Secure all legal clearances and rights. Contact the author of the story, his agent or the publisher and find out who owns the film rights to the material you want to adapt. Draw up a contract that establishes your rights to adapt the story into a screenplay.
Read the story several times until you are immersed in its settings, characters, situations and themes. Decide what elements of the prose story you need in your screenplay: main characters and plot points. Make detailed lists of the characters, locations, situations and their relationships to one another. Focus on the elements you think will be necessary to tell the story visually.
Pare the story to its essentials by deleting secondary characters and incidents that are superfluous to the movie's main plot and themes. Blend traits of minor characters to create composites. Ignore episodes that add atmosphere in the prose story but will bog down your screenplay. Shift events around for dramatic effect.
Capture the essence of the story or novel. Reimagine parts of the story so that they work better in a visual, kinetic sense. Keep the original author's main idea, but change scenes, characters and even the ending to create a memorable movie experience.