Notes to Consolidated Financial Statements

(Thousands of dollars, except share data)

9 Stock Compensation Plans

Under the company’s stock option plans, shares of common stock have been made available to grant at the discretion of the Compensation Committee of the Board of Directors to officers and key associates in the form of stock options, stock appreciation rights, restricted shares, performance units, and deferred shares. In addition, shares can be awarded to directors not employed by the company. The options have a ten-year term and vest in 25% increments annually beginning twelve months after the date of grant. Pro forma information regarding net income and earnings per share is required by SFAS No. 123, and has been determined as if the company had accounted for its associate stock options under the fair value method of SFAS No. 123. The fair value for these options was estimated at the date of grant using a Black-Scholes option pricing model. For purposes of pro forma disclosures, the estimated fair value of the options granted under the plan is amortized to expense over the options’ vesting periods.

Following are the related assumptions under the Black-Scholes method:

A summary of activity related to stock options for the above plans is as follows for the years ended December 31:

The company sponsors a performance target option plan that is contingent upon the company’s common shares reaching specified fair market values. Under the plan, no awards were issued in 2003 and 2001 and 20,000 shares were awarded in 2002. No compensation expense was recognized in 2003, 2002 or 2001.

Exercise prices for options outstanding as of December 31, 2003, range from $15.02 to $19.56, $22.06 to $26.44 and $33.75; the number of options outstanding at December 31, 2003 that correspond to these ranges are 5,377,684, 2,196,636 and 760,600, respectively; and the number of options exercisable at December 31, 2003 that correspond to these ranges are 3,402,154, 1,609,056 and 760,600, respectively. The weighted average remaining contractual life of these options is 6 years. The estimated weighted-average fair values of stock options granted during 2003, 2002 and 2001 were $6.78, $10.36 and $6.36, respectively. At December 31, 2003, a total of 203,950 restricted stock rights, restricted shares or deferred shares have been awarded under the above plans and are not vested. The company distributed 125,967, 100,947 and 61,301 common shares in 2003, 2002 and 2001, respectively, as a result of awards of restricted stock rights, restricted shares and deferred shares.

The company offers a performance unit component under its long-term incentive plan to certain employees in which grants are earned based on company performance measured by several metrics over a three-year performance period. The Compensation Committee of the Board of Directors can elect to make payments that become due in the form of cash or shares of the company’s common stock. 48,225 and 44,375 performance units have been granted in 2003 and 2002, respectively. Each performance unit has a cash value of $100.

The number of shares available for future grants for all plans at December 31, 2003, including stock options, is 1,555,559.

Financial Summary • Letter to Shareholders • Soaring with Opportunities • Driving New Opportunities
Beyond Boundaries • Boundless Innovation • Boundless Drive to Excel • Corporate Profile
Financial Information • Directors • Officers and Executives • Shareholder Information

2003 Annual Report in Print Friendly Format (600K - PDF format)