models, even though such
models were developed to estimate the fair value of freely
tradable, fully transferable options without vesting restric-
tions, which significantly differ from the Company’s stock
option awards. These models also require subjective
assumptions, including future stock price volatility and
expected time to exercise, which greatly affect the calculated
values. The Company’s calculations were made using the
Black-Scholes option pricing model with the following
weighted average assumptions: seven to nine years expected
life; stock volatility of 36% in 2002 and 34% in 2001 and
2000; risk-free interest rates of 4.35% in 2002, 4.86% in
2001 and 6.16% in 2000; and no dividends during the
expected term.
The Company’s calculations are based on a single-option
valuation approach and forfeitures are recognized as they
occur. Had compensation cost for Safeway’s stock option
plans been determined based on the fair value at the grant
date for awards from 1996 through 2002, consistent with the
provisions of SFAS No. 123, the Company’s net income and
earnings per share would have been reduced to the pro
forma amounts disclosed in Note A.
NOTE I: TAXES ON INCOME
The components of income tax expense from continuing
operations are as follows (in millions):
2002 2001 2000
Current:
Federal $486.1 $608.3 $480.4
State 68.1 98.8 84.2
Foreign 61.9 77.8 80.9
616.1 784.9 645.5
Deferred:
Federal 127.5 35.3 114.3
State 9.7 9.5 23.8
Foreign (1.6) 6.3 5.1
135.6 51.1 143.2
$751.7 $836.0 $788.7