Boeing 2006 Annual Report Download - page 69

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The Boeing Company and Subsidiaries 67
Notes to Consolidated Financial Statements
Performance Shares not converted to common stock expire
five years after the date of the award. Awards may vest based
on total shareholder return as follows:
RFor 2002 awards, up to 100% of the award may vest if our
total shareholder return (stock price appreciation plus divi-
dends) during the five-year period exceeds the average total
shareholder return of the S&P 500 over the same period.
RFor 2003 and 2004 awards, up to 125% of the award may
vest based on an award formula using the total shareholder
return performance relative to the S&P 500.
RFor 2005 award, up to 125% of the award may vest based
on an award formula using the total shareholder return per-
formance relative to the S&P 100 and the five-year Treasury
Bill rate.
In the event a participant’s employment terminates due to
retirement, layoff, disability, or death, the participant (or bene-
ficiary) continues to participate in Performance Shares awards
that have been outstanding for at least one year. In all other
cases, participants forfeit unvested awards if their employment
terminates.
The following tables summarize information about Performance
Shares activity:
December 31, 2006
(Shares in thousands) Shares
Number of Performance Shares:
Outstanding at beginning of year 24,859
Granted
Transferred
Dividend 172
Converted or deferred (14,925)
Forfeited (593)
Canceled or expired (5,493)
Outstanding at end of year 4,020
Outstanding at end of year not contingent
on future employment 1,578
Additionally, prior to the adoption of SFAS No. 123R, we
amortized compensation cost for share-based awards over the
stated vesting period for retirement eligible employees and, if
an employee retired before the end of the vesting period, we
recognized any remaining unrecognized compensation cost at
the date of retirement. As a result of adopting SFAS No. 123R,
for all share-based awards granted after January 1, 2005, we
recognize compensation cost for retirement eligible employees
over the greater of one year from the date of grant or the
period from the date of grant to the employee’s retirement eligi-
bility date (non-substantive vesting approach). Had we also
applied the non-substantive vesting approach to awards
granted prior to 2005, compensation expense would have
been $50 and $96 lower and $59 higher for the years ended
December 31, 2006, 2005 and 2004.
Performance Shares
Performance Shares are stock units that are convertible to
com-mon stock, on a one-to-one basis, contingent upon stock
price performance. If, at any time up to five years after award,
the stock price reaches and maintains for twenty consecutive
days a price equal to stated price growth targets, a stated per-
centage (up to 125%) of the Performance Shares awarded are
vested and convertible to common stock. The following table
shows the cumulative vesting percentages based on the cumu-
lative growth rate of the stock above the stock price at the
grant date for performance shares awarded in 2002:
Cumulative Growth 61.0%68.5%76.2%84.2%92.5%101.1%
Cumulative Vesting 25%40%55%75%100%125%
Cumulative stock price growth targets and vesting percentages
for 2003, 2004 and 2005 awards follow:
Cumulative Growth 40%50%60%70%80%90%100%110%120%125%
Cumulative Vesting 15%30%45%60%75%90%100%110%120%125%