Quarterly report pursuant to Section 13 or 15(d)

Stockholders Equity

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Stockholders Equity
 6 Months Ended
Jun. 30, 2012
Stockholders' Equity Note [Abstract]  
Stockholders Equity [Text Block]

(5)       Stockholders' Equity

 

Shared-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 are issued when stock option agreements are exercised or restricted stock awards are granted. We have 3.9 million shares available for grant under the Stock Option Plan at June 30, 2012.

 

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.

 

We estimated the expected term of options granted by evaluating the vesting period of stock options, employee's past exercise and post-vesting employment departure behavior, and expected volatility of the price of the underlying shares.

 

We estimated the expected volatility of our common stock at the grant date using the historical volatility of our common stock over the most recent period equal to the expected stock option term and evaluated the extent to which available information indicated that future volatility may differ from historical volatility.

 

The risk-free interest rate assumption was determined using the Federal Reserve nominal rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. We have never paid any cash dividends on our common stock and we do not anticipate paying any cash dividends in the foreseeable future. Therefore, we assumed an expected dividend yield of zero.

We estimate pre-vesting option forfeitures at the time of grant and periodically revise those estimates in subsequent periods if actual forfeitures differ from those estimates. We record share-based compensation expense only for those awards expected to vest using an estimated forfeiture rate based on our historical pre-vesting forfeiture data. We review our forfeiture estimates annually and adjust our share-based compensation expense in the period our estimate changes.

 

A summary of option activity under the Stock Option Plan for the six months ended June 30, 2012 is presented below (share amounts in thousands):

              Weighted    
          Weighted   Average   Aggregate
          Average   Remaining   Intrinsic
          Exercise   Contractual   Value
      Shares   Price   Term   (in thousands)
  Outstanding at January 1, 2012 1,087   $ 7.27        
    Exercised (188)   $ 7.26        
    Forfeited (5)   $ 6.93        
    Expired (11)   $ 6.14        
  Outstanding at June 30, 2012 883   $ 7.29   3.76 years   $ 1,124
  Exercisable at June 30, 2012 810   $ 7.33   3.50 years   $ 1,008

There were no options granted during the six months ended June 30, 2012 and 2011. The total fair value of options vested during the six months ended June 30, 2012 and 2011, was $502,000 and $97,000, respectively. The total intrinsic values, determined as of the date of exercise, of options exercised in the six months ended June 30, 2012 and 2011, were $772,000 and $155,000, respectively. We received $1.4 million and $285,000 in cash from stock option exercises during the six months ended June 30, 2012 and 2011, respectively.

 

A summary of nonvested restricted stock award activity under the Stock Option Plan for the six months ended June 30, 2012, follows (share amounts in thousands):

          Weighted  
          Average  
          Grant Date  
    Shares   Fair Value  
  Nonvested at January 1, 2012 1,556 $ 6.89  
    Granted 420 $ 10.53  
    Vested (984) $ 4.87  
    Forfeited (2) $ 8.80  
  Nonvested at June 30, 2012 990 $ 10.42  

The following is a summary of our share-based compensation expense for the six months ended June 30, 2012 and 2011 (amounts in thousands):

      2012   2011
  Employee share-based compensation expense $ 2,831   2,968
  Adjustment to fair value of liability classified awards   (236)   (128)
  Total share-based compensation expense $ 2,595   2,840

Share-based compensation expense is classified as Selling, General and Administrative Expense in our Consolidated Statements of Operations. Unrecognized share-based compensation expense was $5.9 million relating to 990,000 restricted stock awards and $169,000 relating to 67,000 unvested stock options as of June 30, 2012. We expect to recognize share-based compensation expense over a weighted average period of 1.8 years for stock options and 2.0 years for restricted stock awards.

 

On August 6, 2009, we filed a Tender Offer Statement on Schedule TO (“Exchange Offer”) with the SEC. The Exchange Offer was an offer by us to eligible officers, employees and stakeholders, other than officers of GCI who also serve on GCI's Board of Directors (“Participants”) to exchange, on a grant-by-grant basis, their outstanding eligible stock options that were granted under our Stock Option Plan, whether vested or unvested, for shares of restricted stock of GCI Class A common stock that we granted under the Stock Option Plan (“Restricted Stock”). We issued 1,908,890 shares of Restricted Stock to Participants in accordance with the terms of the Exchange Offer. In accordance with the terms of the Restricted Stock agreement, one-half of the Restricted Stock received in exchange for eligible options vested on December 20, 2011, and the remainder vested on February 28, 2012.