Pizza Hut 2004 Annual Report Download - page 68

In฀November฀1997,฀we฀granted฀performance-restricted฀stock฀
units฀of฀YUM’s฀Common฀Stock฀in฀the฀amount฀of฀$3.6฀million฀
to฀our฀Chief฀Executive฀Officer฀(“CEO”).฀The฀award฀was฀made฀
under฀the฀1997฀LTIP฀and฀may฀be฀paid฀in฀Common฀Stock฀or฀
cash฀at฀the฀discretion฀of฀the฀Compensation฀Committee฀of฀the฀
Board฀of฀Directors.฀Payment฀of฀the฀award฀is฀contingent฀upon฀
his฀employment฀through฀ January฀25,฀2006฀ and฀our฀attain-
ment฀ of฀ certain฀ pre-established฀ earnings฀ thresholds.฀ The฀
annual฀expense฀related฀to฀this฀award฀included฀in฀earnings฀
was฀$0.4฀million฀for฀2004,฀2003฀and฀2002.
OTHER฀COMPENSATION฀AND฀BENEFIT฀PROGRAMS฀
NOTE฀19
We฀sponsor฀two฀deferred฀compensation฀benefit฀programs,฀the฀
Restaurant฀Deferred฀Compensation฀Plan฀and฀the฀Executive฀
Income฀ Deferral฀ Program฀ (the฀ “RDC฀ Plan”฀ and฀ the฀ “EID฀
Plan,”฀respectively)฀for฀eligible฀employees฀and฀non-employee฀
directors.
Effective฀October฀1,฀2001,฀participants฀can฀no฀longer฀
defer฀funds฀into฀the฀RDC฀Plan.฀Prior฀to฀that฀date,฀the฀RDC฀
Plan฀allowed฀participants฀to฀defer฀a฀portion฀of฀their฀annual฀
salary.฀ The฀ participant’s฀ balances฀ will฀ remain฀ in฀ the฀ RDC฀
Plan฀until฀their฀scheduled฀distribution฀dates.฀As฀defined฀by฀
the฀RDC฀Plan,฀we฀credit฀the฀amounts฀deferred฀with฀earnings฀
based฀on฀the฀investment฀options฀selected฀by฀the฀participants.฀
Investment฀ options฀ in฀ the฀ RDC฀ Plan฀ consist฀ of฀ phantom฀
shares฀of฀various฀ mutual฀ funds฀and฀ YUM฀Common฀Stock.฀
We฀recognize฀compensation฀ expense฀ for฀the฀appreciation฀
or฀depreciation,฀if฀any,฀attributable฀to฀all฀investments฀in฀the฀
RDC฀Plan.฀Our฀obligations฀under฀the฀RDC฀program฀as฀of฀both฀
year-end฀2004฀and฀2003฀were฀$11฀million.฀We฀recognized฀
compensation฀expense฀of฀$2฀million฀in฀2004,฀$3฀million฀in฀
2003฀and฀less฀than฀$1฀million฀in฀2002฀for฀the฀RDC฀Plan.
The฀EID฀Plan฀ allows฀ participants฀to฀defer฀receipt฀of฀a฀
portion฀of฀their฀annual฀salary฀and฀all฀or฀a฀portion฀of฀their฀
incentive฀compensation.฀As฀defined฀by฀the฀EID฀Plan,฀we฀credit฀
the฀amounts฀deferred฀with฀earnings฀ based฀on฀the฀invest-
ment฀options฀selected฀by฀the฀participants.฀These฀investment฀
options฀ are฀ limited฀ to฀ cash฀ and฀ phantom฀ shares฀ of฀ our฀
Common฀Stock.฀ The฀EID฀ Plan฀allows฀participants฀ to฀ defer฀
incentive฀compensation฀to฀purchase฀phantom฀shares฀of฀our฀
Common฀Stock฀at฀a฀25%฀discount฀from฀the฀average฀market฀
price฀at฀the฀date฀of฀deferral฀(the฀“Discount฀Stock฀Account”).฀
Participants฀bear฀the฀risk฀of฀forfeiture฀of฀both฀the฀discount฀
and฀any฀amounts฀deferred฀to฀the฀Discount฀Stock฀Account฀if฀
they฀voluntarily฀separate฀from฀employment฀during฀the฀two-year฀
vesting฀period.฀We฀expense฀the฀intrinsic฀value฀of฀the฀discount฀
over฀the฀vesting฀period.฀As฀investments฀in฀the฀phantom฀shares฀
of฀our฀Common฀Stock฀can฀only฀be฀settled฀in฀shares฀of฀our฀
Common฀Stock,฀we฀do฀not฀recognize฀compensation฀expense฀
for฀the฀appreciation฀or฀the฀depreciation,฀if฀any,฀of฀these฀invest-
ments.฀Deferrals฀into฀the฀phantom฀shares฀of฀our฀Common฀
Stock฀are฀credited฀to฀the฀Common฀Stock฀Account.
A฀summary฀of฀the฀status฀of฀all฀options฀granted฀to฀employees฀and฀non-employee฀directors฀as฀of฀December฀25,฀2004,฀December฀27,฀
2003฀and฀December฀28,฀2002,฀and฀changes฀during฀the฀years฀then฀ended฀is฀presented฀below฀(tabular฀options฀in฀thousands):
฀2004฀ 2003฀ 2002
฀ ฀ Wtd.฀Avg.฀ ฀ Wtd.฀Avg.฀ ฀ Wtd.฀Avg.฀
฀฀ Exercise฀ ฀ Exercise฀ ฀ Exercise฀
฀Options฀ Price฀ Options฀ Price฀ Options฀ Price
Outstanding฀at฀beginning฀of฀year฀ 46,971฀ $฀18.77฀ 49,630฀ $฀17.54฀ 54,452฀ $฀16.04
Granted฀at฀price฀equal฀to฀average฀market฀price฀ 5,223฀ ฀35.17฀ 7,344฀ ฀24.78฀ 6,974฀ ฀25.52
Exercised฀ (12,306)฀ ฀16.27฀ (6,902)฀ ฀16.18฀ (8,876)฀ ฀14.06
Forfeited฀ (2,780)฀ ฀23.75฀ (3,101)฀ ฀19.18฀ (2,920)฀ ฀19.07
Outstanding฀at฀end฀of฀year฀ 37,108฀ $฀21.53฀ 46,971฀ $฀18.77฀ 49,630฀ $฀17.54
Exercisable฀at฀end฀of฀year฀ 21,033฀ $฀17.64฀ 19,875฀ $฀17.22฀ 17,762฀ $฀13.74
Weighted-average฀fair฀value฀of฀options฀granted฀during฀the฀year฀ ฀ $฀15.11฀ ฀ $฀ 9.43฀ ฀ $฀10.44
The฀following฀table฀summarizes฀information฀about฀stock฀options฀outstanding฀and฀exercisable฀at฀December฀25,฀2004฀(tabular฀
options฀in฀thousands):
฀ Options฀Outstanding฀ Options฀Exercisable
฀ ฀ Wtd.฀Avg.฀
฀ ฀ Remaining฀ Wtd.฀Avg.฀ ฀ Wtd.฀Avg.฀
Range฀of฀Exercise฀Prices฀ Options฀ Contractual฀Life฀ Exercise฀Price฀ Options฀ Exercise฀Price
$฀0–10฀ 338฀ 0.51฀ $฀ 8.87฀ 338฀ $฀ 8.87
10–15฀ 4,418฀ 2.46฀ ฀12.96฀ 4,258฀ ฀ 13.01
15–20฀ 13,536฀ 5.17฀ ฀16.21฀ 10,392฀ ฀ 15.76
20–30฀ 13,172฀ 6.85฀ ฀24.46฀ 5,625฀ ฀ 23.75
30–40฀ 5,500฀ 8.76฀ ฀34.75฀ 408฀ ฀ 36.17
40–50฀ 144฀ 9.79฀ ฀41.41฀ 12฀ ฀ 43.52
฀ ฀ ฀ ฀ 37,108฀ ฀ ฀ ฀ 21,033
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