Frontier Communications 2008 Annual Report Download - page 79

senior executives, as well as the target level for each performance metric, for the 2008-2010 Measurement
Period. Minimum financial performance “gates” were set that had to be achieved with respect to revenue and
free cash flow growth over the 2008-2010 Measurement Period for any LTIP award to be granted. In February
2009, the Compensation Committee determined that the minimum performance gates were no longer
achievable and cancelled the award opportunities for the 2008–2010 Measurement Period. Accordingly, there
will be no payouts under the LTIP for the 2008–2010 Measurement Period.
The following summary presents information regarding outstanding stock options and changes with regard
to options under the MEIP and the EIPs:
Shares
Subject to
Option
Weighted
Average
Option Price
Per Share
Weighted
Average
Remaining
Life in Years
Aggregate
Intrinsic
Value
Balance at January 1, 2006 . . . ...................... 7,985,000 $11.52 5.3 $13,980,000
Options granted . . ............................... 22,000 $12.55
Options exercised. ............................... (2,695,000) $ 9.85 $ 9,606,000
Options canceled, forfeited or lapsed ............. (70,000) $10.13
Balance at December 31, 2006 ..................... 5,242,000 $12.41 4.4 $14,490,000
Options granted . . ............................... — $ —
Options exercised. ............................... (1,254,000) $10.19 $ 6,033,000
Options canceled, forfeited or lapsed ............. (33,000) $10.79
Balance at December 31, 2007 ..................... 3,955,000 $13.13 3.4 $ 5,727,000
Options granted . . ............................... — $ —
Options exercised. ............................... (187,000) $ 7.38 $ 743,000
Options canceled, forfeited or lapsed ............. (55,000) $10.40
Balance at December 31, 2008 ................... 3,713,000 $13.46 2.5 $ 495,000
The following table summarizes information about shares subject to options under the MEIP and the EIPs
at December 31, 2008:
Number
Outstanding
Range of
Exercise Prices
Weighted Average
Exercise Price
Weighted Average
Remaining
Life in Years
Number
Exercisable
Weighted
Average
Exercise Price
Options Outstanding Options Exercisable
525,000 $ 6.45– 8.19 $ 7.80 2.66 525,000 $ 7.80
541,000 10.44–10.44 10.44 4.40 541,000 10.44
200,000 11.15–11.15 11.15 1.80 200,000 11.15
476,000 11.79–11.79 11.79 2.38 476,000 11.79
167,000 11.90–14.27 13.44 4.77 160,000 13.45
582,000 15.02–15.02 15.02 1.75 582,000 15.02
640,000 15.94–16.74 16.67 1.73 640,000 16.67
582,000 18.46–18.46 18.46 1.75 582,000 18.46
3,713,000 $ 6.45–18.46 $13.46 2.50 3,706,000 $13.46
The number of options exercisable at December 31, 2007 and 2006 were 3,938,000 and 4,791,000, with a
weighted average exercise price of $13.13 and $12.58, respectively.
Cash received upon the exercise of options during 2008, 2007 and 2006 was $1.4 million, $13.8 million
and $27.2 million, respectively. There is no remaining unrecognized compensation cost associated with
unvested stock options at December 31, 2008.
For purposes of determining compensation expense, the fair value of each option grant is estimated on the
date of grant using the Black-Scholes option-pricing model which requires the use of various assumptions
including expected life of the option, expected dividend rate, expected volatility, and risk-free interest rate. The
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FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements