Metro PCS 2007 Annual Report Download - page 128

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MetroPCS Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2007, 2006 and 2005
F-29
2007 2006 2005
Expected dividends............................................................................................................. 0.00% 0.00% 0.00%
Expected volatility .............................................................................................................. 42.69% 35.04% 50.00%
Risk-free interest rate.......................................................................................................... 4.54% 4.64% 4.24%
Expected lives in years ....................................................................................................... 5.00 5.00 5.00
Weighted-average fair value of options:
Granted at below fair value................................................................................................. $ — $ 10.16 $ —
Granted at fair value ........................................................................................................... $ 9.89 $ 3.75 $ 3.44
Weighted-average exercise price of options:
Granted at below fair value................................................................................................. $ — $ 1.49 $ —
Granted at fair value ........................................................................................................... $ 22.41 $ 9.95 $ 7.13
The Black-Scholes model requires the use of subjective assumptions including expectations of future dividends
and stock price volatility. Such assumptions are only used for making the required fair value estimate and should not
be considered as indicators of future dividend policy or stock price appreciation. Because changes in the subjective
assumptions can materially affect the fair value estimate, and because employee stock options have characteristics
significantly different from those of traded options, the use of the Black-Scholes option pricing model may not
provide a reliable estimate of the fair value of employee stock options.
A summary of the status of the Company’ s Option Plans as of December 31, 2007, 2006 and 2005, and changes
during the periods then ended, is presented in the table below:
2007 2006 2005
Shares
Weighted
Average
Exercise
Price
Shares
Weighted
Average
Exercise
Price
Shares
Weighted
Average
Exercise
Price
Outstanding, beginning of year............................ 23,499,462 $ 6.91 14,502,210 $ 4.18 32,448,855 $ 0.92
Granted ................................................................ 8,476,998 $ 22.41 11,369,793 $ 9.65 5,838,534 $ 7.13
Exercised ............................................................. (2,562,056) $ 3.79 (1,148,328) $ 2.39 (22,669,671) $ 0.38
Forfeited .............................................................. (1,770,610) $ 10.81 (1,224,213) $ 4.22 (1,115,508) $ 4.04
Outstanding, end of year...................................... 27,643,794 $ 11.70 23,499,462 $ 6.91 14,502,210 $ 4.18
Options vested or expected to vest at
year-end............................................................. 25,395,877 $ 11.36 20,127,759 $ 6.55
Options exercisable at year-end ........................... 12,524,250 $ 5.86 10,750,692 $ 3.78 10,985,577 $ 3.23
Options vested at year-end................................... 11,904,985 $ 5.82 8,940,615 $ 3.59 6,696,330 $ 1.87
Options outstanding under the Option Plans as of December 31, 2007 have a total aggregate intrinsic value of
approximately $248.8 million and a weighted average remaining contractual life of 7.85 years. Options outstanding
under the Option Plans as of December 31, 2006 and 2005 have a weighted average remaining contractual life of
8.01 and 7.80 years, respectively. Options vested or expected to vest under the Option Plans as of December 31,
2007 have a total aggregate intrinsic value of approximately $235.7 million and a weighted average remaining
contractual life of 7.76 years. Options exercisable under the Option Plans as of December 31, 2007 have a total
aggregate intrinsic value of approximately $162.8 million and a weighted average remaining contractual life of
6.43 years.