CVS 2004 Annual Report Download - page 43
Download and view the complete annual report
Please find page 43 of the 2004 CVS annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.$17.1 million of the accrued benefit liability was included in
accrued expenses, while the remaining amount was recorded in
other long-term liabilities, as of January 1, 2005 and January 3,
2004. The accumulated benefit obligation for the defined benefit
pension plans was $345.9 million and $333.5 million at January 1,
2005 and January 3, 2004, respectively. The Company estimates
itwill make cash contributions to the plan during the next fiscal
year of approximately $17.1 million. Estimated future benefit
payments for the defined benefit plans and other postretirement
benefit plans, respectively, are $16.7 million and $1.3 million in
2005, $17.3 million and $1.3 million in 2006, $18.0 million and
$1.3 million in 2007, $19.1 million and $1.2 million in 2008, $20.0
million and $1.2 million in 2009 and $120.3 million and $5.0
million in aggregate for the following five years. The Company
recorded a minimum pension liability of $57.7 million as of
January 1, 2005, and $59.4 million as of January 3, 2004, as
required by SFAS No. 87. A minimum pension liability is required
when the accumulated benefit obligation exceeds the combined
fair value of the underlying plan assets and accrued pension costs.
The minimum pension liability adjustment is reflected in
other long-term liabilities, long-term deferred income taxes and
accumulated other comprehensive loss, included in shareholders’
equity, in the consolidated balance sheet.
8²
²Stock incentive plans
The 1996 Directors Stock Plan (the “Directors Plan”) provides
for the granting of up to 346,000 shares of common stock
to the Company’s non-employee directors. In anticipation
of the Directors Plan not having sufficient shares to meet
the Company’s needs for anticipated awards to non-employee
directors, an amendment to the Company’s 1997 Incentive
Compensation Plan (the “ICP”) was approved by shareholders
in 2004, allowing non-employee directors to receive awards
under the ICP. Upon approval of this amendment to the ICP,
all authority to make future grants under the Directors Plan
was terminated, although previously granted awards remain
outstanding in accordance with their terms and the terms of
the Directors Plan.
The ICP provides for the granting of up to 42.9 million shares
of common stock in the form of stock options and other awards
to selected officers and employees of the Company. All grants
under the ICP are awarded at fair market value on the date
of grant. Options granted prior to 2004 generally become
exercisable over a four-year period from the grant date and
expire ten years after the date of grant. Options granted during
fiscal 2004 generally become exercisable over a three-year period
from the grant date and expire seven years after the date of
grant. As of January 1, 2005, there were 14.1 million shares
available for future grants under the ICP.
The ICP allows for up to 3.6 million restricted shares to be
issued. The Company granted 412,000, 213,000 and 26,000
shares of restricted stock with a weighted average per share
grant date fair value of $36.81, $25.26 and $31.20, in 2004, 2003
and 2002, respectively. The fair value of the restricted shares is
expensed over the period during which the restrictions lapse.
Compensation costs for restricted shares totaled $2.4 million in
2004,$3.6 million in 2003 and $4.3 million in 2002.
CVS Corporation 2004 Annual Report | 41
Following is a summary of the stock option activity for the respective years:
2004 2003 2002
WEIGHTED WEIGHTED WEIGHTED
AVERAGE AVERAGE AVERAGE
Shares in thousands SHARES EXERCISE PRICE SHARES EXERCISE PRICE SHARES EXERCISE PRICE
Outstanding at beginning of year 27,079 $ 34.22 23,390 $ 36.42 17,627 $ 39.48
Granted 2,932 35.50 6,401 25.21 8,022 29.89
Exercised (3,782) 27.75 (707) 20.26 (517) 18.31
Canceled (1,315) 38.17 (2,005) 35.84 (1,742) 41.66
Outstanding at end of year 24,914 35.16 27,079 34.22 23,390 36.42
Exercisable at end of year 12,549 $ 38.97 14,870 $ 35.53 8,048 $ 30.21