Pizza Hut 2004 Annual Report Download - page 67
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Please find page 67 of the 2004 Pizza Hut 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.PlanAssets Ourpensionplanweighted-averageassetallo-
cations at September 30,byasset category areset forth
below:
AssetCategory2004 2003
Equitysecurities 70% 65%
Debtsecurities 28% 30%
Cash 2% 5%
Total 100% 100%
Ourprimaryobjectivesregardingthepensionassetsareto
optimizereturnonassetssubjecttoacceptableriskandto
maintainliquidity,meetminimumfundingrequirementsand
minimizeplanexpenses.Toachievetheseobjectives,wehave
adoptedapassiveinvestmentstrategyinwhichtheasset
performanceisdrivenprimarilybytheinvestmentallocation.
Ourtargetinvestmentallocationis70%equitysecuritiesand
30%debtsecurities,consistingprimarilyoflowcostindex
mutual funds that track several sub-categories of equity
anddebtsecurityperformance.Theinvestmentstrategyis
primarilydrivenbyourPlan’sparticipants’agesandreflectsa
long-terminvestmenthorizonfavoringahigherequitycompo-
nentintheinvestmentallocation.
A mutual fund held as an investment by the Plan
includesYUMstockintheamount of$0.2millionatboth
September30,2004and2003(lessthan1%oftotalplan
assetsineachinstance).
BenefitPayments Thebenefitsexpectedtobepaidineach
ofthenextfiveyearsandintheaggregateforthefiveyears
thereafteraresetforthbelow:
Pension Postretirement
Yearended: Benefits MedicalBenefits
2005 $ 17 $ 5
2006 22 5
2007 25 6
2008 28 6
2009 32 6
2010–2014 242 35
Expected benefits are estimated based on the same
assumptions used to measure our benefit obligation on
ourmeasurementdateofSeptember30,2004andinclude
benefitsattributabletoestimatedfurtheremployeeservice.
STOCK-BASEDEMPLOYEECOMPENSATION
NOTE18
Atyear-end2004,wehadfourstockoptionplansineffect:
theYUM!Brands,Inc.Long-TermIncentivePlan(“1999LTIP”),
the1997Long-TermIncentivePlan(“1997LTIP”),theYUM!
Brands,Inc.RestaurantGeneralManagerStockOptionPlan
(“RGMPlan”)andtheYUM!Brands,Inc. SharePowerPlan
(“SharePower”).During2003,the1999LTIPwasamended,
subsequenttoshareholderapproval,to increase thetotal
numberofsharesavailableforissuanceandtomakecertain
othertechnicalandclarifyingchanges.
We may grant awards of up to 29.8million shares
and 45.0million shares of stockunder the 1999 LTIP,as
amended,and1997LTIP,respectively. Potentialawardsto
employeesandnon-employeedirectorsunderthe1999LTIP
includestockoptions,incentivestockoptions,stockapprecia-
tionrights,restrictedstock,stockunits,restrictedstockunits,
performancesharesandperformanceunits.Potentialawards
toemployeesandnon-employeedirectorsunderthe1997
LTIPincludestockappreciationrights,restrictedstockand
performance-restrictedstockunits.PriortoJanuary1,2002,
wealsocouldgrantstockoptionsandincentivestockoptions
underthe1997LTIP.Wehaveissuedonlystockoptionsand
performance-restrictedstockunitsunderthe1997LTIPand
haveissuedonlystockoptionsunderthe1999LTIP.
We may grant stock options under the 1999 LTIP to
purchasesharesatapriceequaltoorgreaterthantheaver-
agemarketpriceofthestockonthedateofgrant.Newoption
grantsunderthe1999LTIPcanhavevaryingvestingprovisions
andexerciseperiods.Previouslygrantedoptionsunderthe
1997LTIPand1999LTIPvestinperiodsrangingfromimmedi-
ateto2008andexpiretentofifteenyearsaftergrant.
Wemaygrantoptionsto purchaseupto 15.0million
sharesofstockundertheRGMPlanatapriceequaltoor
greaterthantheaveragemarketpriceofthestockonthedate
ofgrant.RGMPlanoptionsgrantedhaveafour-yearvesting
periodandexpiretenyearsaftergrant.Wemaygrantoptions
topurchase up to 14.0millionsharesof stockat aprice
equaltoorgreaterthantheaveragemarketpriceofthestock
onthedateofgrantunderSharePower.Previouslygranted
SharePoweroptionshaveexpirationsthrough2014.
AttheSpin-offDate,weconvertedcertainoftheunvested
options to purchase PepsiCo stock that were held by our
employeestoYUMstockoptionsundereitherthe1997LTIP
orSharePower.Weconverted theoptionsat amountsand
exercisepricesthat maintainedtheamountofunrealized
stockappreciationthatexistedimmediatelypriortotheSpin-
off.Thevestingdatesandexerciseperiodsoftheoptions
werenotaffectedbytheconversion.Basedontheiroriginal
PepsiCograntdate,theseconvertedoptionsvestinperiods
rangingfromonetotenyearsandexpiretentofifteenyears
aftergrant.
Weestimatedthefairvalueofeachoptiongrantmade
during2004,2003and2002asofthedateofgrantusing
theBlack-Scholes option-pricing model withthe following
weighted-averageassumptions:
2004 2003 2002
Risk-freeinterestrate 3.2% 3.0% 4.3%
Expectedlife(years) 6.0 6.0 6.0
Expectedvolatility 40.0% 33.6% 33.9%
Expecteddividendyield 0.1%(a) 0.0% 0.0%
(a)Theweighted-averageassumption for theexpected dividend yieldreflects an
assumptionof0%forstockoptionsgrantedpriortotheinitiationofourquarterly
stockdividendin2004and1%thereafter.
65
Yum!Brands,Inc.