Comcast 2008 Annual Report Download - page 64

Note 12: Share-Based Compensation
Our Board of Directors may grant share-based awards, in the form
of stock options and RSUs, to certain employees and directors.
Additionally, through our employee stock purchase plan, employ-
ees are able to purchase shares of Comcast Class A stock at a
discount through payroll deductions.
Recognized Share-Based Compensation Expense
Under SFAS 123R
Year ended December 31 (in millions) 2008 2007 2006
Stock options $99 $ 74 $120
Restricted share units 96 79 62
Employee stock purchase plan 13 11 8
Total $208 $164 $190
Tax benefit $71 $56 $66
As of December 31, 2008, we had unrecognized pretax compen-
sation expense of $292 million and $279 million related to
nonvested stock options and nonvested RSUs, respectively, that
will be recognized over a weighted average period of approx-
imately 2.0 years. The amount of share-based compensation
capitalized was not material to our consolidated financial state-
ments for the periods presented.
When stock options are exercised or RSU awards are settled
through the issuance of shares, any income tax benefit realized in
excess of the amount associated with compensation expense that
was previously recognized for financial reporting purposes is pre-
sented as a financing activity rather than as an operating activity in
our consolidated statement of cash flows. The excess cash
income tax benefit classified as a financing cash inflow in 2008,
2007 and 2006 was approximately $15 million, $33 million and
$33 million, respectively.
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, a combined total of approximately 226 million shares of our
Class A and Class A Special common stock are reserved for the
exercise of stock options, including those outstanding as of
December 31, 2008. Option terms are generally 10 years, with
options generally becoming exercisable between 2 and 9.5 years
from the date of grant.
We use the Black-Scholes option pricing model to estimate the fair
value of each stock option on the date of grant. The Black-Scholes
option pricing model uses the assumptions summarized in the
table below. Dividend yield is based on the yield at the date of
grant. Expected volatility is based on a blend of implied and histor-
ical volatility of our Class A common stock. The risk-free rate is
based on the U.S. Treasury yield curve in effect at the date of
grant. We use historical data on the exercise of stock options and
other factors expected to impact holders’ behavior to estimate the
expected term of the options granted. The table below summa-
rizes 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.
Stock Option Fair Value and Significant Assumptions
2008 2007 2006
Fair value $6.47 $ 9.61 $ 7.30
Dividend yield 1.3% 0% 0%
Expected volatility 32.8% 24.3% 26.9%
Risk-free interest rate 3.0% 4.5% 4.8%
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. The change to net
settled stock options will result in fewer shares being issued and
no cash proceeds being received by us when a net settled option
is exercised. Following the change, we offered employees the
opportunity to modify their outstanding stock options from cash
settled to net settled. The modifications that were made did not
result in any additional compensation expense.
Comcast 2008 Annual Report on Form 10-K 62