iHeartMedia 2003 Annual Report Download - page 86

Pro forma net income and earnings per share, assuming that the Company had accounted for its employee stock options using the fair value
method and amortized such to expense over the options’ vesting period is as follows:
The weighted average fair value of stock options granted is required to be based on a theoretical option pricing model. In actuality, because the
company’s employee stock options are not traded on an exchange, employees can receive no value nor derive any benefit from holding stock
options under these plans without an increase in the market price of Clear Channel stock. Such an increase in stock price would benefit all
stockholders commensurately.
Restricted Stock Awards
Beginning in 2003, the Company has granted 75,000 restricted stock awards to its key executives. These common shares hold a legend which
restricts their transferability for a term of five years and are forfeited in the event the employee terminates his or her employment or
relationship with the Company prior to the lapse of the restriction. The restricted stock awards were granted out of the Company’s stock option
plans. All option plans contain anti-dilutive provisions that require the adjustment of the number of shares of the Company common stock
represented by each option for any stock splits or dividends. Additionally, recipients of the restricted stock awards are entitled to all cash
dividends as of the date the award was granted.
Other
As a result of mergers during 2000, the Company assumed 2.7 million employee stock options with vesting dates that vary through April 2005.
To the extent that these employees’ options vest post-merger, the Company recognizes expense over the remaining vesting period. During the
year ended December 31, 2003, 2002 and 2001, the Company recorded expense of $1.6 million, $4.4 million and $12.1 million, respectively,
related to the post-merger vesting of employee stock options. Additionally, as a result of severance negotiations with 20 employees during
2001, the Company accelerated the vesting of 109,000 existing employee stock options. Accordingly, the Company recorded expense during
2001 equal to the intrinsic value of the accelerated options on the appropriate modification dates of $1.8 million. The expense associated with
stock options is recorded on the statement of operations as a component of “non-cash compensation expense”.
Common Stock Reserved for Future Issuance
Common stock is reserved for future issuances of, approximately 87.0 million shares for issuance upon the various stock option plans to
purchase the Company’s common stock (including 43.1 million options currently granted) and .3 million shares for the settlement of a
performance contract.
Shares Held in Treasury
Included in the 427,971 and the 302,214 shares held in treasury are 356,656 and 242,534 shares that the Company holds in Rabbi trusts at
December 31, 2003 and 2002, respectively.
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(In thousands, except per share data)
2003 2002 2001
Net income before cumulative effect of a change in
accounting principle:
Reported $1,145,591 $724,823 $(1,144,026)
Pro forma stock compensation expense, net of tax (43,788)(52,611)(49,469)
Pro Forma $1,101,803 $672,212 $(1,193,495)
Net income before cumulative effect of a change in
accounting principle per common share:
Basic:
Reported $1.86 $1.20 $(1.93)
Pro Forma $ 1.79 $ 1.11 $ (2.02)
Diluted:
Reported $ 1.85 $ 1.18 $ (1.93)
Pro Forma $1.78 $1.10 $(2.02)