Wells Fargo 2006 Annual Report Download - page 94

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provide annual grants of options to purchase common stock
to each non-employee director elected or re-elected at the
annual meeting of stockholders. The options can be exercised
after six months and through the tenth anniversary of the
grant date.
The table below summarizes stock option activity and
related information for 2006.
As of December 31, 2006, there was $89 million of
unrecognized compensation cost related to stock options.
That cost is expected to be recognized over a weighted-
average period of 2.2 years.
The total intrinsic value of options exercised during 2006
and 2005 was $617 million and $384 million, respectively.
Cash received from the exercise of options for 2006 and
2005 was $1,092 million and $819 million, respectively.
The actual tax benefit recognized in stockholders’ equity
for the tax deductions from the exercise of options totaled
$229 million and $143 million, respectively, for 2006
and 2005.
We do not have a specific policy on repurchasing shares
to satisfy share option exercises. Rather, we have a general
policy on repurchasing shares to meet common stock
issuance requirements for our benefit plans (including share
option exercises), conversion of its convertible securities,
acquisitions, and other corporate purposes. Various factors
quoted market price of our common stock at the date of
grant, we did not recognize any compensation expense in
2005 and prior years. In 2006, under FAS 123(R), we began
to recognize expense related to these grants, based on the
remaining vesting period.
Director Plans
We provide a stock award to non-employee directors as part
of their annual retainer under our director plans. We also
Number Weighted-average Weighted-average Aggregate
exercise price remaining contractual intrinsic value
term (in yrs.) (in millions)
Long-Term Incentive Compensation Plans
Options outstanding as of December 31, 2005 221,182,224 $24.82
Granted 46,962,990 32.80
Canceled or forfeited (1,371,700) 31.18
Exercised (43,656,832) 22.84
Options outstanding as of December 31, 2006 223,116,682 26.85 5.9 $1,947
As of December 31, 2006:
Options exercisable and expected to be exercisable (1) 221,933,695 26.82 5.9 1,943
Options exercisable 185,775,820 25.81 5.2 1,816
Broad-Based Plan
Options outstanding as of December 31, 2005 48,985,522 $22.75
Canceled or forfeited (2,217,334) 24.78
Exercised (8,757,398) 20.40
Options outstanding as of December 31, 2006 38,010,790 23.18 4.1 $ 471
As of December 31, 2006:
Options exercisable and expected to be exercisable (1) 38,010,790 23.18 4.1 471
Options exercisable 20,444,040 21.39 3.1 290
Director Plans
Options outstanding as of December 31, 2005 779,028 $24.33
Granted 91,219 32.69
Exercised (75,636) 15.21
Options outstanding as of December 31, 2006 794,611 26.16 5.7 $ 7
As of December 31, 2006:
Options exercisable and expected to be exercisable (1) 794,611 26.16 5.7 7
Options exercisable 791,106 26.12 5.7 7
(1) Adjusted for estimated forfeitures.
determine the amount and timing of our share repurchases,
including our capital requirements, the number of shares we
expect to issue for acquisitions and employee benefit plans,
market conditions (including the trading price of our stock),
and legal considerations. These factors can change at any
time, and there can be no assurance as to the number of
shares we will repurchase or when we will repurchase them.
Effective with the adoption of FAS 123(R), the fair value
of each option award granted on or after January 1, 2006,
is estimated using a Black-Scholes valuation model. The
expected term of options granted is generally based on the
historical exercise behavior of full-term options. Our expected
volatilities are based on a combination of the historical
volatility of our common stock and implied volatilities for
traded options on our common stock. The risk-free rate is
based on the U.S. Treasury zero-coupon yield curve in effect
at the time of grant. Both expected volatility and the risk-
free rates are based on a period commensurate with our