Cogeco 2007 Annual Report Download - page 65

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12) CAPITAL STOCK (continued)
The Corporation recorded compensation expense for options granted on or after September 1, 2003. As a result, a com-
pen sa tion expense of $1,662,000 ($775,000 in 2006) was recorded for the year ended August 31, 2007. If compensation
expense had been recognized using the fair value-based method at the grant date for options granted between September 1,
2001 and August 31, 2003, the Corporation’s net income and earnings per share for the year ended August 31, 2006 would
have been reduced to the following pro forma amounts:
2006
(amounts are in thousands of dollars, except per share data) $
NET INCOME
AS REPORTED 65,556
PRO FORMA 65,475
BASIC EARNINGS PER SHARE
AS REPORTED 1.64
PRO FORMA 1.64
DILUTED EARNINGS PER SHARE
AS REPORTED 1.63
PRO FORMA 1.63
The fair value of each option granted was estimated on the grant date for purposes of determining stock-based compensation
expense using the binomial option pricing model based on the following assumptions:
2007 2006
(in percentage, except expected life in years) % %
EXPECTED DIVIDEND YIELD 1.27 1.27
EXPECTED VOLATILITY 32 39
RISK-FREE INTEREST RATE 4.05 3.70
EXPECTED LIFE IN YEARS 4.0 4.0
The fair value of stock options granted for the year ended August 31, 2007 was $7.39 ($9.32 in 2006) per option.
For the purpose of compensation expense and pro forma disclosures, stock-based compensation is amortized to expense
on a straight-line basis over the vesting period, which is three to four years.
Performance Unit Plan
The Corporation had also a Performance Unit Plan for key employees, which was terminated in June 2007. The value of a
performance unit granted was equal to the closing price of the subordinate voting shares of the Corporation on the Toronto
Stock Exchange on the trading day preceding the date of grant of the unit. The units credited to the participant’s account
became vested to the participant on the third anniversary of the date of grant of the said performance units. During fi scal
2007 and 2006, no performance units were granted to employees by the Corporation. An amount of $1,125,000 was paid
in the fourth quarter related to the termination of the plan. In 2007, an expense amounting to $608,000 ($139,000 in
2006) has been recorded related to this plan.
Notes to Consolidated Financial Statements COGECO CABLE INC. 2007 63