Graco 2012 Annual Report Download - page 91

Download and view the complete annual report

Please find page 91 of the 2012 Graco 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 118

  • 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
  • 117
  • 118

85
(4) The warrants were dilutive for the period the warrants were outstanding during 2010 because the average price of the Company’s common stock during
quarterly periods the warrants were outstanding was greater than $11.59, the exercise price of the warrants. As disclosed in Footnote 10, the warrants
were settled during September 2010, and as such, dilution for 2010 takes into consideration the period of time the warrants were outstanding.
Net income attributable to participating securities, which consisted of certain of the Company’s outstanding restricted stock awards
and restricted stock units, was $3.5 million, $1.2 million and $3.1 million for 2012, 2011 and 2010, respectively.
FOOTNOTE 15
Stock-Based Compensation
The Company offers stock-based compensation to its employees that includes stock options and time-based and performance-
based restricted stock units, as follows:
Stock Options
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. Stock options issued by the Company generally vest and are expensed
ratably over three to five years. For options granted prior to 2008, options became fully vested and were exercisable for one year
following termination due to death, disability or retirement at age 65 or older. For options granted since the beginning of 2008,
options fully vest and are exercisable for a period of time depending on the employee’s age and years of service in the case of
retirement (as defined in the stock option agreement). Stock option grants are generally subject to forfeiture if employment
terminates prior to vesting, except upon retirement, in which case the options may remain outstanding and exercisable for the
remaining contractual term of the option.
Time-Based Restricted Stock Units
Awards of time-based 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 one to three years from the date of grant. In the case of
retirement (as defined in the award agreement), awards vest depending on the employee’s age and years of service. The time-
based restricted stock units have rights to dividend equivalents payable in cash. The Company expenses the cost of restricted stock
units ratably over the vesting period.
Performance-Based Restricted Stock Units
Performance-based restricted stock unit awards 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. The performance-based restricted stock units generally 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. Other performance-based restricted stock units entitle the recipient to shares of common
stock if specified market and service conditions are achieved and vest no earlier than one year from the date of grant and no later
than seven years from the date of grant. 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. In the case of retirement (as defined in the
award agreement), awards vest depending on the employee’s age and years of service subject to the satisfaction of the applicable
performance criteria.
Stock Plans
The Company’s stock plans include plans adopted in 2003 and 2010. In 2010, a plan was approved by the Company’s stockholders
(the “2010 Plan”). Upon approval of the 2010 Plan, shares available for issuance of new awards under all plans other than the
2010 Plan were canceled, and all future grants are required to be made from the 2010 Plan. The total number of shares of the
Company’s common stock that may be issued under the 2010 Plan may not exceed 21.0 million; however, stock awards and stock
units for one share reduce availability under the 2010 Plan by 2.5 shares. The 2010 Plan generally provides for awards to vest
over a minimum three-year period, except for performance-based grants, which may vest over a minimum of one year.