Aarons 2010 Annual Report Download - page 39

free interest rates are determined using the implied yield currently
available for zero-coupon U.S. government issues with a remaining
term equal to the expected life of the options. The expected dividend
yields are based on the approved annual dividend rate in effect and
current market price of the underlying Common Stock at the time
of grant. No assumption for a future dividend rate increase has been
included unless there is an approved plan to increase the dividend in
the near term. Shares are issued from the Company’s treasury shares
upon share option exercises.
The results of operations for the year ended December 31, 2010,
2009 and 2008 include $3.2 million, $2.4 million and $1.4 million,
respectively, in compensation expense related to unvested grants. At
December 31, 2010, there was $5.0 million of total unrecognized
compensation expense related to non-vested stock options which
is expected to be recognized over a period of 4.2 years. Excess
tax benefits of $321,000, $3.9 million and $1.8 million are
included in cash provided by financing activities for the year
ended December 31, 2010 and 2009, respectively. The Company
recognizes compensation cost for awards with graded vesting on
a straight-line basis over the requisite service period for each
separately vesting portion of the award.
Under the Company’s stock option plans, options granted to date
become exercisable after a period of two to five years and unexercised
options lapse 10 years after the date of the grant. Options are subject
to forfeiture upon termination of service.
The aggregate number of shares of common stock that may be issued
or transferred under the incentive stock awards plan is 14,966,112 at
December 31, 2010.
The Company granted 347,000 and 1,524,000 stock options
during 2010 and 2008, respectively. The Company did not grant
any stock options in 2009. The weighted average fair value of
options granted was $10.31 in 2010 and $5.75 in 2008. 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 2010 and 2008, respectively: risk-free
interest rate 3.59% and 3.47%; a dividend yield of .25% and .25%;
a volatility factor of the expected market price of the Company’s
Common Stock of .41 and .38; weighted average assumptions
of forfeiture rate of 3.89% and 11.77%; and weighted average
expected life of the option of nine and five years. The aggregate
intrinsic value of options exercised was $848,000 million, $13.1
million and $6.4 million in 2010, 2009 and 2008, respectively. The
total fair value of options vested was $3.2 million and $1.0 million
in 2010 and 2008, respectively.
Income tax benefits resulting from stock option exercises credited
to additional paid-in capital totaled $1.4 million, $4.8 million, and
$3.2 million, in 2010, 2009 and 2008, respectively.
The following table summarizes information about stock options
outstanding at December 31, 2010:
Options Outstanding Options Exercisable
Weighted Average
Range of Number Remaining Weighted Number Weighted
Exercise Outstanding Contractual Average Exercisable Average
Prices December 31, 2010 Life (in years) Exercise price December 31, 2010 Exercise Price
$ 3.81–10.00 477,382 2.60 $ 8.75 477,382 $ 8.75
10.01–15.00 2,551,458 6.29 13.95 1,228,458 13.79
15.01–19.92 345,458 8.71 19.61 31,958 16.61
$ 3.81–19.92 3,374,298 6.01 $13.80 1,737,798 $12.46
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, 2010 3,246 $13.09 $23,689 $5.77
Granted 347 19.92 163 10.31
Exercised (110) 11.24 (848) 4.30
Forfeited (109) 14.92 (598) 6.56
Outstanding at December 31, 2010 3,374 13.80 6.01 years 22,245 6.26
Exercisable at December 31, 2010 1,738 $12.46 4.09 years $13,785 $5.87
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