Rite Aid 2015 Annual Report Download - page 101

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RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Years Ended February 28, 2015, March 1, 2014 and March 2, 2013
(In thousands, except per share amounts)
15. Stock Option and Stock Award Plans (Continued)
All of the plans provide for the Board of Directors (or at its election, the Compensation
Committee) to determine both when and in what manner options may be exercised; however, it may
not be more than 10 years from the date of grant. All of the plans provide that stock options may be
granted at prices that are not less than the fair market value of a share of common stock on the date
of grant. The aggregate number of shares authorized for issuance for all plans is 66,288 as of
February 28, 2015.
Stock Options
The Company determines the fair value of stock options issued on the date of grant using the
Black-Scholes-Merton option-pricing model. The following weighted average assumptions were used for
options granted in fiscal 2015, 2014 and 2013:
2015 2014 2013
Expected stock price volatility(1) ............ 74% 85% 85%
Expected dividend yield(2) ................ 0.00% 0.00% 0.00%
Risk-free interest rate(3) ................. 1.70% 1.45% 0.71%
Expected option life(4) ................... 5.5 years 5.5 years 5.5 years
(1) The expected volatility is based on the historical volatility of the stock price over the most
recent period equal to expected life of the option.
(2) The dividend rate that will be paid out on the underlying shares during the expected term
of the options. The Company does not currently pay dividends on its common stock, as
such, the dividend rate is assumed to be zero percent.
(3) The risk free interest rate is equal to the rate available on United States Treasury
zero-coupon issues as of the grant date of the option with a remaining term equal to the
expected term.
(4) The period of time for which the option is expected to be outstanding. The Company
analyzed historical exercise behavior.
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