Graco 2009 Annual Report Download - page 73

Newell Rubbermaid Inc. 2009 Annual Report
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FOOTNOTE 15
STOCK-BASED COMPENSATION
The Company offers stock-based compensation to its employees that includes stock options, restricted stock awards, and time-based and performance-based
restricted stock units, as follows:
Stock Options
The Company’s stock plans include plans adopted in 1993 and 2003. The Company has issued both nonqualified and incentive stock options at exercise
prices equal to the Company’s common stock price on the date of grant with contractual terms of ten years. Historically, stock options issued by the
Company generally vested and were expensed ratably over three to five years, except that in the case of termination due to death, disability or retirement at
age 65 or older, options became fully vested and were exercisable for one year following termination. In 2008, the Company modified the retirement
provisions applicable to future option grants so that in the case of retirement (as defined in the stock option agreement), options fully vest and are
exercisable for a period of time depending on the employee’s age and years of service. Stock option grants are generally subject to forfeiture if employment
terminates prior to vesting.
Restricted Stock and Time-Based Restricted Stock Units
Awards of restricted stock and restricted stock units are independent of stock option grants and are generally subject to forfeiture if employment
terminates prior to vesting. The awards generally cliff-vest three years from the date of grant. In 2008, the Company modified the retirement provisions
applicable to future restricted stock awards so that in the case of retirement at age 65 or older, the awards fully vest. With respect to future awards of
restricted stock units, in the case of retirement (as defined in the award agreement), awards vest depending on the employee’s age and years of service.
Prior to vesting, ownership of restricted shares cannot be transferred. The restricted stock has the same dividend and voting rights as the common stock,
and the time-based restricted stock units have rights to dividend equivalents payable in cash. The Company expenses the cost of restricted stock awards
and restricted stock units ratably over the vesting period, which is generally three years.
Performance-Based Restricted Stock Units and Performance Shares
Performance-based restricted stock units and performance share awards issued under the 2003 Stock Plan represent the right to receive unrestricted shares of stock
based on the achievement of Company performance objectives and/or individual performance goals established by the Organizational Development & Compensation
Committee and the Board of Directors. In 2009, the Company awarded approximately 1.2 million performance-based restricted stock units which entitle recipients
to shares of the Company’s stock at the end of a three-year vesting period if specified market conditions are achieved by the Company. The performance-based
restricted stock units entitle recipients to shares of common stock equal to 0% up to 200% of the number of units granted at the vesting date depending on the
level of achievement of the specified conditions. Performance-based restricted stock units are not subject to the payment of dividend equivalents in the same
manner as time-based restricted stock units. Rather, with respect to performance-based restricted stock units, dividend equivalents are credited to the recipient
and are paid only to the extent the applicable performance criteria are met and the performance-based restricted stock units vest and the related stock is issued.
The Company also awarded performance shares that immediately vested in February 2007 based on 2006 performance.
As of December 31, 2009, the Company had 29.5 million shares authorized for issuance under the 2003 Stock Plan, of which 20.5 million were reserved for
issuance for 14.9 million options outstanding, 3.4 million restricted stock awards and restricted stock units outstanding, and 2.2 million reserved for issuance
for performance-based restricted stock units, which represents 200% of the outstanding performance awards granted in 2009. As of December 31, 2009,
the Company had 9.0 million shares available for issuance under the 2003 Stock Plan. As of December 31, 2009, the Company had 1.4 million options
outstanding under the 1993 plan.
The Company accounts for stock-based compensation pursuant to relevant authoritative guidance, which requires measurement of compensation cost
for all stock awards at fair value on the date of grant and recognition of compensation, net of estimated forfeitures, over the requisite service period for awards
expected to vest.
The table below summarizes the expense related to share-based payments for the years ended December 31, (in millions):
2009 2008 2007
Stock options $14.4 $16.9 $17.2
Restricted stock 20.7 18.7 19.2
Stock-based compensation $35.1 $35.6 $36.4
Stock-based compensation, net of income tax benefit of $5.3 million, $11.6 million and
$13.8 million in 2009, 2008 and 2007, respectively $29.8 $24.0 $22.6