Barnes and Noble 2006 Annual Report Download - page 34

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derived from historical exercise experience under the
Company’s stock option plans and represents the period
of time that stock option awards granted are expected
to be outstanding. The expected term assumption
incorporates the contractual term of an option grant,
which is ten years, as well as the vesting period of an
award, which is generally pro-rata vesting over three or
four years. The risk-free interest rate is based on the
implied yield on a U.S. Treasury constant maturity with a
remaining term equal to the expected term of the option
granted.
The weighted average assumptions relating to the
valuation of the Company’s stock options for fi scal years
2006, 2005 and 2004 were as follows:
FISCAL YEAR 2006 2005 2004
Weighted average fair
value of grants $ 11.10 $ 12.69 $ 11.68
Volatility 30.22% 30.00% 31.00%
Risk-free interest rate 4.91% 4.19% 3.73%
Expected life 5 years 6 years 6 years
Expected dividend yield 1.63% 0.00% 0.00%
Stock-Based Compensation Activity
The following table presents a summary of the Company’s stock options activity:
NUMBER
OF SHARES
(in thousands)
WEIGHTED
AVERAGE
EXERCISE
PRICE
WEIGHTED
AVERAGE
REMAINING
CONTRACTUAL
TERM
AGGREGATE
INTRINSIC
VALUE
(in thousands)
Balance, January 31, 2004 8,899 $ 21.12 6.73 years $ 113,717
Granted 3,049 30.97
Exercised (1,256) 19.42
Forfeited (414) 23.48
Balance, November 12, 2004 10,278 24.16
Adjustment for GameStop spin-off a 4,266 (7.11)
Adjusted balance, November 12, 2004 14,544 17.05
Exercised (619) 14.75
Forfeited (65) 16.51
Balance, January 29, 2005 13,860 17.16 6.94 years $ 201,592
Granted 400 33.45
Exercised (4,068) 15.27
Forfeited (423) 16.94
Balance, January 28, 2006 9,769 18.62 6.61 years $ 224,067
Granted 45 36.94
Exercised (1,177) 16.90
Forfeited (132) 17.55
Balance, February 3, 2007 8,505 $ 18.97 5.64 years $ 182,557
Vested and expected to vest in the future at
February 3, 2007 8,450 $ 18.95 5.63 years $ 181,479
Exercisable at February 3, 2007 6,951 $ 18.16 5.27 years $ 154,825
Available for grant at February 3, 2007 4,156
a In conjunction with the spin-off of GameStop, and the consequent reduction in the market price of the Company’s shares, the Company reduced
the exercise price of its outstanding options and increased the number of such options, so that option holders would have the same intrinsic value
before and after the spin-off.
32 Barnes & Noble, Inc. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS continued