Jamba Juice 2008 Annual Report Download - page 108

Table of Contents
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The fair value of options granted was estimated at the date of grant using a Black-Scholes option-pricing model. Option valuation models, including
Black-Scholes, require the input of highly subjective assumptions, and changes in the assumptions used can materially affect the grant date fair value of an
award. These assumptions include the risk-free rate of interest, expected dividend yield, expected volatility, and the expected life of the award. The risk-free
rate of interest is based on the zero coupon U.S. Treasury rates appropriate for the expected term of the award. Expected dividends are zero based on history of
not paying cash dividends on Jamba Juice Company’s common stock. Expected volatility for the 22 Week Period is based on historic, daily stock price
observations of Jamba Juice Company’s peers during the period immediately preceding the share-based award grant that is equal in length to the award’s
expected term. SFAS 123R also requires that estimated forfeitures be included as a part of the grant date estimate. Jamba Juice Company uses historical data to
estimate expected employee behaviors related to option exercises and forfeitures. There is currently no market-based mechanism or other practical application to
verify the reliability and accuracy of the estimates stemming from these valuation models or assumptions, nor is there a means to compare and adjust the
estimates to actual values, except for annual adjustments to reflect actual forfeitures. The following assumptions were used to calculate the weighted-average
fair value for the 22 Week Period and fiscal 2006 and 2005:
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Weighted-average expected life 2 years 2 years 2 years
Volatility 37.9% 0% 0%
Risk free interest rates 5.0% 4.60% 3.70%
Dividend yield 0% 0% 0%
A summary of option activity under both plans as of November 28, 2006 and June 28, 2006, and changes during the 22 Week Period and fiscal 2006
are presented below (shares in thousands):
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Options outstanding—beginning of period 6,238 6,380 $ 2.87 $ 2.36
Options granted 55 1,286 6.03 5.10
Options exercised (157) (189) 2.05 1.68
Options canceled (281) (1,239) 4.00 2.75
Options outstanding 5,855 6,238 $2.86 $ 2.87 6.85 7.28
Options exercisable 4,014 3,863 $2.31 $ 2.17 6.12 6.31
Options vested and expected to vest—end of period 5,855 6,238 $2.86 $ 2.87 6.85 7.28
The weighted-average grant-date fair value of options granted during the 22 Week Period and fiscal 2006 and 2005 was $1.50, $0.90 and $0.50,
respectively. The total intrinsic value of options exercised during the 22 Week Period and fiscal 2006 and 2005 was $624,000, $561,000 and $96,000,
respectively.
Jamba Juice Company recorded total compensation expense of $83,000 related to options that vested during the 22 Week Period, and all of which relates
to awards granted after the date of adoption. As of November 28, 2006, there was no unrecognized compensation cost related to nonvested stock options
granted under the plans.
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