Cabela's 2005 Annual Report Download - page 104

CABELA’S INCORPORATED AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(Dollar Amounts in Thousands Except Share and Per Share Amounts)
The pro forma information regarding net income, required by Statement 123, Accounting for Stock-Based
Compensation, as amended by Statement No. 148, Accounting for Stock-Based Compensation—Transition and
Disclosure, is presented in Note 1 and has been determined as if the Company had accounted for its employee
stock options under the fair value method by these standards. The weighted average fair value of options granted
during the year was $9.14, $10.05 and $1.18 for the fiscal years ended 2005, 2004 and 2003, respectively. The
fair value of these options was estimated at the date of grant using the minimum value approach with the
following weighted average assumptions for the fiscal years ended 2003 and 2002. The fair value of options in
fiscal years ended 2005 and 2004 was estimated using the Black Scholes model with the following weighted
average assumptions.
2005 2004 2003
Risk-free interest rate ............................. 3.87% to 4.38% 3.63% 2.50%
Dividend yield .................................. — — —
Expected volatility ............................... 50% 50% —
Weighted average expected life ..................... 4.5years 4.5 years 4.5 years
The following summarizes information about stock options outstanding as of fiscal year ended 2005:
Options Outstanding Options Exercisable
Exercise Price Number
Average Remaining
Contractual Life Number
$ 0.00 to $ 5.00 749,592 2.0 years 171,570
$ 5.01 to $10.00 824,167 5.3 years 192,009
$10.01 to $15.00 1,673,803 5.4 years 363,613
$15.01 to $20.00 1,442,186 8.8 years 848,452
$20.01 to $25.00 2,000 9.0 years 2,000
$20.01 to $25.01 4,000 8.6 years 4,000
$ 12.36 4,695,748 5.9 years 1,581,644
Statement 123R, “Share-Based Payment” was issued on December 16, 2004 and eliminates accounting for
share-based compensation transactions using the intrinsic value method prescribed in APB Opinion No. 25,
“Accounting for Stock Issued to Employees,” and requires instead that such transactions be accounted for using a
fair-value-based method. The Company has elected to adopt the provisions of Statement 123R as of January 1,
2006 under the modified prospective transition method.
Because the Company went public in 2004, all options granted prior to March 23, 2004 will be accounted
for in accordance with APB No. 25. The Company estimates that the pre-tax expense related to outstanding
unvested options granted after March 23, 2004, as well as the anticipated impact of expense from the Company’s
employee stock purchase plan, will be approximately $2.3 million in 2006. This amount does not include an
estimate for options that may be granted in 2006. The Company has evaluated the cumulative effect of a change
due to forfeitures as required by Statement 123R. Due to the small amount of grants the Company has expensed
to date, the change in accounting related to forfeitures is immaterial. The Company will continue to evaluate its
compensation strategy, but has not initiated any changes to its stock option compensation at this time.
92