Frontier Airlines 2008 Annual Report Download - page 80

new common shares to satisfy the exercise of stock options. At December 31, 2008 there was $13,386 of unrecognized stock-based
employee compensation expense for unvested stock options, and the expected remaining expense period is 3.1 years. The Company
did not recognize excess tax benefits related to stock option exercises in 2008, 2007 and 2006 since the Company did not have taxable
income in 2008, 2007 and 2006.
The weighted average grant date fair value of options granted in 2008, 2007 and 2006 was $5.36, $5.30, and $7.62,
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,
2008 2007 2006
Dividend yield — — —
Expected volatility 39%-53% 37%-38% 38%
Risk-free interest rate 1.7%-3.2% 4.3%-5.1% 4.5-4.7%
Expected life (in years) 4-5 2-7 1-4
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Source: REPUBLIC AIRWAYS HOLDINGS INC, 10-K, March 16, 2009 Powered by Morningstar® Document Research℠