Chevron 2004 Annual Report Download - page 76
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Please find page 76 of the 2004 Chevron 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.74 CHEVRONTEXACO CORPORATION 2004 ANNUAL REPORT
and2002,respectively,tosatisfyLESOPdebtserviceinexcessof
dividendsreceivedbytheLESOP.
InJanuary2005,thecompanycontributed$98topermitthe
LESOPtomakea$144debtservicepayment,whichincludeda
principalpaymentof$113.
SharesheldintheLESOParereleasedandallocatedtothe
accountsofplanparticipantsbasedondebtservicedeemedto
bepaidintheyearinproportiontothetotalofcurrent-yearand
remainingdebtservice.LESOPsharesasofDecember31,2004
and2003,wereasfollows:
Thousands 2003
Allocated shares* 24,198
Unallocated shares 13,634
Total LESOP shares 37,832
* 2003 share amounts restated to reflect a two-for-one stock split effected as a 100
percent stock dividend in 2004.
BenefitPlanTrust Texacoestablishedabenefitplantrustfor
fundingobligationsundersomeofitsbenefitplans.Atyear-end
2004,thetrustcontained14.2millionsharesofChevronTexaco
treasurystock.Thecompanyintendstocontinuetopayitsobli-
gationsunderthebenefitplans.Thetrustwillselltheshares
orusethedividendsfromthesharestopaybenefitsonlytothe
extentthatthecompanydoesnotpaysuchbenefits.Thetrustee
willvotethesharesheldinthetrustasinstructedbythetrust’s
beneficiaries.Thesharesheldinthetrustarenotconsidered
outstandingforearnings-per-sharepurposesuntildistributed
orsoldbythetrustinpaymentofbenefitobligations.
ManagementIncentivePlans ChevronTexacohastwoincentive
plans,theManagementIncentivePlan(MIP)andtheLong-Term
IncentivePlan(LTIP),forofficersandotherregularsalaried
employeesofthecompanyanditssubsidiarieswhoholdpositions
ofsignificantresponsibility.Theplanswereexpandedin2002
toincludeformeremployeesofTexacoandCaltex.TheMIPis
anannualcashincentiveplanthatlinksawardstoperformance
resultsoftheprioryear.Thecashawardsmaybedeferredbythe
recipientsbyconversiontostockunitsorotherinvestmentfund
alternatives.AwardsundertheLTIPmaytaketheformof,but
arenotlimitedto,stockoptions,restrictedstock,stockunits
andnonstockgrants.Texacoalsohadacashincentiveprogram
andaStockIncentivePlan(SIP)thatincludedstockoptions,
restrictedstockandotherincentiveawardsforexecutives,direc-
torsandkeyemployees.AwardsundertheCaltexLTIPwerein
theformofperformanceunitsandstockappreciationrights.
Aggregatechargestoexpenseforthesemanagementincentive
plans,excludingexpenserelatedtoLTIPandSIPstockoptions
andrestrictedstockawardsthatarediscussedinNote23that
follows,were$214,$148and$48in2004,2003and2002,respec-
tively.Includedinthisamountfor2004was$14relatedtostock
appreciationrights.
OtherIncentivePlans Thecompanyhasaprogramthatprovides
eligibleemployees,otherthanthosecoveredbyMIPandLTIP,with
anannualcashbonusifthecompanyachievescertainfinancial
andsafetygoals.Chargesfortheprogramwere$339,$151and
$158in2004,2003and2002,respectively.
ThecompanyappliesAPBOpinionNo.25andrelatedinterpreta-
tionsinaccountingforitsstock-basedcompensationprograms.
Stock-basedcompensationexpense(credit)recognizedincon-
nectionwiththeseprogramsandthestockappreciationrights
discussedpreviouslywas$16,$2and$(2)in2004,2003and
2002,respectively.
RefertoNote1onpage54fortheproformaeffectsonnet
incomeandearningspersharehadthecompanyappliedthefair-
value-recognitionprovisionsofFASNo.123.
Inthediscussionbelow,thereferencestosharepriceand
numberofshareshavebeenadjustedforthetwo-for-onestocksplit
inSeptember2004,whichisdiscussedinNote3onpage57.
Broad-BasedEmployeeStockOptions In1998,Chevrongrantedto
alleligibleemployeesoptionsthatvariedfrom200to600shares
ofstockorequivalents,dependentontheemployee’ssalaryor
jobgrade.TheseoptionsvestedaftertwoyearsinFebruary2000
andexpireinFebruary2008.Optionsfor9,641,600shareswere
awardedatanexercisepriceof$38.15625pershare.Outstanding
optionshareswere4,018,350attheendof2002.In2003,exer-
cisesof23,260andforfeituresof122,100reducedtheoutstanding
optionsharesto3,872,990attheendoftheyear.In2004,exercises
of1,720,946andforfeituresof42,540reducedtheoutstanding
optionsharesto2,109,504attheendoftheyear.Thecompany
recordedexpense(credit)of$2,$2and$(2)fortheseoptionsin
2004,2003and2002,respectively.
Thefairvalueofeachoptionshareonthedateofgrantunder
FASNo.123wasestimatedat$9.54usingtheaverageresultsof
Black-Scholesmodelsforthepreceding10years.The10-yearaver-
agesofeachassumptionusedbytheBlack-Scholesmodelswere:a
risk-freeinterestrateof7.0percent,adividendyieldof4.2percent,
anexpectedlifeofsevenyearsandavolatilityof24.7percent.
Long-TermIncentivePlan StockoptionsgrantedundertheLTIP
extendfor10yearsfromthedateofgrant.Effectivewithoptions
grantedinJune2002,one-thirdoftheoptionsvestoneachofthe
first,secondandthirdanniversariesofthedateofgrant.Priorto
thischange,optionsgrantedbyChevronvestedoneyearafterthe
dateofgrant,whereasoptionsgrantedbyTexacounderitsSIP
vestedoveratwo-yearperiodatarateof50percenteachyear.
Fora10-yearperiodafterApril2004,nomorethan160million
sharesmaybeissuedunderthePlan,andnomorethan64million
ofthosesharesmaybeinaformotherthanastockoption,stock
appreciationrightorawardrequiringfullpaymentforsharesbythe
awardrecipient.Thisprovisionreplacedaformulathatrestricted
annualawardstonomorethan1percentofsharesoutstanding
atthebeginningofeachyear.Notcountedagainstthe160mil-
lion-sharemaximumaresharesissuedasaresultoftheexerciseof
optionsthatweregrantedbeforethechangeinformulain2004.
OntheclosingofthemergerinOctober2001,outstand-
ingoptionsgrantedundertheTexacoSIPwereconvertedto
ChevronTexacooptionsatthemergerexchangerateof0.77.
Theseoptionsretainedaprovisionforrestoredoptions.This
featureenablesaparticipantwhoexercisesastockoptionby
exchangingpreviouslyacquiredcommonstockorwhohasshares
withheldtosatisfytaxwithholdingobligationstoreceivenew
optionsequaltothenumberofsharesexchangedorwithheld.
Therestoredoptionsarefullyexercisablesixmonthsafterthe
dateofgrant,andtheexercisepriceisthefairmarketvalueof
thecommonstockonthedaytherestoredoptionisgranted.
RestrictedsharesgrantedundertheformerTexacoplancon-
Notes to the Consolidated Financial Statements
Millionsofdollars,exceptper-shareamounts
EMPLOYEE BENEFIT PLANS – Continued