Lumber Liquidators 2009 Annual Report Download - page 59

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Lumber Liquidators Holdings, Inc.
Notes to Consolidated Financial Statements—(Continued)
(amounts in thousands, except share data and per share amounts)
Stock Options
The following table summarizes activity related to stock options:
Shares
Weighted Average
Exercise Price
Remaining Average
Contractual
Term (Years)
Aggregate
Intrinsic
Value
Balance, December 31, 2006 ............................ 1,796,847 $ 7.69
Granted ......................................... 175,000 10.78
Exercised ....................................... — —
Forfeited ........................................ (5,000) 11.00
Balance at December 31, 2007 .......................... 1,966,847 7.95 8.8 $ 2,038
Granted ......................................... 288,760 10.47
Exercised ....................................... (26,500) 7.67
Forfeited ........................................ (3,000) 16.55
Balance, December 31, 2008 ............................ 2,226,107 8.27 8.0 $ 5,199
Granted ......................................... 317,141 11.17
Exercised ....................................... (393,199) 8.35
Forfeited ........................................ (103,073) 10.22
Balance, December 31, 2009 ............................ 2,046,976 $ 8.61 7.2 $37,237
Exercisable at December 31, 2009 ........................ 1,327,850 $ 7.81 6.7 $25,212
The aggregate intrinsic value is the difference between the exercise price and the closing price of the Company’s
common stock on December 31. The intrinsic value of the stock options exercised during 2009 and 2008 was $4,380 and
$201, respectively.
As of December 31, 2009, total unrecognized compensation cost related to unvested options was approximately $2,671,
net of estimated forfeitures, which is expected to be recognized over a weighted average period of approximately 2.2 years.
The fair value of each stock option award is estimated by management on the date of the grant using the Black-Scholes-
Merton option pricing model. The weighted average fair value of options granted during 2009, 2008 and 2007 was $5.78,
$4.99 and $4.08, respectively.
The following are the ranges of assumptions for the periods noted:
Year Ended December 31,
2009 2008 2007
Expected dividend rate ........................................... Nil Nil Nil
Expected stock price volatility ..................................... 39-45% 39% 35-39%
Risk-free interest rate ............................................ 2.8-3.6% 3.2-3.7% 4.2-4.6%
Expected term of options ......................................... 7.5years 7.5 years 7.5 years
The expected stock price volatility range is based on the historical volatilities of companies included in a peer group that
was selected by management whose shares or options are publicly available. The volatilities are estimated for a period of
time equal to the expected life of the related option. The risk-free interest rate is based on the implied yield of U.S. Treasury
zero-coupon issues with an equivalent remaining term. The expected term of the options represents the estimated period of
time until exercise and is determined by considering the contractual terms, vesting schedule and expectations of future
employee behavior.
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