HR Block 2007 Annual Report Download - page 98

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adoption of SFAS 123R, awards granted to employees who are of holder to the right to purchase shares of common stock. We measure
retirement age, or reach retirement age at least one year after the grant the fair value of options on the grant date using the Black-Scholes
date but prior to the end of the service period of the award, are option valuation model. These awards vest immediately upon issuance
expensed over the shorter of the two periods. Options are granted at a and are therefore fully expensed on the grant date. Options are granted
price equal to the fair market value of our common stock on the grant at a price equal to the fair market value of our common stock on the
date and have a contractual term of ten years. grant date and have a contractual term of ten years.
Our 1999 Stock Option Plan for Seasonal Employees provides for Our 2000 Employee Stock Purchase Plan (ESPP) provides employees
awards of nonqualified options to certain employees. These awards are the option to purchase shares of our Common Stock through payroll
granted to seasonal employees in our Tax Services segment and entitle deductions. The purchase price of the stock is 90% of the lower of either
the holder to the right to purchase shares of common stock as the the fair market value of our Common Stock on the first trading day
award vests, typically over a two-year period. We measure the fair value within the Option Period or on the last trading day of the Option Period.
of options on the grant date using the Black-Scholes option valuation The Option Periods are six-month periods beginning on January 1 and
model. We expense the grant-date fair value, net of estimated July 1 each year. We measure the fair value of options on the grant date
forfeitures, over the service period. Options are granted at a price equal utilizing the Black-Scholes option valuation model in accordance with
to the fair market value of our common stock on the grant date, are FASB Technical Bulletin 97-1, ‘‘Accounting under Statement 123 for
exercisable during September through November in each of the two Certain Employee Stock Purchase Plans with a Look-Back Option.’’ The
years following the calendar year of the grant and have a contractual fair value of the option includes the value of the 10% discount and the
term of 29 months. look-back feature. We expense the grant-date fair value over the six-
Our 1989 Stock Option Plan for Outside Directors provides for awards month vesting period.
of nonqualified options to outside directors. These awards entitle the
A summary of options for the year ended April 30, 2007 is as follows:
(in 000s, except per share amounts)
Weighted-
Weighted- Average Aggregate
m70 Average Remaining Intrinsic
Shares Exercise Price Contractual TermValue
Outstanding, beginning of year 26,048 $21.40
Granted 5,040 23.84
Exercised (1,638) 15.86
Forfeited or expired (4,325) 23.83
Outstanding, end of year 25,125 $21.83 4years $70,667
Exercisable, end of year 18,443 $20.75 4years $70,605
Exercisable and expected to vest 23,405 $21.61 4 years $70,647
The total intrinsic value of options exercised during fiscal years 2007, historical stock price data. We also use historical exercise and forfeiture
2006 and 2005 was $11.8 million, $43.2 million and $39.1 million, behaviors to estimate the options expected term and our forfeiture rate.
respectively. As of April 30, 2007, we had $15.2 million of total The dividend yield is calculated based on the current dividend and the
unrecognized compensation cost related to these options. The cost is market price of our common stock on the grant date. The risk-free
expected to be recognized over a weighted-average period of one year. interest rate is based on the U.S. Treasury zero-coupon yield curve in
We utilize the Black-Scholes option pricing model to value our effect on the grant date. Both expected volatility and the risk-free
options on the grant date. We estimate the expected volatility using our interest rate are based on a period that approximates the expected term.
H&R BLOCK 2007 Form 10K