O'Reilly Auto Parts 2015 Annual Report Download - page 67

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FORM 10-K
The table below identifies the employee stock option activity under these plans during the year ended December 31, 2015:
Shares
(in thousands)
Weighted-
Average Exercise
Price
Average
Remaining
Contractual Terms
Aggregate
Intrinsic Value
(in thousands)
Outstanding at December 31, 2014 4,025 $ 64.82
Granted 317 211.64
Exercised (953)54.71
Forfeited (98)93.65
Outstanding at December 31, 2015 3,291 $ 81.04 5.3 Years $ 567,333
Vested or expected to vest at December 31, 2015 3,216 $ 79.75 5.3 Years $ 558,536
Exercisable at December 31, 2015 2,308 $ 52.54 4.2 Years $ 463,671
The Company's director stock plan provides for the granting of stock options for the purchase of common stock of the Company to
directors of the Company. Director stock options are granted at an exercise price that is equal to the closing market price of the Company's
common stock on the date of the grant. Director stock options granted under the plans expire after seven years and vest fully after six
months. The Company records compensation expense for the grant date fair value of the option awards evenly over the vesting period.
The table below identifies the director stock option activity under this plan during the year ended December 31, 2015:
Shares
(in thousands)
Weighted-
Average Exercise
Price
Average
Remaining
Contractual Terms
Aggregate
Intrinsic Value
(in thousands)
Outstanding at December 31, 2014 40 $ 39.19
Granted ——
Exercised (23)34.80
Forfeited ——
Outstanding at December 31, 2015 17 $ 45.13 1.1 Years $ 3,541
Vested or expected to vest at December 31, 2015 17 $ 45.13 1.1 Years $ 3,541
Exercisable at December 31, 2015 17 $ 45.13 1.1 Years $ 3,541
The fair value of each stock option award is estimated on the date of the grant using the Black-Scholes option pricing model. The Black-
Scholes model requires the use of assumptions, including the risk free rate, expected life, expected volatility and expected dividend yield.
• Risk-free interest rate – The United States Treasury rates in effect at the time the options are granted for the options' expected
life.
•
• Expected life – Represents the period of time that options granted are expected to be outstanding. The Company uses historical
experience to estimate the expected life of options granted.
• Expected volatility – Measure of the amount by which the Company's stock price has historically fluctuated.
• Expected dividend yield – The Company has not paid, nor does it have plans in the foreseeable future to pay, any dividends.
The table below identifies the weighted-average assumptions used for grants awarded during the years ended December 31, 2015, 2014
and 2013:
December 31,
2015 2014 2013
Risk free interest rate 1.52% 1.60% 0.96%
Expected life 5.7 Years 5.3 Years 5.0 Years
Expected volatility 22.3% 24.3% 31.0%
Expected dividend yield —% —% —%
The Company's forfeiture rate is the estimated percentage of options awarded that are expected to be forfeited or canceled prior to
becoming fully vested. The Company's estimate is evaluated periodically, and is based upon historical experience at the time of evaluation
and reduces expense ratably over the vesting period or the minimum required service period.