First Data 2008 Annual Report Download - page 168

FIRST DATA CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The Company did not meet the 2008 annual EBITDA target associated with the performance stock options. In addition, the Company could not
conclude it is probable that the annual or cumulative future EBITDA targets associated with the performance stock options will be met given the current
economic conditions. As such, the Company reversed $7.7 million of stock compensation expense in the fourth quarter 2008 that was recognized in the first
three quarters of 2008, which represents the entire accrual, and is not planning to recognize expense related to these options in future periods unless or until
attainment of applicable targets is judged to be probable.
The fair value of Holdings stock options granted for the year ended December 31, 2008 were estimated at the date of grant using a Black-Scholes option
pricing model with the following weighted-average assumptions:
Year ended
December 31,
2008
Risk-free interest rate 3.39%
Dividend yield —
Volatility 55.53%
Expected term (in years) 7
Fair value of stock $ 5
Fair value of options $ 3
Risk-free interest rate—The risk-free rate for stock options granted during the period was determined by using a zero-coupon U.S. Treasury rate for the
periods that coincided with the expected terms listed above.
Expected dividend yield—No routine dividends are currently being paid by Holdings, or are expected to be paid in future periods.
Expected volatility—As Holdings is a non-publicly traded company, the expected volatility is based on the historical volatilities of a group of guideline
companies.
Expected term—The Company estimated the expected term by considering the historical exercise and termination behavior of employees that
participated in the predecessor equity plans, the vesting conditions of options granted under the stock plan, as well as the impact of limited liquidity for
common stock of a non-publicly traded company.
Fair value of stock—The fair value of the stock was $3 per share as of December 31, 2008; however, all options granted in 2008 were done so at points
in time when the fair value of the stock was $5 per share.
A summary of Holdings stock option activity for the year ended December 31, 2008 is as follows (options in millions):
2008
Options
Weighted-
Average
Exercise
Price
Weighted-
Average
Remaining
Contractual
Term
Outstanding at January 1 —
Granted 62.0 $ 5
Exercised —
Cancelled / Forfeited (2.9) $ 5
Outstanding at December 31 59.1 $ 5 9 years
Options exercisable at December 31 6.7 $ 5 9 years
Options outstanding at December 31 expected to vest (a) 18.6 $ 5 9 years
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