iHeartMedia 2007 Annual Report Download - page 91

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The fair value of each option awarded is estimated on the date of grant using a Black-Scholes option-pricing model. Expected volatilities are
based on implied volatilities from traded options on the Company’s stock, historical volatility on the Company’s stock, and other factors. The
expected life of options granted represents the period of time that options granted are expected to be outstanding. The Company uses historical
data to estimate option exercises and employee terminations within the valuation model. Prior to the adoption of Statement 123(R), the
Company recognized forfeitures as they occurred in its Statement 123 pro forma disclosures. Beginning January 1, 2006, the Company
includes estimated forfeitures in its compensation cost and updates the estimated forfeiture rate through the final vesting date of awards. The
risk free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods equal to the expected life of the option.
The following assumptions were used to calculate the fair value of the Company’s options on the date of grant during the years ended
December 31, 2007, 2006 and 2005:
The following table presents a summary of the Company’s stock options outstanding at and stock option activity during the year ended
December 31, 2007 (“Price” reflects the weighted average exercise price per share):
A summary of the Company’s unvested options at and changes during the year ended December 31, 2007, is presented below:
90
2007 2006 2005
Expected volatility 25% 25% 25%
Expected life in years 5.5
–
7 5 – 7.5 5
–
7.5
Risk-free interest rate 4.74%
–
4.81% 4.61% – 5.10% 3.76%
–
4.44%
Dividend yield 1.97% 2.32% – 2.65% 1.46%
–
2.36%
Weighted Average Aggregate
Remaining Intrinsic
(In thousands, except per share data) Options Price Contractual Term Value
Outstanding, January 1, 2007 36,175 $42.18
Granted (a) 5 38.11
Exercised (b) (3,021)23.10
Forfeited (422) 32.05
Expire
d
(2,094)51.67
Outstanding, December 31, 2007 30,643 43.56 2.43 years $20,879
Exercisable 23,826 46.79 1.63 years 4,089
Expect to Vest 6,817 32.26 5.2 years 16,790
(a) The weighted average grant date fair value of options granted during the years ended December 31, 2007, 2006 and 2005 was $10.60,
$7.21 and $8.01, respectively.
(b) Cash received from option exercises for the year ended December 31, 2007 was $69.8 million, and the Company received an income tax
benefit of $6.5 million relating to the options exercised during the year ended December 31, 2007. The total intrinsic value of options
exercised during the years ended December 31, 2007, 2006 and 2005 was $41.2 million, $22.2 million and $10.8 million, respectively.
Weighted Average
Grant Date
(In thousands, except per share data) Options Fair Value
Unvested, January 1, 2007 7,789 $10.77
Granted 5 10.60
Vested (a) (556) 14.23
Forfeited (421) 10.63
Unvested, December 31, 2007 6,817 10.80
(a) The total fair value of shares vested during the year ended December 31, 2007 and 2006 was $7.9 million and $95.3 million, respectively.