Prudential 2005 Annual Report Download - page 135

Download and view the complete annual report

Please find page 135 of the 2005 Prudential annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 172

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156
  • 157
  • 158
  • 159
  • 160
  • 161
  • 162
  • 163
  • 164
  • 165
  • 166
  • 167
  • 168
  • 169
  • 170
  • 171
  • 172

PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
15. STOCK-BASED COMPENSATION (continued)
Employee Stock Option Grants
A summary of the status of the Company’s employee stock option grants is as follows:
Shares
Weighted
Average
Exercise Price
Outstanding at December 31, 2002 ........................................................... 19,121,361 $30.69
Granted ................................................................................ 8,575,698 29.66
Exercised ............................................................................... (1,818,239) 28.60
Forfeited ................................................................................ (5,009,860) 29.40
Expired ................................................................................. — —
Transfer to non-employee status ............................................................. (77,586) 27.55
Outstanding at December 31, 2003 ........................................................... 20,791,374 30.77
Granted ................................................................................ 5,258,900 44.98
Exercised ............................................................................... (3,144,888) 30.29
Forfeited ................................................................................ (1,352,841) 33.51
Expired ................................................................................. — —
Transfer to non-employee status ............................................................. (105,450) 27.79
Outstanding at December 31, 2004 ........................................................... 21,447,095 34.17
Granted ................................................................................ 4,015,482 56.00
Exercised ............................................................................... (4,933,974) 32.40
Forfeited ................................................................................ (711,568) 39.83
Expired ................................................................................. — —
Transfer to non-employee status ............................................................. (10,581) 55.33
Outstanding at December 31, 2005 ........................................................... 19,806,454 $38.82
Options exercisable were 11,190,197 shares with a weighted average exercise price of $32.69 at December 31, 2005,
10,277,942 shares with a weighted average exercise price of $30.69 at December 31, 2004 and 7,424,250 shares with a weighted
average exercise price of $30.21 at December 31, 2003.
Employee options granted and their related grant date weighted average fair value are as follows:
2005 2004 2003
Shares
Weighted
Average
Grant Date
Fair Value
Weighted
Average
Exercise
Price Shares
Weighted
Average
Grant Date
Fair Value
Weighted
Average
Exercise
Price Shares
Weighted
Average
Grant Date
Fair Value
Weighted
Average
Exercise
Price
Exercise equals market .................... 4,015,482 $12.94 $56.00 5,258,900 $11.47 $44.98 8,575,698 $7.39 $29.66
Exercise exceeds market ................... — — — — — — — — —
Exercise less than market .................. — — — — — — — — —
Total granted during the year ............... 4,015,482 $12.94 $56.00 5,258,900 $11.47 $44.98 8,575,698 $7.39 $29.66
For options issued to employees on or after January 1, 2003, the fair value of each option was estimated on the date of grant
using a binomial option-pricing model. The fair value of each option issued to employees prior to January 1, 2003 was estimated on
the date of grant using a Black-Scholes option-pricing model. The weighted average assumptions used in the determination of the
fair value of each option are as follows:
2005 2004 2003
Dividend yield ...................................................................... 1.20% 1.20% 1.20%
Expected volatility .................................................................. 23.77% 25.84% 26.27%
Risk-free interest rate ................................................................ 3.74% 3.42% 3.01%
Expected life of stock option ........................................................... 5.19 years 5.5 years 5.5 years
The dividend yield reflects the assumption that the current dividend payout will continue with no anticipated increases.
Prudential Financial 2005 Annual Report 133