This excerpt taken from the RHT 8-K filed Aug 18, 2006.
Accounting for Stock-Based Compensation
The Company accounts for its stock-based compensation in accordance with APB Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations for options granted to employees and directors. SFAS No. 123, Accounting for Stock-Based Compensation, established the fair-value-based method of accounting for stock-based compensation. The Company has adopted the disclosure-only requirements for options granted to employees and directors under SFAS No. 123, which requires disclosure of the pro forma effects on earnings as if SFAS No. 123 had been adopted, as well as certain other information.
The assumptions used to calculate the fair value of stock options issued for the year ended December 31, 2005:
The following table illustrates the effect on net income if the Company had applied the fair value recognition provisions of SFAS No. 123:
Notes to Consolidated Financial Statements
December 31, 2005
The Company recorded deferred compensation of $2.7 million during the year ended December 31, 2005, to reflect the difference between the aggregate market value of the underlying shares of stock and the exercise price of all stock options granted with an exercise price below the fair value of the Companys common stock at the date of the grant. Deferred compensation is amortized over the vesting period of the related stock options and restricted stock. The Company recognized $523,000 in noncash stock-based compensation expense related to amortization of deferred compensation during the year ended December 31, 2005.