HR Block 2006 Annual Report Download - page 130

A summary of stock options outstanding and exercisable at April 30, 2006 follows:
(shares in 000s)
Outstanding Exercisable
Number Weighted-Average Weighted- Number Weighted-
Outstanding Remaining Average Exercisable Average
at April 30 Contractual Life Exercise Price at April 30 Exercise Price
$ 8.06 – 10.95 2,575 3 years $ 9.11 2,575 $ 9.11
$ 11.06 – 13.91 1,764 3 years 13.13 1,764 13.13
$ 16.05 – 19.98 4,900 6 years 16.69 2,728 16.74
$ 20.00 – 24.95 10,330 7 years 23.25 7,279 23.30
$ 25.25 – 29.48 6,479 9 years 29.14 347 28.96
26,048 14,693
Year Ended April 30, 2006 2005 2004
The ESPP provides the option to purchase shares of our Common
Stock through payroll deductions to a majority of the employees of our
Stock option grants – management:
Risk-free interest rate 3.68% 3.86% 2.64%
subsidiaries. The purchase price of the stock is 90% of the lower of
Expected life 5 years 5 years 5 years
either the fair market value of our Common Stock on the first trading
Expected volatility 27.28% 32.07% 31.13%
day within the Option Period or on the last trading day within the
Dividend yield 1.72% 1.84% 1.63%
Option Period. The Option Periods are six-month periods beginning
Weighted average fair value $6.23 $ 5.87 $ 5.01
January 1 and July 1 each year. During fiscal years 2006 and 2005,
Stock option grants – seasonal:
397,786 and 300,976 shares, respectively, were purchased under the
Risk-free interest rate 3.61% 2.60% 1.21%
ESPP out of a total authorized 6.0 million shares.
Expected life 2 years 2 years 2 years
Expected volatility 23.28% 27.65% 31.97%
During fiscal years 2006, 2005 and 2004, we recorded compensation
Dividend yield 1.71% 1.85% 1.66%
expense under the fair value method using the Black-Scholes option-
Weighted average fair value $3.70 $ 3.29 $ 3.03
pricing model on the date of the grant. The following weighted-average
ESPP options:
assumptions and fair values were used for stock option grants and
Risk-free interest rate 3.96% 2.17% 0.97%
ESPP options during those periods:
Expected life 6 months 6 months 6 months
Expected volatility 25.06% 21.18% 38.14%
Dividend yield 1.91% 1.82% 1.55%
Weighted average fair value $4.55 $ 3.84 $ 4.98
We have 401(k) defined contribution plans covering all full-time
employees following the completion of an eligibility period. Our
contributions to these plans are discretionary and totaled $37.3 million,
$33.4 million and $28.9 million for fiscal years 2006, 2005 and
2004, respectively.
NOTE 13: SHAREHOLDER RIGHTS PLAN
On July 25, 1998, the rights under a shareholder rights plan, adopted by approval of our Board of Directors (an ‘‘Unapproved Stock Acquisition’’),
our Board of Directors on March 25, 1998, became effective. The 1998 and at the close of business on the tenth business day following the
plan was adopted to deter coercive or unfair takeover tactics and to commencement of, or the public announcement of an intent to
prevent a potential acquirer from gaining control of the Company commence, a tender offer that would result in an Unapproved Stock
without offering a fair price to all of our stockholders. Under the 1998 Acquisition. We may, prior to any Unapproved Stock Acquisition, amend
plan, a dividend of one right (a ‘‘Right’’) per share was declared and paid the plan to lower such 15% threshold to not less than the greater of
on each share of our Common Stock outstanding on July 25, 1998. (1) any percentage greater than the largest percentage of beneficial
Rights automatically attach to shares issued after such date. ownership by any person or group of persons then known by the
Under the 1998 plan, a Right becomes exercisable when a person or Company, and (2) 10% (in which case the acquisition of such lower
group of persons acquires beneficial ownership of 15% or more of the percentage of beneficial ownership then constitutes an Unapproved
outstanding shares of our Common Stock without the prior written Stock Acquisition and the Rights become exercisable). When exercisable,
60
H&R BLOCK 2006 Form 10K