Kraft 2006 Annual Report Download - page 80

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the awards was determined using a modified Black-Scholes methodology using the following weighted average assumptions for Altria Group, Inc. common
stock:
Risk-Free
Interest Rate
Expected Life
Expected
Volatility
Expected
Dividend Yield
Fair Value
at Grant Date
2006 Altria Group, Inc. 4.87% 4 years 26.73% 4.43% $ 12.79
2005 Altria Group, Inc. 3.87 4 32.90 4.43 14.08
2004 Altria Group, Inc. 2.99 4 36.63 5.39 10.30
The Company's employees held options to purchase the following number of shares of Altria Group, Inc. stock at December 31, 2006:
Shares Subject
to Option
Weighted
Average
Exercise Price
Average
Remaining
Contractual
Term
Aggregate
Intrinsic
Value
Balance at December 31, 2006 14,525,177 $ 40.29 3 years $661 million
Exercisable at December 31, 2006 14,520,835 40.28 3 661
Restricted Stock Plans:
The Company may grant shares of restricted stock and rights to receive shares of stock to eligible employees, giving them in most instances all of the rights
of stockholders, except that they may not sell, assign, pledge or otherwise encumber such shares and rights. Such shares and rights are subject to forfeiture if
certain employment conditions are not met. Restricted stock generally vests on the third anniversary of the grant date.
The fair value of the restricted shares and rights at the date of grant is amortized to expense ratably over the restriction period. The Company recorded
pre-tax compensation expense related to restricted stock and rights of $139 million (including the pre-tax cumulative effect gain of $9 million from the adoption
of SFAS No. 123(R)), $148 million and $106 million for the years ended December 31, 2006, 2005 and 2004, respectively. The deferred tax benefit recorded
related to this compensation expense was $51 million, $54 million and $39 million for the years ended December 31, 2006, 2005 and 2004, respectively. The
unamortized compensation expense related to the Company's restricted stock and rights was $184 million at December 31, 2006 and is expected to be recognized
over a weighted average period of 2 years.
The Company's restricted stock and rights activity was as follows for the year ended December 31, 2006:
Number of
Shares
Weighted-Average
Grant Date Fair Value
Per Share
Balance at January 1, 2006 15,085,116 $ 33.80
Granted 6,850,265 29.16
Vested (4,213,377) 36.29
Forfeited (2,446,584) 32.07
Balance at December 31, 2006 15,275,420 31.31
The weighted-average grant date fair value of restricted stock and rights granted during the years ended December 31, 2006, 2005 and 2004 was
$200 million, $200 million and $195 million, respectively, or $29.16, $33.26 and $32.23 per restricted share or right, respectively. The total fair value of
restricted stock and rights vested during the years ended December 31, 2006, 2005 and 2004 was $123 million, $2 million and $1 million, respectively.
75
Source: KRAFT FOODS INC, 10-K, March 01, 2007