iHeartMedia 2010 Annual Report Download - page 107

CLEAR CHANNEL CAPITAL I, LLC AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
D
ividends
The Company has not paid cash dividends since its formation and its ability to pay dividends is subject to restrictions should it seek to
do so in the future. Clear Channel’s debt financing arrangements include restrictions on its ability to pay dividends thereby limiting
the Company’s ability to pay dividends.
Prior to the merger, Clear Channel’s Board of Directors declared a quarterly cash dividend of $93.4 million on December 3, 2007 and
paid on January 15, 2008.
Share-Based Compensation
Stock Options
The Company does not have any compensation plans under which it grants stock awards to employees. Prior to the merger, Clear
Channel granted options to purchase its common stock to its employees and directors and its affiliates under its various equity
incentive plans typically at no less than the fair value of the underlying stock on the date of grant. These options were granted for a
term not exceeding ten years and were forfeited, except in certain circumstances, in the event the employee or director terminated his
or her employment or relationship with Clear Channel or one of its affiliates. Prior to acceleration, if any, in connection with the
merger, these options vested over a period of up to five years. All equity incentive plans contained anti-dilutive provisions that
permitted an adjustment of the number of shares of Clear Channel’s common stock represented by each option for any change in
capitalization.
CCMH has granted options to purchase its Class A common stock to certain key executives under its equity incentive plan at no less
than the fair value of the underlying stock on the date of grant. These options are granted for a term not to exceed ten years and are
forfeited, except in certain circumstances, in the event the executive terminates his or her employment or relationship with the
Company or one of its affiliates. Approximately one-third of the options granted vest based solely on continued service over a period
of up to five years with the remainder becoming eligible to vest over five years if certain predetermined performance targets are met.
The equity incentive plan contains antidilutive provisions that permit an adjustment of the number of shares of the CCMH’s common
stock represented by each option for any change in capitalization.
The Company accounts for its share-based payments using the fair value recognition provisions of ASC 718-10. The fair value of the
portion of options that vest based on continued service is estimated on the grant date using a Black-Scholes option-pricing model and
the fair value of the remaining options which contain vesting provisions subject to service, market and performance conditions is
estimated on the grant date using a Monte Carlo model. Expected volatilities were based on implied volatilities from traded options
on peer companies, historical volatility on peer companies’ stock, and other factors. The expected life of the options granted
represents the period of time that the options granted are expected to be outstanding. CCMH used historical data to estimate option
exercises and employee terminations within the valuation model. 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 these options:
98
2010 2009
Ex
p
ected volatilit
y
58% 58%
Ex
p
ected life in
y
ears 5.0
–
7.
0
5.5
–
7.5
Ris
k
-free interest rate 2.03%
–
2.74% 2.30%
–
3.26%
Dividend
y
ield 0% 0%