Kraft 2008 Annual Report Download - page 69

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determined using a modified Black-Scholes methodology using the following weighted average assumptions for Altria common stock.
Risk-Free
Interest Rate Expected Life
Expected
Volatility
Expected
Dividend Yield
Fair Value
at Grant Date
2006 Altria Group Inc. 5% 4 years 26.73% 4.43% $ 12.79
2005 Altria Group Inc. 4% 4 years 32.90% 4.43% $ 14.08
Restricted Stock Plans:
We may grant shares of restricted stock and rights to receive shares of stock to eligible employees, giving them in most instances all of the rights of stockholders,
except that they may not sell, assign, pledge or otherwise encumber the shares and rights. Shares of restricted stock and rights are subject to forfeiture if certain
employment conditions are not met. Restricted stock generally vests on the third anniversary of the grant date.
The fair value of the restricted shares and rights at the date of grant is amortized ratably over the restriction period. We recorded pre-tax compensation expense
related to restricted stock and rights of $136 million in 2007, $139 million (including the pre-tax cumulative effect gain of $9 million from the adoption of SFAS
No. 123(R)) in 2006 and $148 million in 2005. The deferred tax benefit recorded related to this compensation expense was $47 million for the year ended
December 31, 2007, $51 million for the year ended December 31, 2006 and $54 million for the year ended December 31, 2005. The unamortized compensation
expense related to our restricted stock and rights was $230 million at December 31, 2007 and is expected to be recognized over a weighted average period of
two years.
Our restricted stock and rights activity for the year ended December 31, 2007 was:
Number
of Shares
Weighted-Average
Grant Date Fair
Value Per Share
Balance at January 1, 2007 15,275,420 $ 31.31
Issued as part of Distribution 2,954,527 31.66
Granted 6,271,037 34.56
Vested (4,499,323) 32.19
Forfeited (1,340,751) 31.73
Balance at December 31, 2007 18,660,910 32.21
In January 2007, we issued 5.2 million shares of restricted stock and stock rights to eligible U.S. and non-U.S. employees as part of our annual incentive
program. Restrictions on these shares and rights lapse in the first quarter of 2010. The market value per restricted share or right was $34.655 on the date of grant.
Additionally, we issued 1.0 million off-cycle shares of restricted stock and stock rights during 2007. The weighted-average market value per restricted share or
right was $34.085 on the date of grant. The total number of restricted shares and rights issued in 2007 was 9.2 million, including those issued as a result of the
Distribution.
The weighted-average grant date fair value of restricted stock and rights granted was $310 million, or $33.63 per restricted share or right, in 2007, $200 million,
or $29.16 per restricted share or right, in 2006 and $200 million, or $33.26 per restricted share or right, in 2005. The vesting date fair value of restricted stock and
rights was $153 million in 2007, $123 million in 2006 and $2 million in 2005.
Note 9. Benefit Plans:
In September 2006, the FASB issued SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans (“SFAS No. 158”).
SFAS No. 158 requires us to recognize the funded status of our defined benefit pension and other postretirement plans on the consolidated balance sheet.
Subsequent changes in funded status that are not recognized as a component of net periodic benefit cost are recorded as a component of other comprehensive
income. We prospectively adopted the recognition and related disclosure provisions of SFAS No. 158 on December 31, 2006. The adoption resulted in a decrease
to total assets of $2,286 million, a decrease to total liabilities of $235 million and a decrease to shareholders’ equity of $2,051 million.
67
Source: KRAFT FOODS INC, 10-K, February 25, 2008 Powered by Morningstar® Document Research℠