CVS 2006 Annual Report Download - page 46

2006 Annual Report 43
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Following is a summary of the Company’s stock option activity as of December 30, 2006:
Weighted
Average
Weighted Remaining
Average Contractual Aggregate
Shares in thousands Shares Exercise Price Term Intrinsic Value
Outstanding at December 31, 2005 43,617 $ 18.82 – $ –
Granted 7,449 31.00 – –
Exercised (8,342) 16.69 – –
Forfeited (623) 21.55 – –
Expired (484) 21.68 – –
Outstanding at December 30, 2006 41,617 21.35 4.72 410,957,209
Exercisable at December 30, 2006 26,773 $ 19.57 4.16 $ 308,035,407
Following is a summary of the stock options outstanding and exercisable as of December 30, 2006:
Shares in thousands Options Outstanding Options Exercisable
Weighted Weighted Weighted
Number Average Average Number Average
Range of Exercise Prices Outstanding Remaining Life Exercise Price Exercisable Exercise Price
$ 11.50 to $ 14.96 12,644 5.49 $ 13.70 10,239 $ 13.96
14.97 to 18.66 8,378 3.02 17.50 6,707 17.47
18.67 to 25.00 7,598 4.17 22.21 4,073 22.04
25.01 to 30.26 11,047 5.17 30.14 5,753 30.25
30.27 to 33.95 49 7.51 32.34 – –
33.96 to 34.41 1,901 6.59 34.41 1 34.41
Total 41,617 4.72 $ 21.35 26,773 $ 19.57
PENSION PLANS AND
8 OTHER POSTRETIREMENT BENEFITS
During 2006, the Company adopted SFAS No. 158, “Employer’s
Accounting for Defined Benefit Pension and Other Postretirement Plans –
an amendment of FASB Statements No. 87, 88, 106, and 132(R).”
SFAS No. 158 requires an employer to recognize in its statement of
financial position an asset for a plan’s overfunded status or a liability for
a plan’s underfunded status, measure a plan’s assets and its obligations
that determine its funded status as of the end of the employer’s fiscal
year, and recognize changes in the funded status of a defined benefit
postretirement plan in the year in which the changes occur. Those
changes will be reported in comprehensive income and in a separate
component of stockholder’s equity.
Defined Contribution Plans
The Company sponsors a voluntary 401(k) Savings Plan that covers
substantially all employees who meet plan eligibility requirements. The
Company makes matching contributions consistent with the provisions
of the plan. At the participant’s option, account balances, including the
Company’s matching contribution, can be moved without restriction
among various investment options, including the Company’s common
stock. The Company also maintains a nonqualified, unfunded Deferred
Compensation Plan for certain key employees. This plan provides
participants the opportunity to defer portions of their compensation and
receive matching contributions that they would have otherwise received
under the 401(k) Savings Plan if not for certain restrictions and limitations
under the Internal Revenue Code. The Company’s contributions under
the above defined contribution plans totaled $63.7 million in 2006,
$64.9 million in 2005 and $52.1 million in 2004. The Company also
sponsors an Employee Stock Ownership Plan. See Note 6 for further
information about this plan.
Other Postretirement Benefits
The Company provides postretirement healthcare and life insurance
benefits to certain retirees who meet eligibility requirements. The
Company’s funding policy is generally to pay covered expenses as they
are incurred. For retiree medical plan accounting, the Company reviews
external data and its own historical trends for healthcare costs to
determine the healthcare cost trend rates.
For measurement purposes, future healthcare costs are assumed to
increase at an annual rate of 10.0%, decreasing to an annual growth
rate of 5.0% in 2012 and thereafter. A one percent change in the
assumed healthcare cost trend rate would change the accumulated
postretirement benefit obligation by $0.6 million and the total service
and interest costs by $0.03 million.