Kraft 2013 Annual Report Download - page 60

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Restricted Stock, RSUs, and Performance Shares:
We may grant shares of restricted stock or RSUs to eligible employees and directors, giving them, in most
instances, all of the rights of shareholders, except that they may not sell, assign, pledge, or otherwise encumber the
shares. Shares of restricted stock and RSUs granted to employees are subject to forfeiture if certain employment
conditions are not met. Restricted stock and RSUs generally vest on the third anniversary of the grant date.
Performance Shares vest based on varying performance, market, and service conditions. Our Performance Shares
pay accrued dividends at the time of vesting. Shares granted in connection with International’s long-term
incentive plan prior to the Spin-Off do not pay dividends. The unvested shares have no voting rights.
The fair value of the restricted stock, RSUs, and Performance Shares at the date of grant is amortized to earnings
over the restriction period. We recorded compensation expense related to restricted stock, RSUs, and Performance
Shares of $47 million in 2013 and $11 million in 2012 subsequent to the Spin-Off. The deferred tax benefit recorded
related to this compensation expense was $17 million in 2013 and $4 million in 2012. The unamortized
compensation expense related to our restricted stock, RSUs, and Performance Shares was $97 million at
December 28, 2013 and is expected to be recognized over a weighted average period of two years.
Our restricted stock, RSU, and Performance Share activity for the year ended December 28, 2013 was:
Number
of Shares
Weighted Average
Grant Date Fair
Value Per Share
Balance at December 30, 2012 3,920,541 $ 35.32
Granted 2,064,111 53.05
Vested (1,380,626) 30.48
Forfeited (454,229) 42.29
Balance at December 28, 2013 4,149,797 44.99
We granted the following RSUs and Performance Shares during the year ended December 28, 2013:
• In February 2013, as part of our annual equity program, we granted 0.7 million RSUs at a market value of
$46.74 per share. During the year ended December 28, 2013, we issued 0.2 million additional RSUs at a
weighted average market value of $53.73.
• In May 2013, we granted 1.0 million Performance Shares at a grant date fair value of $61.80 per share.
These awards measure performance over a multi-year period, during which the employee earns shares
based on internal financial metrics and the performance of our stock relative to a defined peer group. We
measured the grant date fair value using the Monte Carlo simulation model, which assists in estimating the
probability of achieving the market conditions stipulated in the award grant.
• In February 2013, we also granted 0.2 million additional Performance Shares with a weighted average
market value of $29.70 per share (based on the original award date), which vested immediately. We
granted these shares based on the final business performance rating for the 2010-2012 award cycle.
These shares were adjusted and converted into new equity awards using a formula designed to preserve
the value of the awards immediately prior to the Spin-Off.
During the year ended December 28, 2013, 1.4 million shares of restricted stock, RSUs, and Performance Shares
vested at an aggregate market value of $65 million.
Prior to the Spin-Off, our employees participated in various International stock-based compensation
plans. As such, we were allocated stock-based compensation expense of $39 million in 2012 and $51 million in
2011 associated with these plans. In connection with the Spin-Off, we were required to reimburse
International for their stock awards that were granted to our employees, and International was required to
reimburse us for our stock awards that were granted to their employees. We settled the net amount we owed for
this reimbursement of $55 million in March 2013.
Note 9. Postemployment Benefit Plans
We provide a range of benefits to our employees and retirees. These include pension benefits, postretirement
health care benefits, and other postemployment benefits, as follows: