Metro PCS 2010 Annual Report Download - page 130

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MetroPCS Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2010, 2009 and 2008
F-24
The value of the options is determined by using a Black-Scholes pricing model that includes the following
variables: 1) exercise price of the instrument, 2) fair market value of the underlying stock on date of grant,
3) expected life, 4) estimated volatility and 5) the risk-free interest rate. The Company utilized the following
weighted-average assumptions in estimating the fair value of the option grants in the years ended December 31,
2010, 2009 and 2008:
2010 2009 2008
Expected dividends ............................................................................................................... 0.00% 0.00% 0.00%
Expected volatility ................................................................................................................ 54.74% 50.01% 45.20%
Ris
k
-free interest rate ............................................................................................................ 2.24% 1.99% 2.49%
Expected lives in years ......................................................................................................... 5.00 5.00 5.00
Weighte
d
-average fair value of options:
Granted at fair value ............................................................................................................. $ 3.23 $ 6.43 $ 6.95
Weighte
d
-average exercise price of options:
Granted at fair value ............................................................................................................. $ 6.62 $ 14.23 $ 16.36
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 Equity Plans as of December 31, 2010, 2009 and 2008, and changes
during the periods then ended, is presented in the table below:
2010 2009 2008
Shares
Weighted
Average
Exercise
Price Shares
Weighted
Average
Exercise
Price Shares
Weighted
Average
Exercise
Price
Outstanding, beginning of yea
r
.............................. 31,420,264 $ 13.69 30,677,588 $ 13.21 27,643,794 $ 11.70
Grante
d
.................................................................. 3,556,675 $ 6.62 3,725,564 $ 14.23 6,566,165 $ 16.36
Exercise
d
............................................................... (2,255,318) $ 4.49 (1,792,991) $ 4.81 (2,810,245) $ 4.48
Forfeite
d
................................................................ (1,079,089) $ 14.62 (1,189,897) $ 16.47 (722,126) $ 18.09
Outstanding, end of yea
r
........................................ 31,642,532 $ 13.52 31,420,264 $ 13.69 30,677,588 $ 13.21
Options vested or expected to vest at
yea
r
-en
d
............................................................... 31,138,160 $ 13.57 30,711,160 $ 13.63 29,633,907 $ 13.07
Options exercisable at yea
r
-en
d
............................. 23,653,307 $ 13.97 20,949,920 $ 12.24 15,920,318 $ 10.04
Options vested at yea
r
-en
d
..................................... 23,653,307 $ 13.97 20,949,920 $ 12.24 15,836,608 $ 10.05
Options outstanding under the Equity Plans as of December 31, 2010 have a total aggregate intrinsic value of
approximately $71.1 million and a weighted average remaining contractual life of 6.42 years. Options outstanding
under the Equity Plans as of December 31, 2009 and 2008 have a weighted average remaining contractual life of
6.83 and 7.54 years, respectively. Options vested or expected to vest under the Equity Plans as of December 31,
2010 have a total aggregate intrinsic value of approximately $69.4 million and a weighted average remaining
contractual life of 6.39 years. Options exercisable under the Equity Plans as of December 31, 2010 have a total
aggregate intrinsic value of approximately $49.8 million and a weighted average remaining contractual life of
5.82 years.