Sally Beauty Supply 2006 Annual Report Download - page 78

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Table of Contents
Sally Holdings, Inc. and Subsidiaries
(A Wholly-Owned Subsidiary of Alberto-Culver Company)
Notes to Consolidated Financial Statements
option grant was estimated on the date of grant using the Black Scholes option pricing model with the following assumptions:
2006 2005 2004
Expected life 3.5-4.5 years 3.5-5 years 5 years
Volatility 20% 20% 24%
Risk-free interest rate 4.2%-5.0% 3.4% 2.8%
Dividend yield 1.0% 0.9% 0.7%
The expected life of stock options represents the period of time that the stock options granted are expected to be outstanding based on
historical exercise trends. The expected volatility is based on the historical volatility of Alberto-Culver’ s common stock. The risk-free
interest rate is based on the U.S. Treasury bill rate for the expected life of the stock options. The dividend yield represents the
anticipated cash dividend for Alberto-Culver’ s common stock over the expected life of the stock options.
Activity for Alberto-Culver stock options issued to the Company employees under the plans is summarized as follows (options in
thousands):
Average
Weighted Remaining Aggregate
Number
of
average
option
Contractual
Value
Intrinsic
options price Life (in thousands)
Outstanding at September 30, 2003 2,943 $ 19.55
Granted 512 39.54
Exercised (1,470 ) 14.73
Canceled (88 ) 28.16
Outstanding at September 30, 2004 1,897 28.28
Granted 490 43.83
Exercised (440 ) 22.70
Canceled (66 ) 37.96
Outstanding at September 30, 2005 1,881 33.30
Granted 499 44.43
Exercised (387 ) 26.02
Canceled (24 ) 39.70
Outstanding at September 30, 2006 1,969 $ 37.47 7.5 years $ 25,843
Exercisable at September 30:
2004 1,089 $ 23.98
2005 1,171 $ 28.82
2006 1,256 $ 34.08 6.9 years $ 20,748
The total fair value of Alberto-Culver stock options issued to the Company employees that vested during fiscal years 2006, 2005 and
2004 was $4.4 million, $4.3 million and $4.2 million, respectively. The total intrinsic value of Alberto-Culver stock options exercised
by the Company employees during fiscal years 2006, 2005 and 2004 was $7.5 million, $11.8 million and $39.5 million, respectively.
The tax benefit realized from Alberto-Culver stock options exercised by employees of the Company during fiscal years 2006, 2005
and 2004 was $2.5 million, $4.3 million and $14.0 million, respectively. As of September 30, 2006, the Company had $4.6 million of
unrecognized compensation cost related to Alberto-Culver stock options issued to the Company employees that was expected to be
recognized over a weighted average period of 2.0 years. In connection with the closing of the transaction separating Alberto-Culver’ s
consumer products and beauty supply distribution businesses involving
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