US Bank 2006 Annual Report Download - page 95

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use of subjective assumptions. Because employee stock options have characteristics that differ from those of traded options,
including vesting provisions and trading limitations that impact their liquidity, the determined value used to measure
compensation expense may vary from their actual fair value. The following table includes the weighted average estimated fair
value and assumptions utilized by the Company for newly issued grants:
2006 2005 2004
Estimated fair value ******************************************************************************************** $6.26 $6.65 $8.75
Risk-free interest rate ****************************************************************************************** 4.3% 3.6% 3.5%
Dividend yield ************************************************************************************************ 4.0% 3.5% 3.5%
Stock volatility factor******************************************************************************************* .28 .29 .40
Expected life of options (in years) ******************************************************************************** 5.4 5.4 5.9
Expected stock volatility is based on several factors including the historical volatility of the Company’s stock, implied
volatility determined from traded options and other factors. The Company uses historical data to estimate option exercises
and employee terminations to estimate the expected life of options. The risk-free interest rate for the expected life of the
options is based on the U.S. Treasury yield curve in effect on the date of grant. The expected dividend yield is based on the
Company’s expected dividend yield over the life of the options.
The aggregate fair value of option shares vested was $81 million and $121 million for 2006 and 2005, respectively. The
intrinsic value of options exercised was $346 million, $161 million and $198 million for 2006, 2005 and 2004, respectively.
Cash received from option exercises under all share-based payment arrangements was $885 million, $367 million and
$577 million in 2006, 2005 and 2004, respectively. The tax benefit realized for the tax deductions from option exercises of
the share-based payment arrangements totaled $131 million, $60 million and $74 million for 2006, 2005 and 2004,
respectively. To satisfy option exercises, the Company predominantly uses treasury stock.
Additional information regarding stock options outstanding as of December 31, 2006, is as follows:
Options Outstanding Exercisable Options
Weighted-
Average Weighted- Weighted-
Remaining Average Average
Contractual Exercise Exercise
Range of Exercise Prices Shares Life (Years) Price Shares Price
$ 8.53 – $10.00 ********************************************* 12,422 .3 $ 8.91 12,422 $ 8.91
$10.01 – $15.00********************************************* 315,941 2.8 13.06 315,941 13.06
$15.01 – $20.00********************************************* 12,675,158 4.3 18.83 12,528,415 18.82
$20.01 – $25.00********************************************* 35,048,398 4.4 22.27 33,872,254 22.29
$25.01 – $30.00********************************************* 36,943,083 5.3 29.09 21,478,697 28.77
$30.01 – $35.00********************************************* 11,894,222 7.5 30.53 3,454,324 30.83
$35.01 – $36.95********************************************* 162,997 1.8 35.76 85,622 35.79
97,052,221 5.1 $25.42 71,747,675 $24.01
RESTRICTED STOCK AWARDS
A summary of the status of the Company’s restricted shares of stock is presented below:
2006 2005 2004
Weighted- Weighted- Weighted-
Average Grant- Average Grant- Average Grant-
Year Ended December 31 Shares Date Fair Value Shares Date Fair Value Shares Date Fair Value
NONVESTED SHARES
Number outstanding at beginning of
period *********************** 2,644,171 $26.73 2,265,625 $25.06 1,304,106 $21.13
Granted ********************** 1,040,201 30.22 1,024,622 30.03 1,338,054 28.42
Vested *********************** (493,730) 28.91 (481,323) 25.58 (315,286) 22.47
Cancelled ********************* (270,741) 29.75 (164,753) 27.60 (61,249) 28.35
Number outstanding at end of period** 2,919,901 $27.32 2,644,171 $26.73 2,265,625 $25.06
U.S. BANCORP 93