Airtran 1999 Annual Report Download - page 40

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Pro forma information regarding net loss and loss per share is required by SFAS
No. 123, which also requires that the information be determined as if the Company
has accounted for its employee stock options granted subsequent to December 31,
1994 under the fair value method of that Statement. 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 1999, 1998 and 1997, respectively:
risk-free interest rates of 5.0%, 5.4% and 5.7%; no dividend yields; volatility factors
of the expected market price of the Company’s common stock of 0.648, 0.710 and
0.570; and a weighted average expected life of the options of 6 years.
The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options that have no vesting restrictions and are fully transferable.
In addition, option valuation models require the input of highly subjective assumptions
including the expected stock price volatility. Because the Company’s employee stock
options have characteristics significantly different from those of traded options, and
because changes in the subjective input assumptions can materially affect the fair
value estimate, in management’s opinion, the existing models do not necessarily
provide a reliable single measure of the fair value of its employee stock options.
For purposes of pro forma disclosures, the estimated fair value of the options is
amortized to expense over the options’ vesting period.
The Company’s pro forma information is as follows (in thousands, except per
share data):
1999 1998 1997
Pro forma net loss $(102,173) $(42,279) $(97,876)
Basic and diluted pro forma
net loss per share (1.57) (0.65) (1.75)
Because SFAS No. 123 is applicable only to options granted subsequent to
December 31, 1994, its pro forma effect is not fully reflected until 1999.
A summary of stock option activity under the aforementioned plans is as follows:
Weighted
Average
Shares Price Range Price
Balance at January 1, 1997 6,623,530 $0.17 – 23.19 $ 5.06
Granted 1,304,000 5.31 – 6.88 5.52
Assumed in Airways Merger 732,700 2.7 0 – 10.75 4.60
Exercised (317,480) 0.17 – 5.13 2.85
Canceled (226,320) 1 .00 – 21.38 12.20
Balance at December 31, 1997 8,116,430 0.17–23.19 4.84
Granted 235,000 5.5 0 – 8.13 7.67
Exercised (562,580) 0.17 – 5.69 2.81
Canceled (997,870) 0.17 – 21.38 7.16
Balance at December 31, 1998 6,790,980 0.17–23.19 4.71
Granted 2,571,000 3.03 – 6.41 3.52
Exercised (226,420) 0.17 – 5.50 4.56
Canceled (495,040) 3.13 – 21.50 7.04
Balance at December 31, 1999 8,640,520 $0.17 – 23.19 $ 4.16
Exercisable at December 31, 1999 5,382,149 $0.17 – 23.19 $ 3.61