Discover 2009 Annual Report Download - page 132

The following table sets forth the activity concerning unvested RSUs during the year ended November 30, 2009:
Number
of Shares
Weighted-Average
Grant-Date
Fair Value
Unvested restricted stock units at November 30, 2008(1) ............................................................................................. 5,075,563 $25.39
Granted.............................................................................................................................................................. 2,613,180 $10.36
Vested................................................................................................................................................................ (2,682,152) $24.22
Forfeited ............................................................................................................................................................. (430,677) $23.82
Unvested restricted stock units at November 30, 2009 ............................................................................................... 4,575,914 $17.64
(1) Unvested restricted stock units represent awards where recipients have yet to satisfy either explicit vesting terms or retirement-eligibility requirements.
Compensation cost associated with restricted stock units is determined based on the number of units granted and the
fair value on the date of grant. For the year ended November 30, 2009, the total intrinsic value of RSUs converted to
common stock was $34.9 million and the total grant date fair value of RSUs vested was $65.0 million. For the year ended
November 30, 2008, the total intrinsic value of RSUs converted to common stock was $21.4 million, the total grant date
fair value of RSUs vested was $55.4 million, and the weighted average grant date fair value of RSUs granted was
$15.96. From July 2, 2007 to November 30, 2007, the period subsequent to the Distribution, the total intrinsic value of
RSUs converted to common stock was $6.2 million, the total grant date fair value of RSUs vested was $0.4 million, and
the weighted average grant date fair value of RSUs granted was $27.80. As of November 30, 2009, there was $27.4
million of total unrecognized compensation cost related to non-vested RSUs. The cost is expected to be recognized over a
total period of 3.1 years and a weighted-average period of 1.2 years.
14. Employee Benefit Plans
The Company sponsors the Discover Financial Services Pension Plan, which is a non-contributory defined benefit plan
that is qualified under Section 401(a) of the Internal Revenue Code (the “Qualified Plan”), for eligible employees in the
U.S. The Company also sponsors an unfunded supplementary plan (the “Supplemental Plan”) that covers certain
executives, and the Discover Financial Services 401(k) Plan (the “Discover 401(k) Plan”) for its eligible U.S. employees.
The Qualified Plan and the Supplemental Plan no longer provide for the accrual of future benefits, as described below.
Defined Benefit Pension and Other Postretirement Plans. The Qualified and Supplemental Plans generally provide
pension benefits that are based on each employee’s years of credited service and on compensation levels specified in the
plans. For the Qualified Plan, the Company’s policy is to fund at least the amounts sufficient to meet minimum funding
requirements under the Employee Retirement Income Security Act of 1974 (“ERISA”). For the Supplemental Plan, the
Company’s policy is to fund benefits when amounts are paid to the beneficiaries. The Company previously used a
measurement date of September 30 to calculate the value of plan assets and obligations under its pension and
postretirement plans. In accordance with amendments to ASC Topic 715, Compensation—Retirement Benefits
(“ASC 715”) that require those measurements to be made as of the Company’s fiscal year end date, the Company
changed the measurement date to November 30 effective for the fiscal year ended November 30, 2009. The Company
also participates in an unfunded postretirement benefit plan that provides medical and life insurance for eligible U.S.
retirees and their dependents. All information related to pensions in this footnote is presented on an aggregate basis,
unless otherwise specified.
In conjunction with the Distribution, the Company’s portion of the Morgan Stanley Employees Retirement Plan
(“MSERP”) was spun off to the Qualified Plan effective December 31, 2006. As a result, the net periodic pension cost for
the year ended November 30, 2007 was remeasured as of December 31, 2006. The Qualified Plan assets and liabilities
relating to the pre-Distribution participation of the Company’s employees in the MSERP were transferred prior to
November 30, 2007. Historically, the Company’s portion of pension and postretirement obligations and expense have
been calculated using separate actuarial valuations based on the Company’s specific demographic data and separately
tracked plan assets. Unrecognized gains and losses and unrecognized prior service costs (plan amendments) have been
calculated and tracked separately as well based on the Company’s experience.
Defined Benefit Pension Curtailment. On September 26, 2008, the Company authorized the amendment of the
Qualified Plan and the Supplemental Plan to discontinue the accrual of future benefits in the Qualified Plan and the
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