We grant stock options, restricted stock units (RSUs) and performance share units (PSUs) to employees under the 1990 Long-Term Incentive Plan as described in our current Proxy Statement. In addition, we grant options and RSUs in limited circumstances to consultants, advisors and independent contractors (primarily non-employee talent at NBC Universal) under a plan approved by our Board of Directors in 1997 (the consultants’ plan). There are outstanding grants under two separate shareowner-approved option plans for non-employee directors. Share requirements for all plans may be met from either unissued or treasury shares. Stock options expire 10 years from the date they are granted and vest over service periods that range from one to five years. RSUs give the recipients the right to receive shares of our stock upon the lapse of their related restrictions. Restrictions on RSUs lapse in various increments and at various dates, beginning after three years from date of grant through grantee retirement. Although the plan permits us to issue RSUs settleable in cash, we have only issued RSUs settleable in shares of our stock. PSUs give recipients the right to receive shares of our stock upon the achievement of certain performance targets.
All grants of GE options under all plans must be approved by the Management Development and Compensation Committee, which consists entirely of independent directors.
STOCK COMPENSATION PLANS
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| December 31, 2006 (Shares in thousands) | Securities to be issued upon exercise | Weighted average exercise price | Securities available for future issuance | ||||||||
|---|---|---|---|---|---|---|---|---|---|---|---|
| APPROVED BY SHAREOWNERS | |||||||||||
| Options | 231,713 |
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(a) | ||||||||
| RSUs | 34,224 | (b) | (a) | ||||||||
| PSUs | 1,380 | (b) | (a) | ||||||||
| NOT APPROVED BY SHAREOWNERS (CONSULTANTS’ PLAN) | |||||||||||
| Options | 707 | 34.26 | (c) | ||||||||
| RSUs | 103 | (b) | (c) | ||||||||
| Total | 268,127 |
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130,093 | ||||||||
| (a) | Under the 1990 Long-Term Incentive Plan, 0.95% of issued common stock (including treasury shares) as of the first day of each calendar year during which the plan is in effect becomes available for awards in that calendar year. Total shares available for future issuance under the 1990 Long-Term Incentive Plan amounted to 105.9 million shares. |
| (b) | Not applicable. |
| (c) | Total shares available for future issuance under the consultants’ plan amount to 24.2 million shares. |
Outstanding options expire on various dates through December 14, 2016.
The following table summarizes information about stock options outstanding at December 31, 2006.
STOCK OPTIONS OUTSTANDING
| (Shares in thousands) | Outstanding | Exercisable | ||||||||||||||
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| Exercise price range | Shares | Average life (a) |
Average exercise price | Shares | Average exercise price | |||||||||||
| Under $25.00 | 18,698 | 0.9 | $22.69 | 18,683 | $22.69 | |||||||||||
| 25.01–30.00 | 46,383 | 4.5 | 26.90 | 40,181 | 26.87 | |||||||||||
| 30.01–35.00 | 60,887 | 8.1 | 33.16 | 18,346 | 32.39 | |||||||||||
| 35.01–40.00 | 45,728 | 3.2 | 37.18 | 45,283 | 37.19 | |||||||||||
| 40.01–45.00 | 47,089 | 3.9 | 43.23 | 47,089 | 43.23 | |||||||||||
| Over $45.00 | 13,635 | 3.7 | 56.16 | 13,635 | 56.16 | |||||||||||
| Total | 232,420 | 4.7 | $35.25 | 183,217 | $35.93 | |||||||||||
| At year-end 2005, options with an average exercise price of $33.48 were exercisable on 200 million shares. | |
| (a) | Average contractual life remaining in years. |
STOCK OPTION ACTIVITY
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| Shares (in thousands) |
Weighted average exercise price |
Weighted average remaining contractual term (in years) |
Aggregate intrinsic value (in millions) |
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| Outstanding at January 1, 2006(a) | 259,116 | $33.07 | |||||||
| Granted | 20,464 | 34.00 | |||||||
| Exercised | (35,335 | ) | 17.52 | ||||||
| Forfeited | (4,453 | ) | 32.46 | ||||||
| Expired | (7,372 | ) | 41.84 | ||||||
| Outstanding at December 31, 2006 | 232,420 | $35.25 | 4.7 | $1,040 | |||||
| Exercisable at December 31, 2006 | 183,217 | $35.93 | 3.8 | $ 818 | |||||
| Options expected to vest | 43,994 | $32.61 | 8.1 | $ 202 | |||||
| (a) | Included 1.2 million options with a weighted average exercise price of $21.81 related to various acquisitions. |
We measure the fair value of each stock option grant at the date of grant using a Black-Scholes option pricing model. The weighted average grant-date fair value of options granted during 2006, 2005 and 2004 amounted to $7.99, $8.87 and $8.33, respectively. The following assumptions were used in arriving at the fair value of options granted during 2006, 2005 and 2004, respectively: risk-free interest rates of 4.8%, 4.1% and 4.0%; dividend yields of 2.9%, 2.5% and 2.5%; expected volatility of 24%, 28% and 28%; and expected lives of six years and two months, six years and six years. Risk free interest rates reflect the yield on zero-coupon U.S. Treasury securities. Expected dividend yields presume a set dividend rate. Expected volatilities are based on implied volatilities from traded options and historical volatility of our stock. The expected option lives are based on our historical experience of employee exercise behavior.
The total intrinsic value of options exercised during 2006, 2005 and 2004 amounted to $1,312 million, $731 million and $958 million, respectively. As of December 31, 2006, there was $200 million of total unrecognized compensation cost related to nonvested options. That cost is expected to be recognized over a weighted average period of three years and 11 months.
Cash received from option exercises during 2006, 2005 and 2004 was $622 million, $403 million and $459 million, respectively.
RSU ACTIVITY
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| Shares (in thousands) |
Weighted average remaining contractual term (in years) |
Aggregate intrinsic value (in millions) |
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| Outstanding at January 1, 2006 | 33,078 | ||||||||
| Granted | 9,167 | ||||||||
| Vested | (4,879 | ) | |||||||
| Forfeited | (3,039 | ) | |||||||
| Outstanding at December 31, 2006 | 34,327 | 5.6 | $1,277 | ||||||
| RSUs expected to vest | 30,972 | 4.9 | $1,152 | ||||||
The fair value of each restricted stock unit is the market price of our stock on the date of grant. The weighted average grant-date fair value of RSUs granted during 2006, 2005 and 2004 amounted to $33.95, $34.72 and $32.47, respectively. The total intrinsic value of RSUs vested during 2006, 2005 and 2004 amounted to $132 million, $90 million and $85 million, respectively. As of December 31, 2006, there was $535 million of total unrecognized compensation cost related to nonvested RSUs. That cost is expected to be recognized over a weighted average period of four years and 11 months.
PSU activity
As of December 31, 2006, 1.4 million PSUs with a weighted average remaining contractual term of two years, an aggregate intrinsic value of $51 million and $18 million of unrecognized compensation cost were outstanding.
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