SunTrust 2004 Annual Report Download - page 91

Download and view the complete annual report

Please find page 91 of the 2004 SunTrust annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 116

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued
SUNTRUST 2004 ANNUAL REPORT 89
In the opinion of management, it is more likely than not that all of
the deferred tax assets will be realized; therefore, a valuation
allowance is not necessary.
SunTrust and its subsidiaries file consolidated income tax returns
where permissible or required. Each subsidiary generally remits cur-
rent taxes to or receives current refunds from the Parent Company
based on what would be required had the subsidiary filed an income
tax return as a separate entity. The Company’s federal and state
income tax returns are subject to review and examination by gov-
ernment authorities. Various examinations are now in progress.
Examinations settled in 2004 resulted in a $14.2 million reduction
in income tax expense. In the opinion of management, any future
adjustments which may result from these examinations should not
have a material adverse effect on the Company’s Consolidated
Financial Statements.
Note 16 / EMPLOYEE BENEFIT PLANS
SunTrust sponsors various incentive plans for eligible employees.
The Management Incentive Plan for key executives provides for
annual cash awards, if any, based on the attainment of Company
profit plan and revenue goals, and the achievement of business unit,
as well as, individual performance objectives.The Performance Unit
Plan (PUP) for key executives provides awards, if any, based on
multi-year earnings performance in relation to earnings goals
established by the Compensation Committee (Committee) of the
Company’s Board of Directors.
The Company also sponsors an Executive Stock Plan (Stock Plan)
under which the Committee has the authority to grant stock
options, Restricted Stock and Performance based Restricted Stock
(Performance Stock) to key employees of the Company. For the
2004 Stock Plan, the Company has 14 million shares of common
stock reserved for issuance, of which no more than 2.8 million
shares may be issued as Restricted Stock. Options granted are at no
less than the fair market value of a share of stock on the grant date
and may be either tax-qualified incentive stock options or non-
qualified options. Prior to 2002, the Company did not record
expense as a result of the grant or exercise of any of the stock
options. Effective January 1, 2002, the Company adopted prospec-
tively the fair-value recognition approach and began expensing the
cost of stock options.
With respect to Performance Stock, shares must be granted,
awarded and vested before participants take full title. After
Performance Stock is granted by the Committee, specified portions
are awarded based on increases in the average market value of
SunTrust common stock from the initial price specified by the
Committee.Awards are distributed on the earliest of (i) fifteen years
after the date shares are awarded to participants; (ii) the participant
attaining age 64; (iii) death or disability of a participant; or (iv) a
change in control of the Company as defined in the Stock Plan.
Dividends are paid on awarded but unvested Performance Stock,
and participants may exercise voting privileges on such shares.
The compensation element for Performance Stock (which is
deferred and shown as a reduction of shareholders’ equity) is equal
to the fair market value of the shares at the date of the award and is
amortized to compensation expense over the period from the
award date to age 64 or the 15th anniversary of the award date
whichever comes first. Approximately 40% of Performance Stock
awarded fully vested on February 10, 2000 and is no longer subject
to the forfeiture condition set forth in the agreements.This early
vested Performance Stock was converted into an equal number of
“Phantom Stock Units” as of that date. Payment of Phantom Stock
Units will be made to participants in shares of SunTrust stock upon
the earlier to occur of (1) the date on which the participant would
have vested in his or her Performance Stock or (2) the date of a
change in control. Dividend equivalents will be paid at the same rate
as the shares of Performance Stock; however, these units will not
carry voting privileges.
Compensation expense related to the incentive plans for the three years ended December 31 were as follows:
(Dollars in thousands) 2004 2003 2002
401(k) Plan $49,046 $44,090 $43,670
Management Incentive Plan and Performance Unit Plan 55,027 29,849 (5,664)
Performance Stock 8,515 5,475 3,074