Dish Network 2009 Annual Report Download - page 129

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DISH NETWORK CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
F-39
Stock-Based Compensation
Total non-cash, stock-based compensation expense for all of our employees is shown in the following table for the
years ended December 31, 2009, 2008 and 2007 and was allocated to the same expense categories as the base
compensation for such employees:
2009 2008 2007
Subscriber-related................................................. 1,069$ 797$ 967$
Satellite and transmission...................................... - - 645
General and administrative................................... 11,158 14,552 21,404
Total non-cash, stock-based compensation........... 12,227$ 15,349$ 23,016$
For the Years Ended December 31,
(In thousands)
As of December 31, 2009, our total unrecognized compensation cost related to our non-performance based unvested
stock awards was $24 million and includes compensation expense that we will recognize for EchoStar stock awards
held by our employees as a result of the Spin-off. This cost is based on an estimated future forfeiture rate of
approximately 4.5% per year and will be recognized over a weighted-average period of approximately three years.
Share-based compensation expense is recognized based on stock awards ultimately expected to vest and is reduced
for estimated forfeitures. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent
periods if actual forfeitures differ from those estimates. Changes in the estimated forfeiture rate can have a
significant effect on share-based compensation expense since the effect of adjusting the rate is recognized in the
period the forfeiture estimate is changed.
Valuation
The fair value of each stock award for the years ended December 31, 2009, 2008 and 2007 was estimated at the date
of the grant using a Black-Scholes option valuation model with the following assumptions:
Stock Options 2009 2008 2007
Risk-free interest rate ......................................................... 1.70% - 3.19% 1.00% - 3.42% 3.51% - 5.19%
Volatility factor .................................................................. 29.72% - 45.97% 19.98% - 39.90% 18.10% - 24.84%
Expected term of options in years....................................... 3.0 - 7.25 3.0 - 7.5 2.5 - 10.0
Weighted-average fair value of options granted ................ $3.86 - $8.29 $3.12 - $8.72 $7.19 - $48.20
For the Years Ended December 31,
On December 2, 2009, we paid a $2.00 cash dividend per share on our outstanding Class A and Class B common
stock. We do not intend to pay additional dividends on our common stock and accordingly, the dividend yield
percentage used in the Black-Scholes option valuation model is set at zero for all periods. The Black-Scholes
option valuation model was developed for use in estimating the fair value of traded stock options which have no
vesting restrictions and are fully transferable. Consequently, our estimate of fair value may differ from other
valuation models. Further, the Black-Scholes option valuation model requires the input of highly subjective
assumptions. Changes in the subjective input assumptions can materially affect the fair value estimate. Therefore,
we do not believe the existing models provide as reliable a single measure of the fair value of stock-based
compensation awards as a market-based model would.
As discussed in Note 11, on November 6, 2009, we declared a dividend of $2.00 per share on our outstanding Class
A and Class B common stock. The dividend was paid in cash on December 2, 2009 to shareholders of record on
November 20, 2009. In light of such dividend, our Executive Compensation Committee, which administers our
stock incentive plans, determined to adjust the exercise price of certain stock options issued under the plans by
decreasing the exercise price by $2.00 per share; provided, that the exercise price of eligible stock options will not
be reduced below $1.00. As a result of this adjustment, a majority of the stock options outstanding as of December
31, 2009 were adjusted subsequent to the year ended December 31, 2009. This adjustment will result in additional
incremental non-cash, stock-based compensation expense.