WeightWatchers 2007 Annual Report Download - page 82

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WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—Continued
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
During the fiscal years ended December 29, 2007, December 30, 2006 and December 31, 2005, the Company
granted 15, 12 and 1 fully vested shares, respectively and recognized compensation expense of $727, $550 and
$43, respectively.
The Company issues common stock for share-based compensation awards from treasury stock. The total
compensation cost that has been charged against income for these plans was $11,763 and $12,339 for the years
ended December 29, 2007 and December 30, 2006, respectively. Such amount has been included as a component
of selling, general and administrative expenses. The total income tax benefit recognized in the income statement
for all share-based compensation arrangements was $4,588 and $4,812 for the years ended December 29, 2007
and December 30, 2006, respectively. No compensation costs were capitalized. As of December 29, 2007, there
was $23,789 of total unrecognized compensation cost related to stock options and RSUs granted under the Stock
Plans. That cost is expected to be recognized over a weighted-average period of 2.7 years.
While the plans permit various types of awards, other than the aforementioned shares issued to directors,
grants under the plans have historically been either stock options or RSUs. The following describes some further
details of these awards.
Stock Option Awards
Pursuant to the option components of the Stock Plans, the Board of Directors authorized the Company to
enter into agreements under which certain members of management received stock options. The options are
exercisable based on the terms outlined in the agreement. The options vest over a period of three to five years
and the expiration terms range from five to ten years. Options outstanding at December 29, 2007 have an
exercise price between $2.13 and $56.21 per share.
The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing
model with the weighted average assumptions noted in the following table. Expected volatility is based on the
historical volatility of the Company’s stock with certain time periods excluded due to historical events which are
not expected to recur. Since the Company’s option exercise history is limited, it has estimated the expected term
of option grants to be the midpoint between the vesting period and the contractual term of each award, as is
permitted under Staff Accounting Bulletin No. 107, “Share-Based Payment” (“SAB 107”). The risk free interest
rate is based on the U.S. Treasury yield curve in effect on the date of grant which most closely corresponds to the
expected term of the option. The dividend yield is based on our historic average dividend yield.
December 29,
2007
December 30,
2006
December 31,
2005
Dividend yield .................................. 1.5% 1.4% 0%
Volatility ...................................... 26.5% 27.1% 28.3%
Risk-free interest rate ............................ 3.5%-4.9% 4.3%-5.2% 3.3%-4.5%
Expected term (years) ............................ 7.0 7.4 5.8
F-20