Virgin Media 2006 Annual Report Download - page 113

VIRGIN MEDIA INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
13. Stock−Based Compensation Plans (Continued)
All options have a 10 year term and vest and become fully exercisable over a period of 3 to 5 years of continued employment.
We issue new shares upon exercise of the options. The fair value for these options was estimated at the date of grant using a
Black−Scholes option−pricing model with the following weighted−average assumptions for 2006, 2005 and 2004:
Year ended December 31,
2006 2005 2004
Risk−free Interest Rate 4.79% 4.25% 4.25%
Expected Dividend Yield 0.00% 0.00% 0.00%
Expected Volatility 25.06% 37.50% 69.20%
Expected Lives 2.4 Years 4.6 Years 3.5 Years
The above weighted average assumptions for the year ended December 31, 2006 includes options converted on the merger. Had
these been excluded, the assumptions would have been as follows; risk free interest rate 4.83%, expected dividend yield 0.00%,
expected volatility 26.24% and expected lives 4.3 years.
A summary of the status of our stock option grants as of December 31, 2006, and of changes during the year ended December 31,
2006 is given below.
Options
Weighted
Average
Exercise
Price
Outstanding—beginning of year 7,756,241 $ 14.89
Converted on merger 8,003,039 14.17
Granted 5,262,419 26.26
Exercised (6,185,241) 12.93
Forfeited or Expired (1,780,828) 18.80
Outstanding—end of year 13,055,630 19.31
Exercisable at end of the year 5,006,544 $ 13.21
The weighted−average grant−date fair value of options granted during the years ended December 31, 2006, 2005 and 2004,
excluding options converted on the merger with Telewest was $7.76, $9.56, and $14.59, respectively. The weighted−average
grant−date fair value of options granted during the year 2006 including options converted on the merger was $11.46. The total
intrinsic value of options exercised during the years ended December 31, 2006, 2005, and 2004, was £47.1 million, £17.7 million, and
£18.1 million, respectively.
The aggregate intrinsic value of options outstanding as at December 31, 2006 was £128.7 million with a weighted average
remaining contractual term of 8.4 years. The aggregate intrinsic value of options exercisable as at December 31, 2006 was
£32.8 million with a weighted average remaining contractual term of 7.4 years.
F−33
Source: VIRGIN MEDIA INVESTM, 10−K, March 01, 2007