Prudential 2005 Annual Report Download - page 137

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PRUDENTIAL FINANCIAL, INC.
Notes to Consolidated Financial Statements
15. STOCK-BASED COMPENSATION (continued)
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 .............................................................. 4.13% 3.10% 2.47%
Expected life of stock option ......................................................... 3.98 years 3.33 years 3.20 years
The dividend yield reflects the assumption that the current dividend payout will continue with no anticipated increases.
The compensation expense recognized for stock-based non-employee compensation awards was $4 million, $6 million, and $5
million for the years ended December 31, 2005, 2004 and 2003, respectively.
The following table summarizes information about the non-employee stock options outstanding and exercisable at
December 31, 2005:
Options Outstanding Options Exercisable
Number
Outstanding
Weighted
Average
Remaining
Contractual Life
Weighted
Average
Exercise
Price
Number
Exercisable
Weighted
Average
Exercise
Price
Range of exercise prices:
$27.50 — $30.96 ................................................ 395,784 6.31 $27.74 287,098 $27.55
$32.13 — $34.24 ................................................ 8,834 6.50 33.88 8,451 33.96
$45.00 — $46.42 ................................................ 95,964 8.17 46.01 5,261 45.44
$55.75 — $57.91 ................................................ 101,288 9.15 56.98 707 57.91
Total .......................................................... 601,870 7.09 $35.66 301,517 $28.11
Restricted Stock Shares, Restricted Stock Units and Performance Share Awards
A restricted stock share represents a grant of Common Stock to employee and non-employee participants that is subject to
certain transfer restrictions and forfeiture provisions for a specified period of time. A restricted stock unit is an unfunded, unsecured
right to receive a share of Common Stock at the end of a specified period of time, which is also subject to forfeiture and transfer
restrictions. Generally, the restrictions on restricted stock shares and restricted stock units will lapse on the third anniversary of the
date of grant. Restricted stock shares subject to the transfer restrictions and forfeiture provisions are considered nonvested shares
and are not reflected as outstanding shares until the restrictions expire. At that time, the Company reflects the issuance of the
underlying shares, usually by the issuance of shares from Common Stock held in treasury. Performance share awards are awards of
units denominated in Common Stock. The number of units is determined over the performance period, and may be adjusted based
on the satisfaction of certain performance goals. Performance share awards are payable in Common Stock.
Prudential Financial 2005 Annual Report 135