2006 Annual Report

weighted average remaining term was two years for restricted
stock unit grants outstanding at year-end 2006. The aggregate
intrinsic value of restricted stock units converted and distributed
during 2006, 2005 and 2004, was $78 million, $52 million, and
$21 million, respectively. The weighted average grant-date fair
values of restricted stock units granted in 2006, 2005 and 2004
were $35, $32 and $23, respectively.
Changes in our restricted stock unit grants in 2006 were
as follows:
Number of Weighted
Restricted Average
Stock Units Grant-Date
(in millions) Fair Value
Outstanding at year-end 2005 6.9 $25
Granted during 2006 3.2 35
Distributed during 2006 (2.2) 23
Forfeited during 2006 (0.3) 27
Outstanding at year-end 2006 7.6 30
Employee stock options may be granted to officers and key
employees at exercise prices or strike prices equal to the market
price of our Class A Common Stock on the date of grant. Nonqualified
options generally expire 10 years after the date of
grant, except those issued from 1990 through 2000, which
expire 15 years after the date of the grant. Most stock options
under the Stock Option Program are exercisable in cumulative
installments of one quarter at the end of each of the first four
years following the date of grant.
We recognized compensation expense of $22 million in 2006
associated with employee stock options. We did not recognize
any compensation expense associated with employee stock
options in 2005 or 2004. At year-end 2006, there was approximately
$18 million in deferred compensation costs related to
employee stock options. Upon the exercise of stock options,
shares are issued from treasury shares.
Changes in our Stock Option Program awards in 2006 were
as follows:
Number of Weighted
Options Average
(in millions) Exercise Price
Outstanding at year-end 2005 56.8 $16
Granted during 2006 — 34
Exercised during 2006 (12.8) 14
Forfeited during 2006 (0.1) 19
Outstanding at year-end 2006 43.9 17
Stock options issued under the Stock Option Program awards outstanding at year-end 2006, were as follows:
Outstanding Exercisable
Number of Weighted Average Weighted Number of Weighted Weighted Average
Range of Stock Options Remaining Life Average Stock Options Average Remaining Life
Exercise Prices (in millions) (in years) Exercise Price (in millions) Exercise Price (in years)
$ 3 to $ 5 0.9 1 $ 4 0.9 $ 4 1
$ 6 to $ 8 3.1 3 7 3.1 7 3
$ 9 to $12 2.1 5 11 2.1 11 5
$13 to $18 25.2 7 15 23.0 15 7
$19 to $25 11.2 8 22 9.4 22 8
$26 to $35 1.4 9 32 0.3 32 9
$ 3 to $35 43.9 7 17 38.8 16 6
The weighted average grant-date fair value of the 24,000
options granted in 2006 was $13, and the options had a weighted
average exercise price of $34. The weighted average grant-date
fair value of the 1.4 million options granted in 2005 was $13. The
weighted average grant-date fair value of the 7.0 million options
granted in 2004 was $8. The total intrinsic value of options outstanding
at year-end 2006 was $1,368 million, and the total
intrinsic value for stock options exercisable as of year-end 2006,
was $1,233 million. The total intrinsic value of stock options exercised
during 2006, 2005 and 2004 was approximately $309 million,
$173 million and $182 million, respectively.
Employee share appreciation rights (“Employee SARs”) may be
granted to officers and key employees at exercise prices or strike
prices equal to the market price of our Class A Common Stock on
the date of grant. Employee SARs expire 10 years after the date of
grant and generally both vest and are exercisable in cumulative
installments of one quarter at the end of each of the first four
years following the date of grant. Non-employee share appreciation
rights (“Non-employee SARs”) may be granted to directors at
exercise prices or strike prices equal to the market price of our
Class A Common Stock on the date of grant. Non-employee SARs
expire 10 years after the date of grant and vest upon grant; however
they are generally not exercisable until one year after grant.
We first began issuing share appreciation rights in 2006.
Employees or Non-employee directors shall receive a number of
shares of Common Stock of the Company equal to the number of
share appreciation rights that are being exercised multiplied by
the quotient of (a) the final value minus the base value, divided by
(b) the final value.
We recognized compensation expense of $3 million for 2006
associated with Employee SARs and Non-employee SARs. At the
end of 2006, there was approximately $4 million in deferred compensation
costs related to share appreciation rights. Upon the
exercise of share appreciation rights, shares are issued from treasury
shares. During 2006, we granted 0.5 million Employee SARs
with a weighted average base value of $34 and a weighted average
grant-date fair value of $13, and we also granted 8,000 Nonemployee
SARs with a weighted average base value of $37 and a
weighted average grant-date fair value of $18. No share appreciation
rights have expired or been forfeited.The total intrinsic value
of SARs outstanding at year-end 2006 was $7 million, and the total
intrinsic value of SARs exercisable as of year-end 2006 was zero.
MARRIOTT INTERNATIONAL, INC. 2006 | 49