Kraft 2005 Annual Report Download - page 70

MERRILL CORPORATION ABLIJDE// 7-MAR-06 14:42 DISK126:[06CHI5.06CHI1135]DY1135A.;6
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KRAFT FOODS-FSC CERTIFIED-10K/AR Proj: P1102CHI06 Job: 06CHI1135 File: DY1135A.;6
Merrill Corporation/Chicago [phone] Page Dim: 8.250 X 10.750Copy Dim: 38. X 54.3
Kraft repurchases its Class A common stock in open market transactions. During December 2004,
the Company began a $1.5 billion two-year share repurchase program. During 2005, the Company
repurchased 39.2 million shares of its Class A common stock at a cost of $1.2 billion, an average price of
$30.65 per share. As of December 31, 2005, the Company had repurchased 40.6 million shares of its
Class A common stock, under its $1.5 billion authority, at an aggregate cost of $1.25 billion. During
December 2004, Kraft completed its multi-year $700 million Class A common stock repurchase
program, acquiring 21,718,847 Class A shares at an average price of $32.23 per share. During
December 2003, Kraft completed its $500 million Class A common stock repurchase program, acquiring
15,308,458 Class A shares at an average price of $32.66 per share.
Class B common shares issued and outstanding at December 31, 2005 and 2004 were 1.18 billion.
Altria Group, Inc. holds 276.5 million Class A common shares and all of the Class B common shares at
December 31, 2005. There are no preferred shares issued and outstanding. Class A common shares are
entitled to one vote each, while Class B common shares are entitled to ten votes each. Therefore, Altria
Group, Inc. holds 98.3% of the combined voting power of the Company’s outstanding capital stock at
December 31, 2005. At December 31, 2005, 170,243,228 shares of common stock were reserved for
stock options and other stock awards.
Note 11. Stock Plans:
In 2005, the Company’s Board of Directors adopted, and the stockholders approved, the Kraft 2005
Performance Incentive Plan (the ‘‘2005 Plan’’). The 2005 Plan replaced the Company’s 2001
Performance Incentive Plan (the ‘‘2001 Plan’’). Under the 2005 Plan, the Company may grant to eligible
employees awards of stock options, stock appreciation rights, restricted stock, restricted and deferred
stock units, and other awards based on the Company’s Class A common stock, as well as performance-
based annual and long-term incentive awards. A maximum of 150 million shares of the Company’s
Class A common stock may be issued under the 2005 Plan, of which no more than 45 million shares may
be awarded as restricted stock. In addition, the Company may grant up to 500,000 shares of Class A
common stock to members of the Board of Directors who are not full-time employees of the Company or
Altria Group, Inc., or their subsidiaries, under the Kraft Directors Plan (the ‘‘2001 Directors Plan’’). Shares
available to be granted under the 2005 Plan and the 2001 Directors Plan at December 31, 2005, were
149,879,210 and 439,367, respectively. Restricted shares available for grant under the 2005 Plan at
December 31, 2005, were 44,879,210.
The Company applies the intrinsic value-based methodology in accounting for the various stock
plans. Accordingly, no compensation expense has been recognized other than for restricted stock
awards. In 2004, the FASB issued SFAS No. 123 (revised 2004), ‘‘Share-Based Payment’’ (‘‘SFAS
No. 123R’’). SFAS No. 123R requires companies to measure compensation cost for share-based
payments at fair value. The Company will adopt this new standard prospectively, on January 1, 2006,
and the adoption of SFAS No. 123R will not have a material impact on its consolidated financial position,
results of operations or cash flows.
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