Aarons 2008 Annual Report Download - page 36

The related net tax benefit from the exercise of stock options in
the years ended December 31, 2008 and 2007 was $2.4 million
and $1.1 million, respectively.
Under the Company’s stock option plans, options granted to
date become exercisable after a period of three to five years
and unexercised options lapse ten years after the date of the
grant. Options are subject to forfeiture upon termination of
service. The 709,500 shares currently available for distribution
under 2001 Aaron Rents, Inc., Stock Option and Incentive
Award Plan are not sufficient to cover the 1,016,000 options
granted by the Company on October 16, 2008. Therefore the
options granted on October 16, 2008 are subject to authoriza-
tion of additional shares at the Annual Meeting scheduled for
May 2009. The Company believes that the shareholder approval
of additional shares is perfunctory as R. Charles Loudermilk,
Sr., Chairman of the Board, holds more than 50% of the shares
eligible to vote.
The weighted average fair value of options granted was
$8.62 and $10.79 in 2008 and 2007, respectively. The fair
value for these options was estimated at the date of grant
using a Black-Scholes option pricing model with the following
weighted average assumptions for 2008 and 2007, respectively:
risk-free฀interest฀rates฀of฀3.47%฀and฀5.11%;฀a฀dividend฀yield฀
of฀.25%฀and฀.24%;฀a฀volatility฀factor฀of฀the฀expected฀market฀
price฀of฀the฀Company’s฀Common฀Stock฀of฀.38฀and฀.39;฀weighted฀
average฀assumptions฀of฀forfeiture฀rates฀of฀11.77%฀and฀6.82%;฀
and weighted average expected lives of the options of five and
eight years. The aggregate intrinsic value of options exercised
was $6.4 million, $2.9 million, and $12.7 million in 2008, 2007
and 2006, respectively. The total fair value of options vested
was $1.0 million, $6.6 million, and $4.9 million in 2008, 2007
and 2006, respectively. The Company granted 1,016,000 and
337,500 in stock options during the fourth quarter of 2008
and 2007, respectively. The Company did not grant any stock
options in 2006.
Income tax benefits resulting from stock option exercises
credited to additional paid-in capital totaled $3.2 million,
$1.5 million, and $5.2 million, in 2008, 2007, and 2006,
respectively.
The following table summarizes information about stock
options outstanding at December 31, 2008:
Options Outstanding Options Exercisable
Weighted Average
Range of Number Remaining Weighted Number Weighted
Exercise Outstanding Contractual Average Exercisable Average
Prices December 31, 2008 Life (in years) Exercise price December 31, 2008 Exercise Price
$ 4.38–10.00 599,374 1.99 $ 6.71 599,374 $ 6.71
10.01–15.00 324,000 4.82 14.52 324,000 14.52
15.01–20.00 184,250 5.15 17.58 184,250 17.58
20.01–24.94 1,813,661 8.53 21.42 511,661 22.08
$ 4.38–24.94 2,921,285 6.56 $17.39 1,619,285 $14.37
The table below summarizes option activity for the periods indicated in the Company’s stock option plans:
Weighted Average Aggregate Weighted
Options Weighted Remaining Intrinsic Value Average
(In Thousands) Average Contractual Term (In Thousands) Fair Value
Outstanding at January 1, 2008 2,425 $14.98 $28,223 $6.90
Granted 1,016 21.16 5,547 8.62
Exercised (429) 11.68 (6,384) 5.04
Forfeited (91) 22.08 (412) 9.76
Outstanding at December 31, 2008 2,921 17.39 6.56 years 26,954 7.69
Exercisable at December 31, 2008 1,619 $14.37 4.14 years $19,839 $6.54
The weighted average fair value of unvested options was $9.12 as of December 31, 2008 and $10.53 as of December 31, 2007.
The weighted average fair value of options that vested during 2008, 2007 and 2006 was $6.54, $6.57 and $7.23.
Notes to Consolidated Financial Statements
34