Archer Daniels Midland 2006 Annual Report Download - page 49

2006 Annual Report 47
The aggregate maturities of long-term debt for the five years after
June 30, 2006 are $80 million, $66 million, $43 million, $44 million,
and $507 million, respectively.
At June 30, 2006, the Company had pledged certain property, plant,
and equipment with a carrying value of $446 million as security for
certain long-term debt obligations.
At June 30, 2006, the Company had lines of credit totaling $3.6 billion,
of which $3.1 billion was unused. The weighted average interest rates
on short-term borrowings outstanding at June 30, 2006 and 2005
were 5.25% and 3.75%, respectively. Of the Company’s total lines of
credit, $2.3 billion support a commercial paper borrowing facility,
against which there were no borrowings at June 30, 2006.
The Company has outstanding standby letters of credit and surety
bonds at June 30, 2006 and 2005 totaling $334 million and
$223 million, respectively.
Note 7-Shareholders’ Equity
The Company has authorized one billion shares of common stock and
500,000 shares of preferred stock, each without par value. No preferred
stock has been issued. At June 30, 2006 and 2005, the Company had
approximately 16.3 million and 21.5 million shares, respectively,
in treasury. Treasury stock of $238 million at June 30, 2006, and
$315 million at June 30, 2005, is recorded at cost as a reduction of
common stock.
The Company’s employee stock compensation plans provide for the
granting of options to employees to purchase common stock of the
Company pursuant to the Company’s 1996 Stock Option Plan, 1999
Incentive Compensation Plan, and 2002 Incentive Compensation
Plan. These options are issued at market value on the date of grant
and expire five to ten years after the date of grant. The vesting
requirements of awards under the plans range from four to nine years
based upon the terms of each option grant.
The Company’s 1999 and 2002 Incentive Compensation Plans provide
for the granting of restricted stock awards at no cost to certain officers
and key employees. The awarded shares are made in common stock
and vest at the end of a three-year restriction period. During 2006,
2005, and 2004, 2.4 million, 2.5 million, and 1.1 million common
shares, respectively, were granted as restricted stock awards. At
June 30, 2006, there were 1.1 million and 12.9 million shares
available for future grants pursuant to the 1999 and 2002
plans, respectively.
Compensation expense for option grants and restricted stock awards
granted to employees is generally recognized on a straight-line
basis during the service period of the respective grant. Certain of the
Company’s option grants and restricted stock awards continue to vest
upon the recipient’s retirement from the Company and compensation
expense related to option grants and restricted stock awards granted
to retirement eligible employees is recognized in earnings on the date
of grant. Total compensation expense for option grants and restricted
stock awards recognized during 2006 and 2005 was $67 million and
$29 million, respectively. Total compensation expense for restricted
stock awards recognized during 2004 was $7 million.
The fair value of each option grant is estimated as of the date of
grant using the Black-Scholes single option pricing model. The
volatility assumption used in the Black-Scholes single option pricing
model is based on the historical volatility of the Company’s stock.
The volatility of the Company’s stock was calculated based upon
the monthly closing price of the Company’s stock for the eight-year
period immediately prior to the date of grant. The average expected
life represents the period of time that option grants are expected to be
outstanding. The risk-free rate is based on the rate of U.S. Treasury
zero-coupon issues with a remaining term equal to the expected life
of option grants. The assumptions used in the Black-Scholes single
option pricing model are as follows.
2006 2005 2004
Dividend yield ....................................... 2% 2% 2%
Risk-free interest rate ................................. 4% 4% 4%
Stock volatility ...................................... 31% 27% 28%
Average expected life (years) . . . . . . . . . . . . . . . . . . . . . . . . . . . 8 9 9
A summary of option activity during 2006 is presented below:
Weighted-
Average
Exercise
Shares Price
(In thousands,
except per share amounts)
Shares under option at June 30, 2005 . . . . . . . . . . . . . . . . . . . 10,523 $13.19
Granted ........................................... 3,210 21.56
Exercised .......................................... (3,005) 12.48
Forfeited or expired . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (792) 15.29
Shares under option at June 30, 2006 . . . . . . . . . . . . . . . . . . . 9,936 $15.94
Exercisable at June 30, 2006 . . . . . . . . . . . . . . . . . . . . . . . . . . 1,623 $12.13