Earthlink 2013 Annual Report Download - page 101

Table of Contents EARTHLINK HOLDINGS CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
The Company did not grant any stock options during the year ended December 31, 2011. The fair value of stock options granted during
the years ended December 31, 2012 and 2013 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, 2012 and 2013 was $1.65
per share
and $1.19
per share, respectively. The dividend yield assumption was based on the Company's history of dividend payouts at the time of grant.
The expected volatility was based on a combination of the Company's historical stock price and implied volatility. The selection of implied
volatility data to estimate expected volatility was based upon the availability of prices for actively traded options on the Company's stock. The
risk-
free interest rate assumption was 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 restricted stock unit activity as of and for the year ended December 31, 2013 :
The fair value of restricted stock units is determined based on the closing 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, 2011, 2012 and 2013 was $8.22
,
$7.51 and $6.01 , respectively. As of December 31, 2013 , there was $10.5 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 1.8 years
. The total fair value of shares vested
during the years ended December 31, 2011, 2012 and 2013 was $15.6 million , $7.4 million and $5.7 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.
14. Profit Sharing Plans
The Company sponsors the EarthLink Holdings Corp. 401(k) Plan ("Plan"), which qualifies as a deferred salary arrangement under
Section 401(k) of the Internal Revenue Code. Under the Plan, participating employees may defer a portion of their pretax earnings up to the
Internal Revenue Service annual contribution limit. The Company makes a matching contribution of 50% of the first 6%
of base compensation
that a participant contributes to the Plan. The Company's matching contributions vest over four years
from the participant's date of hire. The
Company contributed $3.2 million , $3.9 million and $3.7 million during the years ended December 31, 2011, 2012 and 2013 , respectively.
89
Year Ended December 31,
2012
2013
Dividend yield 2.69% 3.29%
Expected volatility 32.50%
31.20%
Risk-free interest rate 0.81% 0.88%
Expected life 5 years
5 years
Restricted
Stock Units
Weighted
Average
Grant Date
Fair Value
(in thousands)
Outstanding as of December 31, 2012
2,981
$
7.90
Granted
2,621
6.01
Vested
(875
)
8.05
Forfeited
(791
)
6.95
Outstanding as of December 31, 2013
3,936
$
6.80