Safeway 2006 Annual Report Download - page 69

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SAFEWAY INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
of common stock authorized for issuance pursuant to grants under the 2002 Plan. As of December 30, 2006, no
options have been granted under this plan.
In September 2004, Safeway initiated a voluntary exchange program for stock options and stock rights having an
exercise price greater than $35.00 to eligible employees. The Company’s executive officers, members of the Board of
Directors and former employees were not eligible to participate. The voluntary exchange offer ended on October 5,
2004, and approximately 9.7 million stock options and rights were surrendered and cancelled. Replacement stock
options and replacement stock rights totaling approximately 4.5 million were issued on April 7, 2005 at an exercise
price of $20.75. These replacement stock options have a six-year term and vest over five years.
Restricted Stock Restricted stock was not awarded in 2006. The Company awarded 21,187 shares of restricted stock
in 2005 and 263,135 shares of restricted stock in 2004 to certain officers and key employees. These shares vest over a
period of between three to four years and are subject to certain transfer restrictions and forfeiture prior to vesting.
Deferred stock compensation, representing the fair value of the stock at the measurement date of the award, is
amortized to compensation expense over the vesting period. The amortization of this restricted stock resulted in
compensation expense of $5.0 million in 2006, $5.5 million in 2005 and $4.5 million in 2004. As of December 30, 2006,
691,527 restricted shares were vested, 299,031 were unvested and 161,330 shares had been returned to Safeway to
satisfy tax-withholding obligations of employees. There were no cancellations of restricted stock during 2006, 2005 or
2004. The weighted-average intrinsic value at grant date of restricted stock outstanding at year-end 2006 was $20.81.
Activity in the Company’s stock option plans for the three-year period ended December 30, 2006 was as follows:
Options
Weighted
average
exercise price
Aggregate
intrinsic value
(in millions)
Outstanding, year-end 2003 36,306,627 $ 31.51
2004 Activity:
Granted 5,871,639 20.60
Canceled (12,167,123) 44.07
Exercised (3,196,582) 6.78
Outstanding, year-end 2004 26,814,561 $ 26.37 $ 81.4
2005 Activity:
Granted 11,515,944 20.19
Canceled (1,575,189) 28.55
Exercised (1,889,572) 8.12
Outstanding, year-end 2005 34,865,744 $ 25.23 $ 139.3
2006 Activity:
Granted 7,223,122 23.51
Canceled (1,388,435) 26.00
Exercised (2,725,654) 15.80
Outstanding, year-end 2006 37,974,777 $ 25.59 $ 431.2
Exercisable, year-end 2004 15,218,373 $ 26.35 $ 81.1
Exercisable, year-end 2005 16,239,331 29.16 81.9
Exercisable, year-end 2006 17,885,299 29.69 175.3
Weighted average fair value of options granted during the year:
2004 $8.57
2005 6.32
2006 6.75
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