Overstock.com 2010 Annual Report Download - page 127

Download and view the complete annual report

Please find page 127 of the 2010 Overstock.com annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 154

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154

Table of Contents
Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
18. STOCK-BASED AWARDS (Continued)
Expected Volatility: The fair value of stock based payments were valued using a volatility factor based on historical stock prices over the expected
term.
Expected Term: For 2008 option grants, we elected to use the "simplified method" as discussed in Staff Accounting Bulletin ("SAB") No. 107, Share
Based Payment ("SAB No. 107"), to develop an estimate of expected term. In December 2007, the SEC issued SAB No. 110, Certain Assumptions Used in
Valuation Methods—Expected Term ("SAB No. 110"). According to SAB No. 110, under certain circumstances the SEC staff will continue to accept the use
of the simplified method as discussed in SAB No. 107, in developing an estimate of expected term of "plain vanilla" share options in accordance with ASC
Topic 718, beyond December 31, 2007. We had no stock option grants in 2009 and 2010.
Expected Dividend: We have not paid any dividends and do not anticipate paying dividends in the foreseeable future.
Risk-Free Interest Rate: We base the risk-free interest rate on the implied yield currently available on U.S. Treasury zero-coupon issues with remaining
term equivalent to the expected term of the options.
Estimated Pre-vesting Forfeitures: When estimating forfeitures, we consider voluntary and involuntary termination behavior.
Stock Option Activity
Our board of directors adopted the 2005 Equity Incentive Plan (the "Plan"), in April 2005. Under this Plan, the Board of Directors may issue incentive
stock options to employees and directors of the Company and non-qualified stock options to consultants of the Company. Options granted under this Plan
generally expire at the end of ten years and vest in accordance with a vesting schedule determined by our Board of Directors, usually over four years from the
grant date. As of December 31, 2010, 1.1 million shares of stock based awards are available for future grants under the 2005 Equity Incentive Plan. We settle
stock option exercises with newly issued common shares. The following is a summary of stock option activity (in thousands, except per share data):
2010 2009 2008
Shares
Weighted
Average
Exercise
Price Shares
Weighted
Average
Exercise
Price Shares
Weighted
Average
Exercise
Price
Outstanding—
beginning of year 721 $ 20.29 974 $ 21.27 1,161 $ 20.48
Granted at fair
value — — — — 11 14.14
Exercised (90) 17.05 (2) 15.82 (112) 12.96
Expired/
Forfeited (135) 30.41 (251) 24.12 (86) 20.45
Outstanding—end of
year 496 $ 18.09 721 $ 20.29 974 $ 21.27
Options exercisable at
year-end 472 $ 18.08 543 $ 21.17 609 $ 23.18
F-38