American Eagle Outfitters 2008 Annual Report Download - page 63

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and $1.1 million, respectively, for Fiscal 2008. Cash received from the exercise of stock options and the actual tax
benefit realized from stock option exercises were $13.2 million and $7.3 million, respectively, for Fiscal 2007. For
Fiscal 2006, cash received from the exercise of stock options and the actual tax benefit realized from stock option
exercises were $28.4 million and $25.5 million, respectively.
The fair value of stock options was estimated at the date of grant using a Black-Scholes option pricing model
with the following weighted-average assumptions:
Black-Scholes Option Valuation Assumptions
January 31,
2009
February 2,
2008
February 3,
2007
For the Years Ended
Risk-free interest rates(1) ........................... 2.5% 4.5% 4.9%
Dividend yield . . . ................................ 1.7% 0.9% 1.0%
Volatility factors of the expected market price of the
Company’s common stock(2) ...................... 44.4% 39.2% 41.3%
Weighted-average expected term(3) .................... 4.3years 4.4 years 4.4 years
(1) Based on the U.S. Treasury yield curve in effect at the time of grant with a term consistent with the expected life
of our stock options.
(2) Based on a combination of historical volatility of the Company’s common stock and implied volatility.
(3) Represents the period of time options are expected to be outstanding. The weighted average expected option
term for the year ended January 31, 2009 was determined based on historical experience. The weighted average
expected option terms for the years ended February 2, 2008 and February 3, 2007 were determined using a
combination of the “simplified method” for plain vanilla options as allowed by Staff Accounting
Bulletin No. 107, Share-Based Payments (“SAB No. 107”), and past behavior. The “simplified method”
calculates the expected term as the average of the vesting term and original contractual term of the options.
As of January 31, 2009, there was $20.6 million of unrecognized compensation expense related to nonvested
stock option awards that is expected to be recognized over a weighted average period of 1.8 years.
Restricted Stock Grants
Under the 2005 Plan, the fair value of restricted stock awards is based on the closing market price of the
Company’s common stock on the date of grant. A summary of the activity of the Company’s restricted stock is
presented in the following tables.
Time-Based Restricted Stock Shares
Weighted-
Average Grant
Date Fair Value
For the Year Ended
January 31, 2009
Nonvested — February 2, 2008 . . . ............................. 74,500 $19.97
Granted.................................................. — —
Vested................................................... (18,500) 20.25
Cancelled ................................................ (15,000) 19.60
Nonvested — January 31, 2009 . . . ............................. 41,000 $19.97
61
AMERICAN EAGLE OUTFITTERS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)