Sunbeam 2007 Annual Report Download - page 78

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restricted share awards were based on the closing price of the Company’s common stock on the dates of grant.
For those restricted share awards with only service conditions, the Company recognizes compensation cost on a
straight-line basis over the explicit service period. For those restricted share awards with market conditions, the
Company recognizes compensation cost on a straight-line basis over the derived service period unless the market
condition is satisfied prior to the end of the derived service period. For performance only awards, the Company
recognizes compensation cost on a straight-line basis over the implicit service period which represents the
Company’s best estimates for when the target will be achieved. If it becomes apparent the original service
periods are no longer accurate, the remaining unrecognized compensation cost will be recognized over the
revised service periods. For restricted share awards that contain both service and market or performance vesting
conditions, compensation cost is recognized over the shorter of the two conditions if only one of the conditions
must be met or the longer of the two conditions if both must be met.
For restricted awards that contain performance or market vesting conditions, the Company excludes these
awards from diluted earning per share computations until the contingency is met as of the end of that reporting
period.
Had stock-based compensation costs been recognized using the fair value method for all of 2005, pro forma
net income allocable to shareholders and earnings per share would have been presented as follows (in millions,
except per share data):
Year ended
December 31, 2005
Net income, as reported(1) ...................................................... $60.7
Paid-in-kind dividends on Series B and C preferred stock .......................... (9.7)
Charges from beneficial conversions of Series B and C preferred Stock ............... (38.9)
Income available to common stockholders .......................................... $12.1
Add: Total stock-based employee compensation expense included in reported net income,
net of related tax effects .................................................. 38.1
Deduct: Total stock-based employee compensation expense determined under the fair
value based method for all awards, net of tax related effects(2) .................... (32.5)
Pro forma net income available to common stockholders .............................. $17.7
Basic earnings per share:
As reported(1) ............................................................ $0.23
Pro forma(2) ............................................................. $0.33
Diluted earnings per share:
As reported(1) ............................................................ $0.22
Pro forma(2) ............................................................. $0.32
(1) Net income and earnings per share prior to October 1, 2005 does not include stock-based compensation
expense related to stock options and employee stock purchase plans.
(2) Stock-based compensation expense and pro forma earnings per share prior to October 1, 2005 were
calculated using pro forma guidance under SFAS 123.
Pension and Postretirement Plans
The Company records annual amounts relating to its pension and postretirement plans based on calculations
which include various actuarial assumptions, including discount rates, assumed rates of return, compensation
increases, turnover rates and healthcare cost trend rates. The Company reviews its actuarial assumptions on an
annual basis and makes modifications to the assumptions based on current rates and trends when it is deemed
appropriate to do so. The effect of modifications is generally recorded or amortized over future service periods.
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