Saks Fifth Avenue 2009 Annual Report Download - page 90

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Table of Contents
SAKS INCORPORATED & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
STOCK OPTIONS
The Company expenses the fair value of all stock-based option grants over the requisite service period on a prospective basis utilizing the Black-Scholes
option pricing model. The Black-Scholes model estimates the expected value employees will receive from the options based on a number of assumptions, such as
interest rates, employee exercises, the Company’s stock price and dividend yield. The weighted-average Black-Scholes fair value assumptions are as follows:
2009 2008 2007
Expected life 4.75 years 5 years 5 years
Risk free interest rate 2.1% 2.5% 4.6%
Expected volatility 57% 36% 35%
Expected dividend yield 0% 0% 0%
The expected life is a significant assumption as it determines the period for which the risk free interest rate, volatility and dividend yield must be applied.
The expected life is the period over which employee groups are expected to hold options. The expected life is calculated using the simplified method in
accordance with the appropriate accounting guidance. The risk free interest rate is based on the expected U.S. Treasury rate over the expected life. Volatility
reflects movements in the Company’s stock price over the most recent historical period equivalent to the expected life. The dividend yield is zero as the
Company does not anticipate declaring dividends in the foreseeable future.
The Company recognizes compensation expense for stock option awards with graded vesting on a straight line basis over the requisite service period. Total
compensation expense for stock option awards, net of related tax effects, for the years ended January 30, 2010, January 31, 2009, and February 2, 2008 was
$1,340, $1,374, and $772, respectively. The Company has not granted stock options with performance or market conditions.
A summary of the stock options for the year ended January 30, 2010 is presented below:
2009
Shares
Weighted
Average
Exercise
Price
Aggregate
Intrinsic
Value
Outstanding at beginning of year 2,487 $ 13.26
Granted 650 2.36
Exercised (171) 6.44
Forfeited (658) 13.08
Outstanding at end of year 2,308 $ 10.75 $ 2,717
Options exercisable at year end 766 $ 12.86 $ 65
The weighted average fair value of options granted during the years ended 2009, 2008, and 2007 was $1.15, $4.65, and $7.61. The fair value of stock
options vested during the years ended 2009, 2008, and 2007 was $2,265, $1,459, and $0, respectively. The total intrinsic value of stock options exercised during
the years ended 2009, 2008, and 2007 was $115, $1,951, and $25,915, respectively.
F-34
Source: SAKS INC, 10-K, March 18, 2010 Powered by Morningstar® Document Research℠