LVLT » Topics » (11) Employee Benefit Plans

This excerpt taken from the LVLT 10-Q filed May 12, 2008.

(10) Employee Benefit Plans

 

The following table summarizes non-cash compensation expense and capitalized non-cash compensation for the three months ended March 31, 2008 and 2007.

 

 

 

Three Months Ended
March 31,

 

(dollars in millions)

 

2008

 

2007

 

 

 

 

 

 

 

OSO

 

$

4

 

$

9

 

Restricted Stock

 

11

 

7

 

401(k) Match Expense

 

8

 

8

 

 

 

$

23

 

$

24

 

 

This excerpt taken from the LVLT 10-K filed Feb 29, 2008.

(16) Employee Benefit Plans

        The Company adopted the recognition provisions of SFAS No. 123 in 1998. Under SFAS No. 123, the fair value of an option or other stock-based compensation (as computed in accordance with accepted option valuation models) on the date of grant was amortized over the vesting periods of the option or stock grant.

        Although the recognition of the value of the instruments results in compensation expense in an entity's financial statements, the expense differs from other compensation expense in that these charges may not be settled in cash, but rather, are generally settled through issuance of common stock.

        Beginning January 1, 2006, the Company adopted SFAS No. 123R. SFAS No. 123R requires that estimated forfeitures be factored in the amount of expense recognized for awards that are not fully vested. The Company has historically recorded the effect of forfeitures of equity awards as they occur. The effect of applying the change from the original provisions of SFAS No. 123 on the Company's results of operations, basic and diluted earnings per share and cash flows for the year ended December 31, 2006 was not material.

        The adoption of SFAS No. 123 resulted in material non-cash charges to operations since its adoption in 1998, and the adoption of SFAS No. 123R on January 1, 2006 continues to result in material non-cash charges to operations in the future. The amount of the non-cash charges will be dependent upon a number of factors, including the number of grants, the fair value of each grant estimated at the time of its award and the number of grants that ultimately vest.

F-65


LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(16) Employee Benefit Plans (Continued)

        The Company recognized in loss from continuing operations a total of $122 million, $84 million and $51 million of non-cash compensation in 2007, 2006 and 2005, respectively. Included in discontinued operations is non-cash compensation expense of zero, $2 million and $6 million in 2007, 2006 and 2005, respectively.

        The Company provides an accelerated vesting of stock awards upon retirement if an employee meets certain age and years of service requirements and certain other requirements. Under SFAS No. 123R, if an employee meets the age and years of service requirements under the accelerated vesting provision, the award would be expensed at grant or expensed over the period from the grant date to the date the employee meets the requirements, even if the employee has not actually retired. The Company recognized $11 million of non-cash compensation expense in 2007 for employees that met the age and years of service requirements for accelerated vesting at retirement.

        During the second quarter of 2006, the October 2005 and January 2006 grants of Outperform Stock Option ("OSO") units were revalued using May 15, 2006 as the grant date, in accordance with SFAS No. 123R, and resulted in an additional $6 million in non-cash compensation expense. As stated in the Company's proxy materials for its 2006 Annual Meeting of Stockholders, over the course of the years since April 1, 1998, the compensation committee of the Company's Board of Directors had administered the 1995 Stock Plan under the belief that the action of the Company's Board of Directors to amend and restate the plan effective April 1, 1998 had the effect of extending the original term of the Plan to April 1, 2008. After a further review of the terms of the plan, however, the compensation committee determined that an ambiguity could have existed that may have resulted in an interpretation that the expiration date of the plan was September 25, 2005. To remove any ambiguity, the Board of Directors sought the approval of the Company's stockholders to amend the plan to extend the term of the plan by five years to September 25, 2010. This approval was obtained at the 2006 Annual Meeting of Stockholders held on May 15, 2006.

        The following table summarizes non-cash compensation expense and capitalized non-cash compensation for each of the three years ended years ended December 31, 2007.

 
  2007
  2006
  2005
 
 
  (dollars in millions)

 
OSO   $ 35   $ 38   $ 18  
Restricted Stock     42     20     19  
Shareworks Match Plan             (2 )
401(k) Match Expense     30     18     15  
401(k) Discretionary Grant Plan     16     12     9  
   
 
 
 
      123     88     59  
Capitalized Noncash Compensation     (1 )   (2 )   (2 )
   
 
 
 
      122     86     57  
Discontinued Operations         (2 )   (6 )
   
 
 
 
    $ 122   $ 84   $ 51  
   
 
 
 

F-66


LEVEL 3 COMMUNICATIONS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)

(16) Employee Benefit Plans (Continued)

This excerpt taken from the LVLT 10-Q filed May 10, 2007.

(11) Employee Benefit Plans

The Company recognized in net loss from continuing operations a total of $24 million and $14 million of non-cash compensation for the three months ended March 31, 2007 and 2006, respectively. In addition, included in discontinued operations for the three months ended March 31, 2006, is non-cash compensation expense of $1 million.

The Company capitalized less than $1 million of non-cash compensation for those employees and contractors directly involved in the construction of the network, installation of customers or development of the business support systems for each of the three month periods ended March 31, 2007 and 2006.

SFAS No. 123R requires the benefit of tax deductions in excess of recognized compensation expense be reported as a financing cash flow if the tax benefits are expected to be realizable. As the Company is currently in a net operating loss position and does not expect to generate net income in the near term, Level 3’s management does not expect to realize tax benefits from share-based compensation for the foreseeable future.

The following table summarizes non-cash compensation expense and capitalized non-cash compensation for the three months ended March 31, 2007 and 2006.

(dollars in millions)

 

March 31,
2007

 

March 31,
2006

 

OSO

 

$

9

 

$

4

 

Restricted Stock

 

7

 

6

 

401(k) Match Expense

 

8

 

4

 

401(k) Discretionary Grant Plan

 

 

1

 

 

 

24

 

15

 

Discontinued Operations

 

 

(1

)

 

 

$

24

 

$

14

 

 

This excerpt taken from the LVLT 10-K filed Mar 2, 2006.

(16) Employee Benefit Plans

        The Company adopted the recognition provisions of SFAS No. 123 in 1998. Under SFAS No. 123, the fair value of an option or other stock-based compensation (as computed in accordance with accepted option valuation models) on the date of grant is amortized over the vesting periods of the options in accordance with FASB Interpretation 28, "Accounting for Stock Appreciation Rights and Other Variable Stock Option or Award Plans." Although the recognition of the value of the instruments results in compensation or professional expenses in an entity's financial statements, the expense differs from other compensation and professional expenses in that these charges may not be settled in cash, but rather, are generally settled through issuance of common stock.

F-54



        The adoption of SFAS No. 123 has resulted in material non-cash charges to operations since its adoption in 1998, and the adoption of SFAS No. 123R will continue to result in material non-cash charges to operations in the future. The amount of the non-cash charges will be dependent upon a number of factors, including the number of grants, the fair value of each grant estimated at the time of its award and the number of grants that ultimately vest.

        The Company recognized in the consolidated statement of operations a total of $57 million, $46 million and $86 million of non-cash compensation in 2005, 2004 and 2003, respectively. Included in discontinued operations is non-cash compensation expense of $2 million, $2 million and $4 million in 2005, 2004 and 2003, respectively. In addition, the Company capitalized $2 million, $2 million and $4 million in 2005, 2004 and 2003, respectively, of non-cash compensation for those employees and contractors directly involved in the construction of the network, installation of customers or development of the business support systems.

        The following table summarizes non-cash compensation expense and capitalized non-cash compensation for the three years ended December 31, 2005.

(dollars in millions)

  2005
  2004
  2003
 
Warrants   $   $   $ 9  
OSO     18     16     30  
C-OSO         1     15  
Restricted Stock     19     4     2  
Shareworks Match Plan     (2 )   4     8  
401(k) Discretionary Grant Plan     9     5     11  
401(k) Match Expense     15     18     15  
   
 
 
 
      59     48     90  
Capitalized Noncash Compensation     (2 )   (2 )   (4 )
   
 
 
 
      57     46     86  
Discontinued Operations—(i)Structure     (2 )   (2 )   (4 )
   
 
 
 
    $ 55   $ 44   $ 82  
   
 
 
 
This excerpt taken from the LVLT 10-K filed Mar 16, 2005.

(15) Employee Benefit Plans

        The Company adopted the recognition provisions of SFAS No. 123 in 1998. Under SFAS No. 123, the fair value of an option or other stock-based compensation (as computed in accordance with accepted option valuation models) on the date of grant is amortized over the vesting periods of the options in accordance with FIN 28. Although the recognition of the value of the instruments results in compensation or professional expenses in an entity's financial statements, the expense differs from other compensation and professional expenses in that these charges may not be settled in cash, but rather, are generally settled through issuance of common stock.

        The adoption of SFAS No. 123 has resulted in material non-cash charges to operations since its adoption in 1998, and will continue to do so. The amount of the non-cash charges will be dependent upon a number of factors, including the number of grants, the fair value of each grant estimated at the time of its award and the number of grants that ultimately vest.

        The Company recognized on the statement of operations a total of $46 million, $86 million and $181 million of non-cash compensation in 2004, 2003 and 2002, respectively. In addition, the Company capitalized $2 million, $4 million and $7 million in 2004, 2003 and 2002, respectively, of non-cash compensation for those employees and contractors directly involved in the construction of the network or development of the business support systems.

F-53



        The following table summarizes non-cash compensation expense and capitalized non-cash compensation for the three years ended December 31, 2004.

 
  2004
  2003
  2002
 
 
  (dollars in millions)

 
Warrants   $   $ 9   $ 11  
OSO     16     30     116  
C-OSO     1     15     40  
Restricted Stock     4     2     1  
Shareworks Match Plan     4     8     12  
Shareworks Grant Plan     5     11     8  
401(k) Match Expense     18     15      
   
 
 
 
      48     90     188  
Capitalized Noncash Compensation     (2 )   (4 )   (7 )
   
 
 
 
    $ 46   $ 86   $ 181  
   
 
 
 
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