Sunbeam 2007 Annual Report Download - page 63

Download and view the complete annual report

Please find page 63 of the 2007 Sunbeam 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 156

  • 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
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156

6.25%, respectively. A one percentage point decrease in the discount rate at the 2007 measurement dates would
increase the pension plans’ accumulated benefit obligation by approximately $39 million.
The health care cost trend rates used in valuing the Company’s postretirement benefit obligation are
established based upon actual health care cost trends and consultation with its actuaries and benefit providers. At
the 2007 measurement dates, the current weighted average healthcare trend rate assumption was 8.0% for pre-age
65 and 9.0% for post-age 65. The current trend rate gradually decreases to an ultimate trend rate of 5.0%.
A one percentage point increase in the assumed health care cost trend rates would have the following effects
(in millions):
Accumulated postretirement benefit obligation ...................................... $0.1
Aggregate of the service and interest cost components net postretirement benefit cost ........ 0.8
A one percentage point decrease in the assumed health care cost trend rates would have the following effects
(in millions):
Accumulated postretirement benefit obligation ...................................... $(0.1)
Aggregate of the service and interest cost components net postretirement benefit cost ....... (0.7)
Product liability
As a consumer goods manufacturer and distributor, the Company faces the risk of product liability and
related damages for substantial money damages, product recall actions and higher than anticipated rates of
warranty returns or other returns of goods. Each year the Company sets its product liability insurance program,
which is an occurrence-based program based on current and historical claims experience and the availability and
cost of related insurance.
Stock-Based Compensation Expense
Effective October 1, 2005, the Company adopted SFAS No. 123 (Revised 2004), “Share-Based Payment”
(“SFAS 123r”), which requires the measurement and recognition of all unvested outstanding stock-based
payment awards made to employees and directors based on estimated fair value at date of grant. Prior to this as
permitted under SFAS No. 123, the Company accounted for the issuance of stock options and restricted stock
using the intrinsic value method in accordance with Accounting Principles Opinion No. 25, Accounting for Stock
Issued to Employees (“APB 25”) and related interpretations. Under SFAS 123r, compensation cost is recognized
on a straight-line basis in the Consolidated Statements of Income related to stock options and restricted stock
expected to vest as well as the Company’s employee stock purchase plans. Prior to this under the aforementioned
intrinsic value method, the Company did not recognize compensation cost related to stock options in the
Consolidated Statements of Income when the exercise price equaled the market price of the underlying stock on
the date of grant. However, the Company would recognize compensation cost in circumstances where the market
price of the underlying stock exceeds the exercise price of the Company’s stock options on the date of grant.
The fair value of stock options was determined using the Black-Scholes option-pricing model which was
previously used for disclosing the Company’s pro forma information under SFAS 123. The fair value of the
market-based restricted stock awards was determined using a Monte Carlo simulation embedded in a lattice
model, and for all other restricted stock awards were based on the closing price of the Company’s common stock
on the date of grant. The determination of the fair value of the Company’s stock option awards and restricted
stock awards is based on a variety of factors including, but not limited to, the Company’s common stock price,
expected stock price volatility over the expected life of awards, and actual and projected exercise behavior.
Additionally, the Company estimates forfeiture for options and restricted stock awards at the grant date of the
award based on historical experience and are adjusted as necessary if actual forfeitures differ from these
estimates. Certain performance awards require management’s judgement as to whether performance targets will
be achieved.
51