CompUSA 2010 Annual Report Download - page 95

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44
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 2010, 2009 and 2008 was $1.5 million, $2.2 million, and $3.2 million respectively. The related future income tax
benefits recognized for 2010, 2009 and 2008 were $0.6 million, $0.9 million and $1.2 million, respectively.
Stock options
The following table presents the weighted-average assumptions used to estimate the fair value of options granted in 2010, 2009
and 2008:
2010 2009 2008
Expected annual dividend yield
0
%
0
% 0%
Risk-free interest rate
1.37
%
2.64
% 3.17%
Expected volatility
61.1
%
66.9
% 63.8%
Expected life in years
4.8
7.7
6.3
The following table summarizes information concerning outstanding and exercisable options:
Weighted Average
2010 2009 2008
Shares
Exercise
Price Shares
Exercise
Price Shares
Exercise
Price
Outstanding at beginning of year 2,102,459 $ 9.87 2,202,584 $ 9.23 2,655,937 $ 7.95
Granted 40,000 $ 14.18 164,000 $ 13.46 110,000 $ 12.90
Exercised
(234,011)
$ 4.34 (221,225) $ 4.89 (503,078) $ 2.25
Cancelled or expired (7,750) $ 19.39 (42,900) $ 16.46 (60,275) $ 17.77
Outstanding at end of year 1,900,698 $ 10.60 2,102,459 $ 9.87 2,202,584 $ 9.23
Options exercisable at year end 1,559,872 1,558,229 1,560,804
Weighted average fair value per
option granted during the year $ 7.24 $ 9.53 $ 7.94
The total intrinsic value of options exercised was $3.2 million, $2.0 million and $4.1 million respectively, for 2010, 2009 and
2008.
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, 2010:
Range of Exercise Prices
Number
Exercisable
Weighted
Average
Exercise
Price
Weighted Average
Remaining
Contractual Life
Aggregate
Intrinsic
Value (in
thousands)
$ 1.76 to $ 5.00 313,441 $ 2.35 1.68 $ 3,682
$ 5.01 to $ 15.00 981,836 $ 8.10 5.41 5,893
$ 15.01 to $ 20.00 476,341 $ 18.78 6.38 -
$
20.01
to $ 20.15 100,000 $ 20.15 6.05
—
$ 1.76 to $ 20.15 1,871,618 $ 10.50 5.06 $ 9,575
The aggregate intrinsic value in the tables above represents the total pretax intrinsic value (the difference between the closing
stock price on the last day of trading in 2010 and the exercise price) that would have been received by the option holders had all
options been exercised on December 31, 2010. This value will change based on the fair market value of the Company’ s common
stock.