Baker Hughes 2009 Annual Report Download - page 121

2009 Form 10-K 47
The weighted average grant date fair value per share for
RSAs in 2009, 2008 and 2007 was $31.18, $72.82 and $68.59,
respectively. The weighted average grant date fair value per
unit for RSUs in 2009, 2008 and 2007 was $31.54, $75.96
and $68.54, respectively.
The total fair value of RSAs and RSUs vested in 2009,
2008 and 2007 was $18 million, $30 million and $16 million,
respectively. As of December 31, 2009, there was $38 million
and $18 million of total unrecognized compensation cost
related to nonvested RSAs and RSUs, respectively, which is
expected to be recognized over a weighted average period
of two years.
Employee Stock Purchase Plan
In 2009, the Employee Stock Purchase Plan (“ESPP”) allowed
eligible employees to elect to contribute on an after-tax basis
between 1% and 10% of their annual pay to purchase our
common stock; provided, however, an employee may not con-
tribute more than $25,000 annually to the plan pursuant to
Internal Revenue Service restrictions. Shares are purchased at
a 15% discount of the fair market value of our common stock
on January 1 or December 31, whichever is lower.
Effective January 1, 2010, the ESPP will provide for shares
to be purchased: (i) on June 30 of each year at a 15% discount
of the fair market value of our common stock on January 1 or
June 30, whichever is lower, and (ii) on December 31 of each
year at a 15% discount of fair market value of our common
stock on July 1 or December 31, whichever is lower. Also
effective January 1, 2010, an employee may not contribute
more than $5,000 in either of the six-month measurement
periods described above or $10,000 annually. All other terms
and conditions of the ESPP remain in effect.
We currently have 22.5 million shares authorized for issu-
ance under the ESPP, and at December 31, 2009, there were
7.2 million shares reserved for future issuance under the ESPP.
Compensation expense determined under ASC 718, Compen-
sation – Stock Compensation for the year ended December 31,
2009 was calculated using the Black-Scholes option pricing
model with the following assumptions:
2009 2008 2007
Expected life (years) 1.0 1.0 1.0
Risk-free interest rate 0.3% 3.2% 4.9%
Volatility 69.5% 32.8% 30.5%
Dividend yield 1.9% 0.6% 0.7%
Fair value per share of
15% cash discount $ 4.81 $ 10.01 $ 9.07
Fair value per share of
look-back provision 8.44 11.44 10.39
Total weighted average
fair value per share
at grant date $ 13.25 $ 21.45 $ 19.46
We calculated estimated volatility using historical daily prices
based on the expected life of the stock purchase plan. The
risk-free interest rate is based on the observed U.S. Treasury
yield curve in effect at the time the ESPP shares were granted.
The dividend yield is based on our history of dividend payouts.
NOTE 5. INCOME TAXES
The provision for income taxes on income is comprised of
the following for the years ended December 31:
2009 2008 2007
Current:
United States $ 65 $ 292 $ 366
Foreign 381 413 381
Total current 446 705 747
Deferred:
United States (210) (14) 19
Foreign (46) (7) (23)
Total deferred (256) (21) (4)
Provision for income taxes $ 190 $ 684 $ 743
The geographic sources of income before income taxes are
as follows for the years ended December 31:
2009 2008 2007
United States $ (18) $ 795 $ 877
Foreign 629 1,524 1,380
Income before income taxes $ 611 $ 2,319 $ 2,257
The provision for income taxes differs from the amount
computed by applying the U.S. statutory income tax rate to
income before income taxes for the reasons set forth below
for the years ended December 31:
2009 2008 2007
Statutory income tax at 35% $ 214 $ 812 $ 790
Effect of foreign operations (61) (134) (84)
Net tax charge (benefit)
related to foreign losses 38 3 (1)
State income taxes –
net of U.S. tax benefit 6 19 18
Other – net (7) (16) 20
Provision for income taxes $ 190 $ 684 $ 743