iHeartMedia 2009 Annual Report Download - page 132

Prior to CCO’s IPO, CCO did not have any compensation plans under which it granted stock awards to employees. However, Clear
Channel had granted certain of CCO’s officers and other key employees, stock options to purchase shares of Clear Channel’s
common stock under its own equity incentive plans. Concurrent with the closing of CCO’s IPO, all such outstanding options to
purchase shares of Clear Channel’s common stock held by CCO employees were converted using an intrinsic value method into
options to purchase shares of CCO Class A common stock.
The fair value of each option awarded on CCO common stock is estimated on the date of grant using a Black-Scholes option-pricing
model. Expected volatilities are based on implied volatilities from traded options on CCO’s stock, historical volatility on CCO’s
stock, and other factors. The expected life of options granted represents the period of time that options granted are expected to be
outstanding. CCO uses historical data to estimate option exercises and employee terminations within the valuation model. CCO
includes estimated forfeitures in its compensation cost and updates the estimated forfeiture rate through the final vesting date of
awards. The risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods equal to the
expected life of the option. The following assumptions were used to calculate the fair value of CCO’s options on the date of grant:
The following table presents a summary of CCO’s stock options outstanding at and stock option activity during the year ended
December 31, 2009 (“Price” reflects the weighted average exercise price per share):
127
Pos
t
-Merger Pre-Merger
Year Ended
December 31,
2009
Period from
July 31
through
December 31,
2008
Period from
January 1
through
July 30,
2008
Year Ended
December 31,
2007
Expected volatility 58% n/
a
27% 27%
Expected life in years
5.5 – 7.0 n/a 5.5 – 7.0 5.0 – 7.0
Risk-free interest rate 2.31% – 3.25% n/
a
3.24%
–
3.38% 4.76% – 4.89%
Dividend yield
0% n/
a
0% 0%
(In thousands, except per share data)
Options Price
Weighted
Average
Remaining
Contractual Term
Aggregate
Intrinsic
Value
Post-Mer
g
er
Outstanding, January 1, 2009 7,713 $ 22.03
Granted 2,388 5.92
Exercised
—
n/
a
Forfeited (167) 17.37
Expire
d
(894) 24.90
Outstanding, December 31, 2009 9,040 17.58 6.0 years $ 10,502
Exercisable 3,417 22.82 3.7 years 0
Expect to vest 5,061 14.66 7.4 years 9,095
(1) The weighted average grant date fair value of CCO options granted during the post-merger year ended December 31, 2009 was
$3.38 per share. The weighted average grant date fair value of CCO options granted during the pre-merger prior from January 1,
2008 through July 30, 2008 was $7.10 per share. The weighted average grant date fair value of CCO options granted during the
pre-merger year ended December 31, 2007 was $11.05 per share.
(1)
(2)