Graco 2007 Annual Report Download - page 70

Newell Rubbermaid Inc. 2007 Annual Report
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FOOTNOTE 15
Stock-Based Compensation
The Company offers stock-based compensation to its employees that includes stock options, restricted stock awards, performance share awards and an
employee stock purchase plan, as follows:
Stock Options
The Company’s stock plans include plans adopted in 1993 and 2003. The Company has issued both non-qualified and incentive stock options at exercise
prices equal to the Company’s common stock price on the date of grant with contractual terms of ten years that generally vest and are expensed ratably
over five years. Stock option grants are generally subject to forfeiture if employment terminates prior to vesting.
Restricted Stock
Restricted stock awards are independent of stock option grants and are subject to forfeiture if employment terminates prior to vesting. The awards generally
cliff-vest three years from the date of grant. Prior to vesting, ownership of the shares cannot be transferred. The restricted stock has the same dividend and
voting rights as the common stock. The Company expenses the cost of these awards ratably over the vesting period.
Performance Shares
Performance share awards issued under the 2003 Stock Plan represent the right to receive unrestricted shares of stock based on the achievement of
Company performance objectives and/or individual performance goals established by the Organizational Development & Compensation Committee and the
Board of Directors. The Company awarded performance shares in February 2007 based on 2006 performance and awarded performance shares in 2006
related to a transition grant as the Company moved to a new cash bonus structure.
Employee Stock Purchase Plan
The Company established an Employee Stock Purchase Plan (“ESPP”) effective August 1, 2006. The ESPP allows all employees the ability to purchase shares
of the Company’s $1.00 par value per share common stock at a 5% discount at the end of each quarter. Pursuant to the ESPP, $0.9 million of shares were
purchased during 2007.
Prior to January 1, 2006, the Company recognized stock-based compensation expense by applying the intrinsic value method in accordance with APB 25.
Under APB 25, the Company generally recognized compensation expense only for restricted stock grants. The Company recognized the compensation
expense associated with the restricted stock ratably over the associated service period.
Effective January 1, 2006, the Company adopted the provisions of SFAS 123(R) using the modified prospective transition method, and therefore has
not restated the results of prior periods. Under this transition method, stock-based compensation expense for 2007 and 2006 includes (i) compensation
expense for all stock-based compensation awards granted prior to, but not yet vested as of January 1, 2006, based on the grant date fair value estimated
in accordance with the original provisions of SFAS No. 123, “Accounting for Stock-Based Compensation,” and (ii) compensation expense for all share-based
payment awards granted after January 1, 2006 based on estimated grant-date fair values estimated in accordance with the provisions of SFAS 123(R).
The table below highlights the expense related to share-based payments for the years ended December 31, (in millions):
2007 2006 2005
Stock options $17.2 $17.8 $0.4
Restricted stock 19.2 14.3 5.7
Performance shares
— 11.9 —
Stock-based compensation $36.4 $44.0 $6.1
Stock-based compensation, net of income tax benefit of $13.8 million, $16.7 million
and $2.3 million in 2007, 2006 and 2005, respectively $22.6 $27.3 $3.8