Saks Fifth Avenue 2010 Annual Report Download - page 81

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SAKS INCORPORATED & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
Total stock-based compensation expense and related tax benefits recognized in fiscal years 2010, 2009, and
2008 are as follows:
2010 2009 2008
Stock options ...................................................... $ 2,016 $ 2,197 $ 2,290
Restricted stock .................................................... 11,510 10,974 10,852
Performance share awards ............................................ 3,240 3,675 2,891
Employee stock purchase plan ......................................... — — 321
Total stock-based compensation expense ................................ $16,766 $16,846 $16,354
Total income tax benefit recognized related to stock-based compensation
expense ......................................................... $ 6,871 $ 6,570 $ 6,542
STOCK OPTIONS
The fair value of stock options is determined on the grant date utilizing the Black-Scholes valuation model.
The Black-Scholes model estimates the expected value employees will receive from the stock 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 utilized in determining grant-date fair values
are as follows:
2010 2009 2008
Expected term ........................................................ n/a 4.75 years 5 years
Risk free interest rate .................................................. n/a 2.1% 2.5%
Expected volatility .................................................... n/a 57% 36%
Expected dividend yield ................................................ n/a 0% 0%
The expected term 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 term is the period over which employee groups are
expected to hold the stock options until they are exercised. The expected term is calculated using the simplified
method in accordance with the appropriate accounting guidance. The risk-free interest rate is based on the U.S.
Treasury rate securities that mature over the expected term of the stock option. Volatility reflects movements in
the Company’s stock price over the most recent historical period equivalent to the expected term. 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. As of January 29, 2011, total unrecognized compensation expense
related to non-vested stock options, including an estimate for pre-vesting forfeitures, was $1,481, which is
expected to be recognized over a weighted-average period of 1.3 years.
F-31