Earthlink 2008 Annual Report Download - page 92

Table of Contents
EARTHLINK, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Valuation Assumptions for Stock Options
The fair value of stock options granted during the years ended December 31, 2006, 2007 and 2008 was estimated using the Black-
Scholes
option-pricing model with the following assumptions:
The weighted average grant date fair value of options granted during the years ended December 31, 2006, 2007 and 2008 was $3.28, $2.79
and $2.71, respectively.
The dividend yield assumption is based on the Company's history of dividend payouts. The expected volatility is based on a combination of
the Company's historical stock price and implied volatility. The selection of implied volatility data to estimate expected volatility is based upon
the availability of prices for actively traded options on the Company's stock. The risk-
free interest rate assumption is based upon the U.S.
Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option. The expected life of employee
stock options represents the weighted-average period the stock options are expected to remain outstanding.
Restricted Stock Units
The following table summarizes the Company's restricted stock units as of and for the year ended December 31, 2008:
The fair value of restricted stock units is determined based on the closing trading price of EarthLink's common stock on the grant date. The
weighted-
average grant date fair value of restricted stock units granted during the years ended December 31, 2006, 2007 and 2008 was $7.89,
$6.94 and $7.20, respectively. As of December 31, 2008, there was $15.8 million of total unrecognized compensation cost related to nonvested
restricted stock units. That cost is expected to be recognized over a weighted-
average period of 2.1 years. The total fair value of shares vested
during the years ended December 31, 2006, 2007 and 2008 was $1.2 million, $2.7 million and $7.0 million, respectively, which represents the
closing price of the Company's common stock on the vesting date multiplied by the number of restricted stock units that vested.
88
Year Ended December 31,
2006
2007
2008
Dividend yield
0
%
0
%
0
%
Expected volatility
43
%
39
%
39
%
Risk
-
free interest rate
4.86
%
4.78
%
3.00
%
Expected life
4.3 years
4.3 years
4.2 years
Restricted
Stock Units
Weighted
Average
Grant Date
Fair Value
(in thousands)
Nonvested as of December 31, 2007
2,061
$
7.17
Granted
3,564
7.20
Vested
(824
)
7.12
Forfeited
(678
)
7.17
Nonvested as of December 31, 2008
4,123
7.20