Aarons 2015 Annual Report Download - page 83

Stock Options
Under the Company's 2001 Plan, options granted to date become exercisable after a period of one to five years and unexercised options lapse 10 years after
the date of grant. Under the Company’s 2015 Plan, options granted to date become exercisable after a period of one to three years and unexercised options
lapse 10 years after the date of the grant. Options are subject to forfeiture upon termination of service for both plans. Shares are issued from the Company’s
treasury shares upon share option exercises.
The Company determines the fair value of stock options on the grant date using a Black-Scholes-Merton option pricing model that incorporates expected
volatility, expected option life, risk-free interest rates and expected dividend yields. The expected volatility is based on implied volatilities from traded
options on the Company’s stock and the historical volatility of the Company’s common stock over the most recent period generally commensurate with the
expected estimated life of each respective grant. The expected lives of options are based on the Company's historical option exercise experience. The
Company believes that the historical experience method is the best estimate of future exercise patterns. The risk-free interest rates are determined using the
implied yield available for zero-coupon United States government issues with a remaining term equal to the expected life of the grant. The expected dividend
yields are based on the approved annual dividend rate in effect and 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.
The Company granted 338,000 and 351,000 stock options during 2015 and 2014, respectively. No stock options were granted in 2013. The weighted-
average fair value of options granted in 2015 and 2014 and the weighted-average assumptions used in the Black-Scholes-Merton option pricing model for
such grants were as follows:
 
Dividend Yield .3% .3%
Expected Volatility 28.9% 31.9%
Risk-free Interest Rate 1.6% 1.9%
Expected Term (in years) 5.2 6.2
Weighted-average Fair Value of Stock Options Granted $ 8.41 $ 9.61
The following table summarizes information about stock options outstanding at December 31, 2015:
















$10.01-15.00 199,000
2.79
$ 14.11
199,000
$ 14.11
15.01-20.00 82,500
4.15
19.92
82,500
19.92
20.01-25.00 7,521
8.85
24.98
—
—
25.01-30.00 380,646
8.91
28.23
53,640
27.80
30.01-32.20 202,687
8.97
31.93
—
—
10.01-32.20 872,354
7.08
25.05
335,140
17.73
The table below summarizes option activity for the year ended December 31, 2015:














Outstanding at January 1, 2015 624
$ 21.52
Granted 338
30.17
Exercised (61)
16.95
Forfeited/expired (29)
28.92
Outstanding at December 31, 2015 872
25.05
7.08
$ —
$ 8.31
Expected to Vest at December 31, 2015 485
29.56
8.93
—
8.90
Exercisable at December 31, 2015 335
17.73
4.11
1,562
7.39
The aggregate intrinsic value amounts in the table above represent the closing price of the Company’s common stock on December 31, 2015 in excess of the
exercise price, multiplied by the number of in-the-money stock options as of that same date. Options outstanding that are expected to vest are net of
estimated future option forfeitures.
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