Frontier Communications 2009 Annual Report Download - page 85

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EIPs generally are equal to or greater than the fair market value of the underlying common stock on the date of
grant. Stock options are not ordinarily exercisable on the date of grant but vest over a period of time (generally
four years). Under the terms of the EIPs, subsequent stock dividends and stock splits have the effect of
increasing the option shares outstanding, which correspondingly decrease the average exercise price of
outstanding options.
The following summary presents information regarding outstanding stock options and changes with regard
to options under the EIP:
Shares
Subject to
Option
Weighted
Average
Option Price
Per Share
Weighted
Average
Remaining
Life in Years
Aggregate
Intrinsic
Value
Balance at January 1, 2007 . . . ...................... 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
Options granted . . ............................... — $ —
Options exercised. ............................... (114,000) $ 6.58 $ 65,000
Options canceled, forfeited or lapsed ............. (48,000) $ 9.24
Balance at December 31, 2009 ..................... 3,551,000 $13.74 1.5 $ —
The following table summarizes information about shares subject to options under the EIP at December 31,
2009:
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
394,000 $ 8.19–8.19 $ 8.19 2.37 394,000 $ 8.19
511,000 10.44–10.44 10.44 3.4 511,000 10.44
199,000 11.15–11.15 11.15 0.8 199,000 11.15
476,000 11.79–11.79 11.79 1.38 476,000 11.79
167,000 11.90–14.27 13.44 3.77 166,000 13.44
582,000 15.02–15.02 15.02 0.75 582,000 15.02
640,000 15.94–16.74 16.67 0.73 640,000 16.67
582,000 18.46–18.46 18.46 0.75 582,000 18.46
3,551,000 $ 8.19–18.46 $13.74 1.54 3,550,000 $13.74
The number of options exercisable at December 31, 2008 and 2007 were 3,706,000 and 3,938,000, with a
weighted average exercise price of $13.46 and $13.13, respectively.
Cash received upon the exercise of options during 2009, 2008 and 2007 was $0.8 million, $1.4 million and
$13.8 million, respectively. There is no remaining unrecognized compensation cost associated with unvested
stock options at December 31, 2009.
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
expected life (estimated period of time outstanding) of stock options granted was estimated using the historical
F-23
FRONTIER COMMUNICATIONS CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements