Cogeco 2013 Annual Report Download - page 82

Consolidated financial statements COGECO CABLE INC. 2013 81
Under the Stock Option Plan, the following options were granted by the Corporation and are outstanding at August 31:
Years ended August 31, 2013 2012
Options
Weighted
average
exercise price Options
Weighted
average exercise
price
$$
Outstanding, beginning of the year 609,686 34.80 564,377 32.30
Granted 223,942 39.96 91,961 48.03
Exercised(1) (88,115) 26.92 (43,852) 29.52
Cancelled (20,420) 42.18 (2,800) 48.02
Balance, end of the year 725,093 37.14 609,686 34.80
Exercisable, end of the year 382,676 33.68 410,443 31.64
(1) The weighted average share price for options exercised during the period was $47.22 ($49.48 in 2012).
At August 31, 2013, the range of exercise prices, the weighted average exercise price and the weighted average remaining contractual life
of options are as follows:
Options outstanding Options exercisable
Range of exercise prices Number outstanding
Weighted
average
remaining
contractual life
(years)
Weighted
average
exercise price Number exercisable
Weighted
average
exercise price
$$ $
21.50 to 26.63 151,579 2.73 25.63 151,579 25.63
29.05 to 34.46 147,194 4.92 32.14 125,222 32.19
38.08 to 44.70 256,485 8.72 39.13 25,389 39.45
45.59 to 49.82 169,835 6.87 48.75 80,486 49.33
725,093 6.26 37.14 382,676 33.68
The weighted average fair value of stock options granted for the period ended August 31, 2013 was $8.00 ($11.30 in 2012) per option. The
weighted average fair value of each option granted was estimated at the grant date for purposes of determining share-based payment expense
using the Black-Scholes option pricing model based on the following weighted-average assumptions:
Years ended August 31, 2013 2012
%%
Expected dividend yield 2.56 1.66
Expected volatility(1) 26.49 26.85
Risk-free interest rate 1.53 1.74
Expected life (in years) 6.2 6.1
(1) The expected volatility is based on the historical volatility of the Corporation's subordinate voting shares for a period equivalent to the expected life of the
options.
ISU plan
The Corporation also offers a senior executive and designated employee ISU Plan. Under this plan, senior executives and designated
employees periodically receive a given number of Incentive Share Units (“ISUs”) which entitle the participants to receive subordinate voting
shares of the Corporation after three years less one day from the date of grant. For the year ended August 31, 2013, the Corporation granted
112,347 (60,479 in 2012) ISUs of which 12,280 (11,006 in 2012) ISUs were granted to COGECO Inc.’s employees. The Corporation establishes
the value of the compensation related to the ISUs granted based on the fair value of the Corporation’s subordinate voting shares at the date
of grant and a compensation expense is recognized over the vesting period, which is three years less one day. A trust was created for the
purpose of purchasing these shares on the stock market in order to protect against stock price fluctuation. The Corporation instructed the
trustee to purchase 101,047 (61,815 in 2012) subordinate voting shares of the Corporation on the stock market. These shares were purchased
for cash consideration aggregating $4,076,000 ($3,049,000 in 2012) and are held in trust for the participants until they are fully vested. The
trust, considered as a special purpose entity, is consolidated in the Corporation’s financial statements with the value of the acquired shares
presented as subordinate voting shares held in trust under the ISU Plan in reduction of share capital. A compensation expense of $2,117,000
($1,391,000 in 2012) was recorded for the year ended August 31, 2013 related to this plan.