Note 8. Employee Benefit Plans
A. Stock Plans. The Company has stock option plans which provide
for the issuance to eligible employees of incentive and non-qualified
stock options, which may expire as much as 10 and 12 years, respectively,
from the date of grant, at prices not less than the fair market
value on the date of grant. At June 30, 1997, there were 6,200
participants in the plans. The aggregate purchase price for options
outstanding at June 30, 1997 was approximately $615 million. The
options expire between 1997 and 2007.
A summary of changes in the stock option plans for the three years
ended June 30, 1997 is as follows:
(In thousands, except per share amounts)
| Years ended June 30 | ||||||
| Options outstanding, beginning of year | ||||||
| Options granted | ||||||
| Options exercised | ||||||
| Options canceled | ||||||
| Options outstanding, end of year | ||||||
| Options exercisable, end of year | ||||||
| Shares available for future grants, end of year | ||||||
| Shares reserved for issuance under stock option plans | ||||||
Summarized information about stock options outstanding as of June
30, 1997 is as follows:
| Exercise Price Range | (In Thousands) | (Life In Years) | (In Thousands) | ||
| Under $10 | |||||
| $10 to $20 | |||||
| $20 to $30 | |||||
| $30 to $40 | |||||
| Over $40 | |||||
The Company has stock purchase plans under which eligible employees
have the ability to purchase shares of common stock at 85% of
the lower of market value as of the date of purchase election
or end of the plan. Approximately 2.0 million shares are scheduled
for issuance on December 31, 1997 and on December 31, 1998. Approximately
1.8 million and 1.9 million shares were issued during the years
ended June 30, 1997 and 1996 respectively. At June 30, 1997 and
1996, there were approximately 8.6 million shares reserved for
purchase under the plan. Included in liabilities as of June 30,
1997 and 1996 are employee stock purchase plan withholdings of
approximately $56 million and $51 million, respectively.
The Company has elected to continue to follow APB 25 to account
for its stock plans. FASB Statement No. 123 requires that the
Company disclose the pro forma net income impact of options and
stock purchase plan rights granted subsequent to July 1, 1995.
The fair value for these instruments was estimated at the date
of grant using a Black-Scholes option pricing model with the following
weighted average assumptions:
| Years ended June 30, | ||
| Risk-free interest rate | ||
| Dividend yield | ||
| Volatility factor | ||
| Expected life: | ||
| Options | ||
| Purchase rights | ||
| Weighted average fair value: | ||
| Options | ||
| Purchase rights |
The Company's pro forma information, amortizing the fair value
of the stock options and stock purchase plan rights issued in
1997 and 1996 over their vesting period, is as follows:
(In millions, except per share amounts)
| Years Ended June 30, | ||
| Pro forma net earnings | ||
| Pro forma earnings per share |
The Company has a restricted stock plan under which shares of
common stock have been sold for nominal consideration to certain
key employees. These shares are restricted as to transfer and
in certain circumstances must be resold to the Company at the
original purchase price. The restrictions lapse over periods of
up to six years. During the years ended June 30, 1997, 1996 and
1995, the Company issued 148,800, 186,800, and 106,300 restricted
shares, and repurchased 20,000, 47,200 and 50,200 shares, respectively.
B. Pension Plan. The Company has a defined benefit cash balance
pension plan covering substantially all U.S. employees, under
which employees are credited with a percentage of base pay each
plus 7% interest. Employees are fully vested on completion of
five years service. The Company's policy is to make contributions
within the range determined by generally accepted actuarial principles.
The plan's funded status is as follows:
(In thousands)
| June 30, | ||
| Funded plan assets at market value, primarily stocks and bonds | ||
| Actuarial present value of benefit obligations: | ||
| Vested benefits | ||
| Non-vested benefits | ||
| Accumulated/projected benefit obligation | ||
| Plan assets in excess of projected benefits | ||
| Prior service cost | ||
| Transition obligation | ||
| Unrecognized net actuarial loss due to different experience than that assumed | ||
| Prepaid pension cost |
The components of net pension expense were as follows:
(In thousands)
| Years ended June 30, | |||
| Service cost - benefits earned during the period | |||
| Interest cost on projected benefits | |||
| Return on plan assets | |||
| Net amortization and deferral | |||
Assumptions used to develop the actuarial present value of benefit
obligations for the three years ended June 30, 1997 were:
| Discount rate | |||
| Expected long-term rate of return on assets | |||
| Rate of increase in compensation levels |
C. Retirement and Savings Plan. The Company has a 401(k) retirement
and savings plan which allows eligible employees to contribute
up to 12% of their compensation annually. The Company matches
a portion of this contribution which amounted to approximately
$19 million, $18 million and $11 million for calendar years 1996,
1995 and 1994, respectively.