Circuit City 2009 Annual Report Download - page 54

Table of Contents
The 2006 Stock Incentive Plan For Non-Employee Directors — This plan, adopted by the Company’s stockholders on October 11, 2006,
replaces the 1995 Stock Option Plan for Non-Employee Directors. The Company adopted the plan so that it could offer directors of the
Company who are not employees of the Company or of any entity in which the Company has more than a 50% equity interest (“
independent
directors”) an opportunity to participate in the ownership of the Company by receiving options to purchase shares of common stock at a
price equal to the fair market value at the date of grant of the option and restricted stock awards. Awards for a maximum of 200,000 shares
may be granted under this plan. A total of 20,000 options were outstanding under this plan as of December 31 , 2009.
Shares issued under our share-based compensation plans are usually issued from shares of our common stock held in the treasury.
The fair value of employee share options is recognized in expense over the vesting period of the options, using the graded attribution
method. The fair value of employee share options is determined on the date of grant using the Black-Scholes option pricing model. The
Company has used historical volatility in its estimate of expected volatility. The expected life represents the period of time (in years) for
which the options granted are expected to be outstanding. The risk-free interest rate is based on the U.S. Treasury yield curve.
Compensation cost related to non-qualified stock options recognized in operating results (selling, general and administrative expense) for
2009, 2008 and 2007 was $2.2 million, $3.2 million, and $3.4 million respectively. The related future income tax benefits recognized for
2009, 2008 and 2007 were $0.9 million, $1.2 million and $1.1 million, respectively.
Stock options
The following table presents the weighted-average assumptions used to estimate the fair value of options granted in 2009, 2008 and 2007:
The following table summarizes information concerning outstanding and exercisable options:
The total intrinsic value of options exercised was $2.0 million, $4.1 million and $6.5 million respectively, for 2009, 2008 and 2007.
The following table summarizes information about options vested and exercisable or nonvested that are expected to vest (nonvested
outstanding less expected forfeitures) at December 31, 2009:
51
2009 2008 2007
Expected annual dividend yield
0
%
0
%
0
%
Risk
-
free interest rate
2.64
%
3.17
%
4.93
%
Expected volatility
66.9
%
63.8
%
71.2
%
Expected life in years
7.7
6.3
6.2
Weighted Average
2009 2008 2007
Shares
Exercise
Price
Shares
Exercise
Price
Shares
Exercise
Price
Outstanding at beginning of year
2,202,584
$
9.23
2,655,937
$
7.95
2,629,076
$
4.69
Granted
164,000
$
13.46
110,000
$
12.90
699,050
$
19.45
Exercised
(221,225
)
$
4.89
(503,078
)
$
2.25
(545,815
)
$
5.19
Cancelled or expired
(42,900
)
$
16.46
(60,275
)
$
17.77
(126,374
)
$
15.64
Outstanding at end of year
2,102,459
$
9.87
2,202,584
$
9.23
2,655,937
$
7.95
Options exercisable at year end
1,558,229
1,560,804
1,645,639
Weighted average fair value per option
granted during the year
$
9.53
$
7.94
$
13.19
Range of Exercise Prices
Number
Exercisable
Weighted
Average
Exercise
Price
Weighted Average
Remaining
Contractual Life
Aggregate
Intrinsic
Value (in
thousands)
$
1.76
to
$
5.00
427,378
$
2.28
2.53
$
5,739
$
5.01
to
$
15.00
1,063,317
$
7.68
6.07
8,538
$
15.01
to
$
20.00
472,174
$
18.76
7.40
28
$
20.01
to
$
20.15
100,000
$
20.15
7.05
—
$
1.76
to
$
20.15
2,062,869
$
9.70
5.69
$
14,305