Frontier Airlines 2007 Annual Report Download - page 82

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The following table summarizes option activity under the stock option plans as of December 31, 2007:
Options
Weighted
Average
Exercise Price
Aggregate
Intrinsic
Value
Weighted
Average
Contractual
Term
(in years)
Outstanding at January 1, 2007 1,725,576 $ 12.54
Granted 1,775,000 19.04
Exercised 728,090 11.24
Forfeited 61,668 14.19
Outstanding at December 31, 2007 2,710,818 $ 16.81 $ 6,728 8.80
Vested or expected to vest at December 31, 2007 2,263,533 $ 17.11 $ 5,618 8.80
Exercisable at December 31, 2007 1,029,995 $ 14.63 $ 5,104 7.58
The intrinsic value of options exercised during the years ended December 31, 2007, 2006 and 2005 was $6,081, $12,429 and
$5,140.
There were 1,199,052 and 1,709,700 options exercisable at December 31, 2006 and 2005 respectively. The weighted average
exercise price for the options exercisable at December 31, 2006 and 2005 was $11.92 and $4.07. The remaining contractual life for the
options outstanding at December 31, 2006 and 2005 was 7.6 years and 6.3 years, respectively.
During the years ended December 31, 2007, 2006 and 2005, $3,119 ($1,871 net of tax), $1,297 ($785 net of tax) and $125
($75 net of tax), respectively, was charged to expense relating to the stock option plans. The Company has a policy of issuing new
common shares to satisfy the exercise of stock options. At December 31, 2007 there was $7,808 of unrecognized stock-based
employee compensation expense for unvested stock options, and the expected remaining expense period is 3.9 years. The Company
did not recognize excess tax benefits related to stock option exercises in 2007 since the Company did not have taxable income in
2007.
The weighted average grant date fair value of options granted in 2007, 2006 and 2005 was $5.30, $7.62, and $3.98,
respectively. The Company estimates the fair value of stock options issued using the Black-Scholes option pricing model. Expected
volatilities are based on the historical volatility of the Company’s stock and other factors. The Company uses historical data to
estimate option exercises and employee terminations within the valuation model. Dividends were based on an estimated dividend
yield. The risk-free rates for the periods within the contractual life of the option are based on the U.S. Treasury rates in effect at the
time of the grant. The forfeiture rate is based on historical information and managements best estimate of future forfeitures. The
expected term of options granted is derived from historical exercise experience and represents the period of time the Company expects
options granted to be outstanding. Option valuation models require the input of subjective assumptions including the expected
volatility and lives. Actual values of grants could vary significantly from the results of the calculations.
The following assumptions were used to value stock option grants during the following periods:
December 31,
2007 2006 2005
Dividend yield — — —
Expected volatility 37%-38% 38% 40%
Risk-free interest rate 4.3%-5.1% 4.5-4.7% 3.9%
Expected life ( in years ) 2-7 1-4 1-4
-66-
Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, February 21, 2008 Powered by Morningstar® Document Research℠