Discover 2009 Annual Report Download - page 131

Stock Option Activity. The following table sets forth the activity concerning stock option activity during the year ended
November 30, 2009:
Number
of Shares
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic Value
(in thousands)
Options outstanding at November 30, 2008 ........................................................................... 4,559,148 $19.71 4.17
Granted(1) .......................................................................................................................... —
Forfeited............................................................................................................................ (19,613) $26.68
Exercised........................................................................................................................... (9,642) $14.49
Expired ............................................................................................................................. (242,828) $20.64
Options outstanding at November 30, 2009 ........................................................................... 4,287,065 $19.64 3.24 579,025
Vested and expected to vest at November 30, 2009................................................................. 4,287,050 $19.64 3.24 579,025
Options exercisable at November 30, 2009............................................................................ 4,175,149 $19.44 3.13 579,025
(1) No stock options have been granted by the Company since the Distribution.
Cash received from the exercise of stock options was $140,000 and the income tax benefit realized from the exercise
of stock options was $49,000 for the year ended November 30, 2009. For the year ended November 30, 2009, the total
intrinsic value of stock options exercised was $17,000 and the fair value of stock options vested was $4.2 million. For the
year ended November 30, 2008, the total intrinsic value of stock options exercised was $0.7 million and the fair value of
stock options vested was $5.3 million. From July 2, 2007 to November 30, 2007, the period subsequent to the
Distribution, the total intrinsic value of stock options exercised was $0.9 million and no options vested during this period.
As of November 30, 2009, there was $16,000 of total unrecognized compensation cost related to non-vested stock
options granted under the Company’s Omnibus Plan. The cost is expected to be recognized over a total period of 0.5
years and a weighted-average period of 0.1 years.
The Company utilized the Black-Scholes pricing model to estimate the fair value of each option at its date of grant. The
fair value is amortized on a straight-line basis over the requisite service periods of the awards, which is generally the
vesting period. Use of a valuation model requires management to make certain assumptions with respect to selected
model inputs. Since all options were granted prior to the Distribution, the expected option life of stock options and the
expected dividend yield of stock were determined based upon Morgan Stanley’s historical experience, and the expected
stock price volatility was determined based upon Morgan Stanley’s historical stock price data over a time period similar
to the expected option life. The risk-free interest rate was based on U.S. Treasury Strips with a remaining term equal to
the expected life assumed at the date of grant.
Restricted Stock Unit Activity. The following table sets forth the activity concerning vested and unvested RSUs during the
year ended November 30, 2009.
Number
of Shares
Weighted-Average
Grant-Date
Fair Value
Restricted stock units at November 30, 2008 ............................................................................................................ 7,345,593 $23.93
Granted.............................................................................................................................................................. 2,613,180 $10.36
Conversions to common stock................................................................................................................................. (4,056,871) $22.25
Forfeited ............................................................................................................................................................. (430,677) $23.82
Restricted stock units at November 30, 2009 ............................................................................................................ 5,471,225 $18.70
-119-