Aarons 2011 Annual Report Download - page 38

vesting on a straight-line basis over the requisite service period for
each separately vesting portion of the award.
Under the Company’s stock option plans, options granted to
date become exercisable after a period of two to five years and
unexercised options lapse ten years after the date of the grant.
Options are subject to forfeiture upon termination of service. The
aggregate number of shares of common stock that may be issued or
transferred under the incentive stock awards plan is 14,700,556 at
December 31, 2011.
The Company granted 347,000 stock options during 2010.
The Company did not grant any stock options in 2011 and 2009.
The weighted average fair value of options granted was $10.31 in
2010. The fair value for these options was estimated at the date of
grant using a Black-Scholes option pricing model with the follow-
ing weighted average assumptions for 2010, respectively: risk-free
interest rate 3.59%; a dividend yield of .25%; a volatility factor
of the expected market price of the Company’s Common Stock
of .41; weighted average assumptions of forfeiture rate of 3.89%;
and weighted average expected life of the option of nine years. The
aggregate intrinsic value of options exercised was $5.5 million,
$848,000 and $13.1 million in 2011, 2010 and 2009, respectively.
The total fair value of options vested was $2.7 million and $3.2
million in 2011 and 2010, respectively.
Income tax benefits resulting from stock option exercises cred-
ited to additional paid-in capital totaled $2.1 million, $1.4 million,
and $4.8 million, in 2011, 2010 and 2009, respectively.
The following table summarizes information about stock
options outstanding at December 31, 2011:
believes that the historical experience method is the best estimate
of future exercise and forfeiture patterns. The risk-free interest rates
are determined using the implied yield available for zero-coupon
United States government issues with a remaining term equal to the
expected life of the grant. The expected dividend yields are based on
the approved annual dividend rate in effect and market price of the
underlying Common Stock at the time of grant. No assumption
for a future dividend rate increase has been included unless there
is an approved plan to increase the dividend in the near term.
Shares are issued from the Company’s treasury shares upon share
option exercises.
Under the Aaron’s Management Performance Plan (“AMP
Plan”) RSUs are granted quarterly upon achievement of certain
pre-tax profit levels during the prior quarter by the employees’
operating units or the overall Company. The RSUs granted under
the AMP Plan vest over four to five years from the date of grant.
The AMP Plan participants include certain vice presidents, director
level employees and other key personnel in the Company’s home
office, divisional vice presidents and regional managers.
The results of operations for the years ended December 31,
2011, 2010 and 2009 include $2.6 million, $3.2 million and $2.4
million, respectively, in compensation expense related to unvested
grants. At December 31, 2011, there was $2.7 million of total
unrecognized compensation expense related to non-vested stock
options which is expected to be recognized over a period of 2.2
years. Excess tax benefits of $1.3 million, $321,000 and $3.9 mil-
lion are included in cash provided by financing activities for the
years ended December 31, 2011 2010 and 2009, respectively. The
Company recognizes compensation cost for awards with graded
Options Outstanding Options Exercisable
Weighted Average
Range of Number Remaining Weighted Number Weighted
Exercise Outstanding Contractual Average Exercisable Average
Prices December 31, 2011 Life (in years) Exercise price December 31, 2011 Exercise Price
$ 5.92–10.00 460,661 1.62 $ 8.80 460,661 $ 8.80
10.01–15.00 2,068,006 5.19 13.97 1,281,506 13.89
15.01–19.92 320,453 7.84 19.70 21,203 16.61
$ 5.92–19.92 2,849,120 4.91 $13.78 1,763,370 $12.59
The table below summarizes option activity for the periods indicated in the Company’s stock option plans:
Weighted Average Aggregate Weighted
Options Weighted Remaining Intrinsic Value Average
(In Thousands) Average Contractual Term (In Thousands) Fair Value
Outstanding at January 1, 2011 3,374 $13.80 $43,460 $6.26
Granted — — — —
Exercised (447) 13.68 (5,469) 5.45
Forfeited (78) 15.21 (886) 6.18
Outstanding at December 31, 2011 2,849 13.78 4.91 years 36,760 6.38
Exercisable at December 31, 2011 1,763 $12.59 3.52 years $24,848 $5.93
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
36