Overstock.com 2009 Annual Report Download - page 137

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Table of Contents
Overstock.com, Inc.
Notes to Consolidated Financial Statements (Continued)
19. STOCK AND DEBT REPURCHASE PROGRAM (Continued)
market purchases for $13.4 million as of December 31, 2008. In addition, during the year ended December 31, 2008, the Company retired $9.5 million of the
Senior Notes for $6.6 million in cash. As a result of the Senior Notes retirements, the Company recognized a gain of $2.8 million, net of the associated
unamortized discount of $142,000 for the year ended December 31, 2008. The Company fully used this authorized $20.0 million repurchase program by
December 31, 2008.
On February 17, 2009, the Board of Directors approved a debt repurchase program that authorizes the Company to use up to an additional $20.0 million
in cash to repurchase a portion of its Senior Notes. For the year ended December 31, 2009, the Company retired a total of $7.4 million of its Senior Notes for
$4.6 million in cash and recorded a $2.8 million gain, net of amortization of debt discount of $92,000.
During the year ended December 31, 2009, the Company purchased 36,000 shares of its common stock for $340,000.
20. STOCK BASED AWARDS
Valuation Assumptions
During the years ended December 31, 2007 and 2008, total stock options granted to employees were 762,000 and 11,000 respectively, with estimated
total grant-date fair values of $8.1 million, and $106,000, respectively. The Company granted no options during the year ended December 31, 2009. During
the years ended December 31, 2007, 2008 and 2009, the Company recorded stock-based compensation related to stock options of $4.5 million, $3.3 million
and $2.2 million, respectively.
The fair value for each stock option granted during the twelve months ended December 31, 2007 and 2008 was estimated at the date of grant using the
Black Scholes Merton option-pricing model, assuming no dividends and the following assumptions.
Years ended
December 31,
2007 2008
Average risk-free interest rate 4.75% 2.91%
Average expected life (in years) 6.3 6.3
Volatility 68.5% 70.6%
Expected Volatility: The fair value of stock based payments were valued using a volatility factor based on the Company's historical stock prices over
the expected term.
Expected Term: The Company's expected term represents the period that the Company's stock-based awards are expected to be outstanding and was
determined based on historical experience of similar awards, giving consideration to the contractual terms and vesting provisions of the stock-based awards.
For 2007 and 2008 option grants, the Company elected to use the "simplified method" as discussed in SAB No. 107 to develop the estimate of the expected
term. In December 2007, the SEC issued SAB No. 110, Certain Assumptions Used in Valuation Methods—Expected Term ("SAB No. 110"). According to
SAB No. 110, under certain circumstances the SEC staff will continue to accept the use of the simplified method as discussed in SAB No. 107, in developing
an estimate of expected term of "plain vanilla" share options in accordance with SFAS No. 123(R), beyond December 31, 2007. The
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