Radio Shack 2010 Annual Report Download - page 67

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During the third quarter of 2006, we granted 1.7 million
options under the 1997, 1999 and 2001 ISPs to our Chief
Executive Officer and Chief Financial Officer. These options
vested over four years from the date of grant and have a
term of seven years. We also granted 2.5 million non-plan
options to our Chief Executive Officer as part of an
inducement grant related to the terms of his employment.
These options vested over four years from the date of grant
and have a term of seven years. An additional market
condition was attached to 2.0 million of these non-plan
options that restricted exercise until certain stock price
hurdles had been achieved. The market condition was met
in 2007, and all stock price hurdles have been achieved.
The fair value of the stock options granted during the years
ended December 31, 2010, 2009 and 2008, was estimated
using the Black-Scholes-Merton option-pricing model. The
Black-Scholes-Merton model requires the use of certain
subjective assumptions. The following table lists the
assumptions used in calculating the fair value of stock
options granted during each year:
Valuation Assumptions
(1)
2010
2009
2008
Risk free interest rate
(2)
2.3%
2.0%
2.8%
Expected dividend yield 1.3%
1.8%
1.0%
Expected stock price volatility
(3)
42.4%
50.4%
40.5%
Expected life of stock options
(in years)(4) 5.4
5.4
4.6
(1) Forfeitures are estimated using historical experience and projected
employee turnover.
(2) Based on the U.S. Treasury constant maturity interest rate whose term
is consistent with the expected life of our stock options.
(3) We consider both the historical volatility of our stock price, as well as
implied volatilities from exchange-traded options on our stock.
(4) We estimate the expected life of stock options based upon historical
experience.
Information with respect to stock option activity under the above plans is as follows:
Shares
(In thousands)
Weighted Average
Exercise Price
Remaining
Contractual Life
(in years)
Aggregate
Intrinsic Value
(in millions)
Outstanding at January 1, 2010 10,014 $ 20.28
Grants 194 19.23
Exercised (213) 15.11
Expired (892) 37.30
Forfeited (586) 36.01
Outstanding at December 31, 2010 8,517 $ 17.52 2.8 $ 34.4
Exercisable at December 31, 2010 7,134 $ 18.83 2.4 $ 23.6
The weighted-average grant-date fair value of stock options
granted during 2010, 2009 and 2008, was $7.08, $4.32 and
$6.33, respectively. The total fair value of stock options
vested was $8.5 million, $7.2 million and $8.5 million in
2010, 2009 and 2008, respectively.
The aggregate intrinsic value of options exercised under
our stock option plans was $1.3 million, $0.1, and zero for
2010, 2009 and 2008, respectively. The aggregate intrinsic
value is the amount by which the market price of our
common stock on the date of exercise exceeded the
exercise price of the option. Net cash proceeds from the
exercise of stock options were $4.0 million, $0.7 million and
zero in 2010, 2009 and 2008, respectively. The actual
income tax benefit realized from stock option exercises was
$0.5 million, zero and zero, in 2010, 2009 and 2008,
respectively.
The following table summarizes information concerning currently outstanding and exercisable options to purchase our
common stock:
(Share amounts in thousands) Options Outstanding Options Exercisable
Range of Exercise Prices
Shares
Outstanding
at Dec. 31, 2010
Weighted
Average
Remaining
Contractual Life
(in years)
Weighted
Average
Exercise Price
Shares
Exercisable
at Dec. 31, 2010
Weighted
Average
Exercise Price
$ 7.05 – 13.58 1,347 5.2 $ 7.13 403 $ 7.05
13.82 4,000 2.5 13.82 4,000 13.82
14.71 – 19.20 1,180 4.2 18.27 754 18.10
19.20 – 35.08 1,147 1.5 26.57 1,134 26.65
38.35 843 0.2 38.35 843 38.35
$ 7.05 – 38.35 8,517 2.8 $ 17.52 7,134 $ 18.83