Comcast 2007 Annual Report Download - page 63

Option Plans
We maintain stock option plans for certain employees under which
fixed-price stock options may be granted and the option price is
generally not less than the fair value of a share of the underlying
stock at the date of grant. Under our stock option plans, approx-
imately 211 million shares of our Class A and Class A Special
common stock are reserved for issuance upon the exercise of
options, including those outstanding as of December 31, 2007.
Option terms are generally 10 years, with options generally becom-
ing exercisable between two and nine and one half years from the
date of grant.
The fair value of each stock option is estimated on the date of
grant using the Black-Scholes option pricing model that uses the
assumptions summarized in the following table. Expected volatility
is based on a blend of implied and historical volatility of our
Class A common stock. We use historical data on exercises of
stock options and other factors to estimate the expected term
of the options granted. The risk-free rate is based on the U.S.
Treasury yield curve in effect at the date of grant.
The following table summarizes the weighted-average fair values at
the date of grant of a Class A common stock option granted under
our stock option plans and the related weighted-average valuation
assumptions:
2007 2006 2005
Fair value $9.61 $ 7.30 $ 8.67
Dividend yield 0% 0% 0%
Expected volatility 24.3% 26.9% 27.1%
Risk-free interest rate 4.5% 4.8% 4.3%
Expected option life (in years) 7.0 7.0 7.0
In 2007, we began granting net settled stock options instead of stock
options exercised with a cash payment (“cash settled stock options”).
In net settled stock options, an employee receives the number of
shares equal to the number of options being exercised less the
number of shares necessary to satisfy the cost to exercise the options
and, if applicable, taxes due on exercise based on the fair value of the
shares at the exercise date. This change will result in fewer shares
issued into the market and no cash proceeds will be received by us
upon exercise of the option. Following the change from granting cash
settled stock options to net settled stock options, we offered em-
ployees the opportunity to modify outstanding stock options from
cash settled options to net settled options. These modifications did
not result in any additional compensation expense.
The table below summarizes the activity of the stock options under our stock option plans for the year ended December 31, 2007:
Cash Settled
Options
(in thousands)
Net
Settled Options
(in thousands)
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual Term
(in years)
Aggregate
Intrinsic Value
(in millions)
Class A Common Stock
Outstanding as of January 1, 2007 121,777 — $ 24.43
Granted 710 15,086 $ 25.59
Modified (cash settled to net settled) (48,148) 48,148 $ 22.92
Exercised (12,408) (106) $ 20.28
Forfeited (2,024) (790) $ 20.93
Expired (3,635) (92) $ 25.65
Outstanding as of December 31, 2007 56,272 62,246 $ 25.07 5.4 $ 21.3
Weighted-average exercise price, as of December 31, 2007 $ 26.80 $ 23.51
Exercisable as of December 31, 2007 40,095 23,316 $ 28.54 3.4 $ 9.6
Weighted-average exercise price, as of December 31, 2007 $ 29.68 $ 26.58
Class A Special Common Stock
Outstanding as of January 1, 2007 64,601 — $ 21.75
Modified (cash settled to net settled) (43,378) 43,378 $ 22.02
Exercised (5,803) (1,936) $ 16.85
Forfeited (15) — $ 20.32
Expired (199) (46) $ 26.04
Outstanding as of December 31, 2007 15,206 41,396 $ 22.41 2.6 $ 59.8
Weighted-average exercise price, as of December 31, 2007 $ 22.30 $ 22.45
Exercisable as of December 31, 2007 14,448 37,192 $ 22.36 2.5 $ 57.7
Weighted-average exercise price, as of December 31, 2007 $ 22.46 $ 22.32
61 Comcast 2007 Annual Report on Form 10-K