US Cellular 2015 Annual Report Download - page 109

On June 25, 2013, U.S. Cellular paid a special cash dividend to all holders of U.S. Cellular Common Shares and
Series A Common Shares as of June 11, 2013. Outstanding U.S. Cellular stock options, restricted stock unit awards and
deferred compensation stock units were equitably adjusted for the special cash dividend. The impact of such
adjustments are fully reflected for all years presented. See Note 5 — Earnings Per Share for additional information.
At December 31, 2015, U.S. Cellular had reserved 9,340,000 Common Shares for equity awards granted and to be
granted under the Long-Term Incentive Plans and 183,000 Common Shares for issuance under the Non-Employee
Director compensation plan.
U.S. Cellular uses treasury stock to satisfy requirements for Common Shares issued pursuant to its various stock-based
compensation plans.
Long-Term Incentive Plans – Stock Options – Stock options granted to key employees are exercisable over a specified
period not in excess of ten years. Stock options generally vest over a period of three years from the date of grant. Stock
options outstanding at December 31, 2015 expire between 2016 and 2025. However, vested stock options typically
expire 30 days after the effective date of an employee’s termination of employment for reasons other than retirement.
Employees who leave at the age of retirement have 90 days (or one year if they satisfy certain requirements) within
which to exercise their vested stock options. The exercise price of options equals the market value of U.S. Cellular
Common Shares on the date of grant.
U.S. Cellular estimated the fair value of stock options granted during 2015, 2014 and 2013 using the Black-Scholes
valuation model and the assumptions shown in the table below.
2015 2014 2013
Expected life ....................................... 4.6 years 4.5 years 4.6-9.0 years
Expected annual volatility rate ............................ 30.1% 28.0%-28.1% 29.2%-39.6%
Dividend yield ...................................... 0% 0% 0%
Risk-free interest rate .................................. 1.2% 1.4%-1.5% 0.7%-2.4%
Estimated annual forfeiture rate ........................... 9.7% 9.4% 0.0%-8.1%
The fair value of options is recognized as compensation cost using an accelerated attribution method over the requisite
service periods of the awards, which is generally the vesting period.
A summary of U.S. Cellular stock options outstanding (total and portion exercisable) and changes during 2015, is
presented in the table below:
Weighted
Average
Weighted Remaining
Average Aggregate Contractual
Number of Exercise Intrinsic Life
Common Share Options Options Price Value (in years)
Outstanding at December 31, 2014 ............ 3,388,000 $ 41.51
(1,586,000 exercisable) .................... 45.28
Granted ............................ 1,279,000 36.42
Exercised ........................... (321,000) 32.94
Forfeited ........................... (110,000) 37.57
Expired ............................ (134,000) 43.77
Outstanding at December 31, 2015 ............ 4,102,000 $ 40.62 $ 11,292,000 6.8
(1,849,000 exercisable) .................... $ 44.33 $ 3,733,000 4.6
The weighted average grant date fair value per share of the U.S. Cellular stock options granted in 2015, 2014 and 2013
was $9.94, $10.68 and $11.53, respectively. The aggregate intrinsic value of U.S. Cellular stock options exercised in
2015, 2014 and 2013 was $2.1 million, $2.0 million and $6.8 million, respectively. The aggregate intrinsic value
represents the total pre-tax intrinsic value (the difference between U.S. Cellular’s closing stock price and the exercise
price multiplied by the number of in-the-money options) that was received by the option holders upon exercise or that
would have been received by option holders had all options been exercised on December 31, 2015.
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TELEPHONE AND DATA SYSTEMS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS