Cablevision 2012 Annual Report Download - page 196

COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
(Dollars in thousands, except per share amounts)
I-68
Valuation Assumptions - Stock Options and Stock Appreciation Rights
Cablevision calculates the fair value of each option award on the date of grant and for each stock
appreciation right on the date of grant and at the end of each reporting period using the Black-Scholes
option pricing model. Cablevision's computation of expected life was determined based on historical
experience of similar awards, giving consideration to the contractual terms of the share-based awards and
vesting schedules, or by using the simplified method (the average of the vesting period and option term),
if applicable. The interest rate for periods within the contractual life of the stock option is based on
interest yields for U.S. Treasury instruments in effect at the time of grant. For stock appreciation rights,
the interest rate is based on interest yields for U.S. Treasury instruments in effect at the time of grant and
at the end of each reporting period. Cablevision's computation of expected volatility is based on historical
volatility of its common stock.
In the first quarter of 2012, Cablevision granted options that are scheduled to vest over a two year period
in 50% annual increments and expire 10 years from the date of grant. These options are performance
based and will vest based on the achievement of certain performance criteria. Cablevision calculated the
fair value of each option award on the date of grant using the Black-Scholes option pricing model.
Cablevision's computation of expected life was determined based on the simplified method (the average
of the vesting period and option term) due to the Company's lack of recent historical data for similar
awards. Cablevision has not, in its recent history, granted options with performance criteria or with
similar terms. Additionally, these options were issued subsequent to a change in Cablevision's structure
in connection with the AMC Networks Distribution and the MSG Distribution.
The following assumptions were used to calculate the fair value of stock option awards granted in 2012:
Risk-free interest rate ......................................................................................................................
.
1.14%
Expected life (in years) ...................................................................................................................
.
5.75
Dividend yield .................................................................................................................................
.
3.52%
Volatility ..........................................................................................................................................
.
43.20%
Grant date fair value ........................................................................................................................
.
$4.06
There were no stock options granted during 2011 and 2010.
Treatment of Share-Based Payment Awards After the AMC Networks Distribution and MSG Distribution
In connection with the AMC Networks Distribution and MSG Distribution, and as provided for in the
Company's equity plans, each stock option and stock appreciation right ("SAR") outstanding at the
effective date of the AMC Networks Distribution and MSG Distribution became: (i) one option and one
SAR with respect to CNYG Class A Common Stock, (ii) one option and one SAR with respect to AMC
Networks Class A common stock, and (iii) one option and one SAR with respect to Madison Square
Garden Class A common stock. The existing exercise price of each option/SAR was allocated between
the existing Cablevision option/SAR, AMC Networks option/SAR and Madison Square Garden
option/SAR based on the average of the volume weighted average prices of AMC Network's, Madison
Square Garden's and Cablevision's common shares for the ten trading days immediately following the
AMC Networks Distribution and MSG Distribution. The underlying share amount took into account the
1:4 distribution ratio for both the AMC Networks Distribution and MSG Distribution. As a result of these
adjustments, 82.63% of the pre-MSG Distribution exercise price of options/rights was allocated to the
Cablevision options/rights and 17.37% was allocated to the new Madison Square Garden options/rights
and approximately 73.59% of the pre-AMC Networks Distribution exercise price of options/SARs was
allocated to the Cablevision options/SARs and approximately 26.41% was allocated to the new AMC