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page 85 |99 AR
The weighted average fair value at date of grant for stock
options granted during fiscal 1999, 1998 and 1997 was $29.76,
$11.19 and $8.38 per option, respectively. The fair value of stock
options at date of grant was estimated using the Black-Scholes
option pricing model utilizing the following weighted average
assumptions:
FISCAL FISCAL FISCAL
1999 1998 1997
Risk-free interest rate 5.9% 4.9% 6.0%
Expected option life in years 5.6 4.8 6.0
Expected stock price volatility 38.6% 33.2% 28.0%
Expected dividend yield 1.1% 1.3% 1.3%
13 EMPLOYEE BENEFIT PLANS
The Company sponsors various pension plans for the majority of its
worldwide employees. The Company provides certain other postre-
tirement benefits, primarily health care and life insurance, to eligi-
ble employees. The Company also provides certain benefits to for-
mer or inactive employees prior to retirement. The following sum-
marizes these plans:
PENSION PLANS
Substantially all of the U.S. employees of the Company and its U.S.
affiliates are covered by non-contributory pension plans that are
qualified under Section 401(a) of the Internal Revenue Code (the
“Qualified Plans”). Unfunded supplementary plans (the
“Supplemental Plans”) cover certain executives. In addition to the
Qualified Plans and the Supplemental Plans (collectively, the “U.S.
Plans”), 10 of the Company’s international subsidiaries also have
pension plans covering substantially all of their employees. These
pension plans generally provide pension benefits that are based on
each employee’s years of credited service and on compensation lev-
els specified in the plans. For the Qualified Plans and the other
international plans, the Company’s policy is to fund at least the
amounts sufficient to meet minimum funding requirements under
applicable employee benefit and tax regulations. Liabilities for ben-
efits payable under the Supplemental Plans are accrued by the
Company and are funded when paid to the beneficiaries.
The following tables present information for the Company’s
pension plans on an aggregate basis.
Pension expense includes the following components:
FISCAL FISCAL FISCAL
(dollars in millions) 1999 1998 1997
U.S. Plans:
Service cost, benefits earned
during the period $ 98 $72 $54
Interest cost on projected
benefit obligation 80 78 67
Expected return on plan assets (86) (87) (66)
Net amortization 8 11
Total U.S. plans 100 64 56
Total international plans 18 12 9
Net pension expense $118 $76 $65
The following table provides the assumptions used in determining
the Company’s benefit obligation for the U.S. Plans:
FISCAL FISCAL
1999 1998
Weighted average discount rate 7.50% 6.75)%
Rate of increase in future
compensation levels 5.00% 5.00)%
Expected long-term rate of
return on plan assets 9.00% 9.00)%