HR Block 2013 Annual Report Download - page 80

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H&R Block 2013 Form 10-K 73
model. The fair value of the option includes the value of the 15% discount. We expense the grant-date fair value over
the six-month vesting period. Prior to January 1, 2013, this plan offered a purchase price of the stock of 90% of the
lower of either the fair market value of our common stock on the first trading day of the Option Period or on the last
trading day of the Option Period.
A summary of options for the fiscal year ended April 30, 2013, is as follows:
(in 000s, except per share amounts)
Shares
Weighted–
Average
Exercise Price
Weighted–
Average
Remaining
Contractual
Term
Aggregate
Intrinsic Value
Outstanding, beginning of the year 7,308 $18.02
Granted 979 17.95
Exercised (1,414)18.08
Forfeited or expired (2,369)19.22
Outstanding, end of the year 4,504 $17.53 7 years $ 46,202
Exercisable, end of the year 2,646 $18.33 5 years $ 25,119
Exercisable and expected to vest 4,340 17.58 7 years 44,326
The total intrinsic value of options exercised during fiscal years 2013, 2012 and 2011 was $6.0 million, $1.0 million
and $1.8 million, respectively. As of April 30, 2013, we had $3.6 million of total unrecognized compensation cost
related to these options. The cost is expected to be recognized over a weighted-average period of one year.
We utilize the Black-Scholes option valuation model to value our options on the grant date. We typically estimate
the expected volatility using our historical stock price data, unless historical volatility is not representative of expected
volatility. We also use historical exercise and forfeiture behaviors to estimate the options expected term and our forfeiture
rate. The dividend yield is calculated based on the current dividend and the market price of our common stock on the
grant date. The risk-free interest rate is based on the U.S. Treasury zero-coupon yield curve in effect on the grant date.
Both expected volatility and the risk-free interest rate are based on a period that approximates the expected term.
The following assumptions were used to value options during the periods:
Year ended April 30, 2013 2012 2011
Options – management and director:
Expected volatility 29.69% - 31.43% 31.75% - 32.34% 28.98% - 30.20%
Expected term 4 - 5 years 5 years 5 years
Dividend yield 4.18% - 5.21% 3.43% - 4.80% 4.18% - 5.17%
Risk–free interest rate 0.61% - 0.75% 0.79% - 1.95% 1.26% - 1.92%
Weighted–average fair value $2.79 $3.31 $2.25
ESPP options:
Expected volatility 22.32% - 27.39% 24.27% - 33.07% 22.75% - 23.31%
Expected term 0.5 years 0.5 years 0.5 years
Dividend yield 4.20% - 5.00% 3.68% - 4.93% 3.86% - 4.80%
Risk–free interest rate 0.11% - 0.15% 0.06% - 0.10% 0.19% - 0.23%
Weighted–average fair value $2.60 $2.78 $2.16