Redbox 2007 Annual Report Download - page 59

certain obligations to third parties. We expect to renew these letters of credit. As of December 31, 2007, no amounts
were outstanding under these standby letter of credit agreements.
NOTE 9: STOCKHOLDERS’ EQUITY
Treasury stock: Under the terms of our current credit facility, we are permitted to repurchase up to
$25.0 million of our common stock plus proceeds received after November 20, 2007, from the issuance of new
shares of capital stock under our employee equity compensation plans. Subsequent to November 20, 2007 and as of
December 31, 2007, the authorized cumulative proceeds received from option exercises or other equity purchases
under our equity compensation plans totaled $0.3 million bringing the total authorized for purchase under our credit
facility to $25.3 million. After taking into consideration our share repurchases of $6.5 million subsequent to
November 20, 2007, the remaining amount authorized for repurchase under our credit facility is $18.8 million as of
December 31, 2007, however we will not exceed our repurchase limit authorized by the board of directors as
outlined below.
Apart from the credit facility limitations, on October 27, 2004, our board of directors authorized repurchase of
up to $22.5 million of our common stock plus additional shares equal to the aggregate amount of net proceeds
received after January 1, 2003, from our employee equity compensation plans. As of December 31, 2007, this
authorization currently allows us to repurchase up to $15.0 million of our common stock.
NOTE 10: STOCK-BASED COMPENSATION PLANS
Stock-based compensation: Stock-based compensation is accounted for in accordance with the provisions of
FASB Statement No. 123 (revised 2004), Share-Based Payment (“SFAS 123R”) since January 1, 2006. Under
SFAS 123R, the fair value of stock awards is estimated at the date of grant using the Black-Scholes-Merton
(“BSM”) option valuation model. Stock-based compensation expense is reduced for estimated forfeitures and is
amortized over the vesting period.
The following summarizes the weighted average valuation assumptions and grant date fair value of options
granted during the periods shown below:
2007 2006
2005
(Pro Forma)
Year Ended December 31,
Expected term (in years) ................................. 3.7 3.6 4.6
Expected stock price volatility ............................. 41% 47% 52%
Risk-free interest rate ................................... 4.4% 4.6% 4.0%
Expected dividend yield ................................. 0.0% 0.0% 0.0%
Estimated fair value per option granted ...................... $10.91 $9.87 $11.07
The expected term of the options represents the estimated period of time from grant until exercise and is based
on historical experience of similar awards, giving consideration to the contractual terms, vesting schedules and
expectations of future employee behavior. Expected stock price volatility is based on historical volatility of our
stock for a period at least equal to the expected term. The risk-free interest rate is based on the implied yield
available on United States Treasury zero-coupon issues with an equivalent remaining term. We have not paid
dividends in the past and do not plan to pay any dividends in the foreseeable future.
The following table summarizes stock-based compensation expense and the related deferred tax benefit for
stock option expense during the periods indicated:
2007 2006
Year Ended
December 31,
(In thousands)
Stock-based compensation expense ................................... $6,421 $6,258
Related deferred tax benefit ........................................ 1,700 1,590
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