Quarterly report pursuant to Section 13 or 15(d)

Share-based Compensation

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Share-based Compensation
9 Months Ended
Sep. 30, 2011
Condensed Notes to Interim Consolidated Financial Statements (Unaudited)  
Disclosure Of Compensation Related Costs Share Based Payments Text Block

(6)       Share-Based Compensation

Our Amended and Restated 1986 Stock Option Plan ("Stock Option Plan"), provides for the grant of options and restricted stock awards (collectively "award") for a maximum of 15.7 million shares of GCI Class A common stock, subject to adjustment upon the occurrence of stock dividends, stock splits, mergers, consolidations or certain other changes in corporate structure or capitalization. If an award expires or terminates, the shares subject to the award will be available for further grants of awards under the Stock Option Plan. The Compensation Committee of GCI's Board of Directors administers the Stock Option Plan. Substantially all restricted stock awards granted vest over periods of up to three years. Substantially all options vest in equal installments over a period of five years and expire ten years from the date of grant. The requisite service period of our awards is generally the same as the vesting period. Options granted pursuant to the Stock Option Plan are only exercisable if at the time of exercise the option holder is our employee, non-employee director, or a consultant or advisor working on our behalf. New shares of GCI Class A common stock are issued when stock option agreements are exercised or restricted stock awards are granted.

 

The fair value of restricted stock awards is determined based on the number of shares granted and the quoted price of our common stock. We use a Black-Scholes-Merton option pricing model to estimate the fair value of stock options issued. The Black-Scholes-Merton option pricing model incorporates various and highly subjective assumptions, including expected term and expected volatility. We have reviewed our historical pattern of option exercises and have determined that meaningful differences in option exercise activity existed among employee job categories. Therefore, we have categorized these awards into two groups of employees for valuation purposes.

 

The weighted average grant date fair value of options granted during the nine months ended September 30, 2010 was $2.84 per share. There were no options granted during the nine months ended September 30, 2011. The total fair value of options vesting during the nine months ended September 30, 2011 and 2010 was $153,000 and $151,000, respectively.

 

The following is a summary of our share-based compensation expense for the nine months ended September 30, 2011 and 2010 (in thousands):

 

      2011   2010
  Employee share-based compensation expense $ 4,193   3,982
  Adjustment to fair value of liability classified awards   (969)   714
  Total share-based compensation expense $ 3,224   4,696

Share-based compensation expense is classified as selling, general and administrative expense in our Consolidated Income Statements. Unrecognized share-based compensation expense was $5.1 million relating to 2.5 million restricted stock awards and $379,000 relating to 293,000 unvested stock options as of September 30, 2011. We expect to recognize share-based compensation expense over a weighted average period of 1.0 years for stock options and restricted stock awards.

 

A summary of option activity under the Stock Option Plan for the nine months ended September 30, 2011 follows (share amounts in thousands):

 

              Weighted    
          Weighted   Average   Aggregate
          Average   Remaining   Intrinsic
          Exercise   Contractual   Value
      Shares   Price   Term   (in thousands)
  Outstanding at December 31, 2010 1,249   $ 7.08        
    Exercised (157)   $ 5.84        
  Outstanding at September 30, 2011 1,092   $ 7.26   3.9 years   $ 1,317
  Exercisable at September 30, 2011 799   $ 7.64   2.4 years   $ 720

A summary of nonvested restricted stock award activity under the Stock Option Plan for the nine months ended September 30, 2011, follows (share amounts in thousands):

          Weighted  
          Average  
          Grant Date  
    Shares   Fair Value  
  Nonvested at December 31, 2010 2,196 $ 5.29  
    Granted 417 $ 12.30  
    Vested (121) $ 12.31  
    Forfeited (12) $ 6.85  
  Nonvested at September 30, 2011 2,480 $ 6.12  

At September 30, 2011, 3.8 million shares were available for grant under the Stock Option Plan.

 

The total intrinsic values, determined as of the date of exercise, of options exercised during the nine months ended September 30, 2011 and 2010 were $264,000 and $116,000, respectively. We received $915,000 and $207,000 in cash from stock option exercises during the nine months ended September 30, 2011 and 2010, respectively.

 

The following is a summary of activity for stock option grants that were not made pursuant to the Stock Option Plan for the nine months ended September 30, 2011 and 2010 (share amounts in thousands):

 

          Weighted
          Average
          Exercise
    Shares   Price
  Outstanding at December 31, 2009 150 $ 6.50
    Options forfeited and retired (150) $ 6.50
  Outstanding at September 30, 2010 and 2011 -    
  Available for grant at September 30, 2011 -    

In January 2001 we entered into an aircraft operating lease agreement with a company owned by our President and Chief Executive Officer. The lease was amended several times, most recently on May 9, 2011. Upon signing the lease in January 2001, the lessor was granted an option to purchase 250,000 shares of GCI Class A common stock at $6.50 per share, of which 100,000 shares were exercised during the year ended December 31, 2006 and the remaining 150,000 shares expired on March 31, 2010.