Charter 2004 Annual Report Download - page 136

CHARTER COMMUNICATIONS, INC. AND SUBSIDIARIES 2004 FORM 10-K
Notes to Consolidated Financial Statements (continued)
The following table summarizes information about stock options outstanding and exercisable as of December 31, 2004:
Options Outstanding Options Exercisable
Weighted- Weighted-
Average Weighted- Average Weighted-
Remaining Average Remaining Average
Range of Number Contractual Exercise Number Contractual Exercise
Exercise Prices Outstanding Life Price Exercisable Life Price
(In thousands) (in thousands)
$1.11 - $1.60 3,144 8 years $ 1.52 782 8 years $ 1.45
$2.85 - $4.56 7,408 8 years 3.45 2,080 8 years 3.28
$5.06 - $5.17 8,857 9 years 5.14 533 9 years 5.06
$9.13 - $13.68 2,264 7 years 11.08 1,481 7 years 11.28
$13.96 - $23.09 3,162 5 years 19.63 2,855 5 years 19.59
On January 1, 2003, the Company adopted the fair value employee would have received multiplied by $5.00. The offer
measurement provisions of SFAS No. 123, under which the applied to options (vested and unvested) to purchase a total of
Company recognizes compensation expense of a stock-based 22,929,573 shares of Class A common stock, or approximately
award to an employee over the vesting period based on the fair 48% of the Company’s 47,882,365 total options issued and
value of the award on the grant date. Adoption of these outstanding as of December 31, 2003. Participation by employ-
provisions resulted in utilizing a preferable accounting method ees was voluntary. Those members of the Company’s board of
as the consolidated financial statements present the estimated directors who were not also employees of the Company or any
fair value of stock-based compensation in expense consistently of its subsidiaries were not eligible to participate in the exchange
with other forms of compensation and other expense associated offer.
with goods and services received for equity instruments. In In the closing of the exchange offer on February 20, 2004,
accordance with SFAS No. 123, the fair value method will be the Company accepted for cancellation eligible options to
applied only to awards granted or modified after January 1, purchase approximately 18,137,664 shares of its Class A com-
2003, whereas awards granted prior to such date will continue mon stock. In exchange, the Company granted 1,966,686 shares
to be accounted for under APB No. 25, unless they are modified of restricted stock, including 460,777 performance shares to
or settled in cash. The ongoing effect on consolidated results of eligible employees of the rank of senior vice president and
operations or financial condition will be dependent upon future above, and paid a total cash amount of approximately $4 million
stock based compensation awards granted. The Company (which amount includes applicable withholding taxes) to those
recorded $31 million of option compensation expense for the employees who received cash rather than shares of restricted
year ended December 31, 2004. stock. The restricted stock was granted on February 25, 2004.
Prior to the adoption of SFAS No. 123, the Company used Employees tendered approximately 79% of the options eligible
the intrinsic value method prescribed by APB No. 25, Accounting to be exchanged under the program.
for Stock Issued to Employees, to account for the option plans. The cost to the Company of the stock option exchange
Option compensation expense of $5 million for the year ended program was approximately $10 million, with a 2004 cash
December 31, 2002, was recorded in the consolidated statements compensation expense of approximately $4 million and a non-
of operations since the exercise prices of certain options were cash compensation expense of approximately $6 million to be
less than the estimated fair values of the underlying membership expensed ratably over the three-year vesting period of the
interests on the date of grant. restricted stock in the exchange.
In January 2004, the Company began an option exchange In January 2004, the Compensation Committee of the
program in which the Company offered its employees the right board of directors of Charter approved Charter’s Long-Term
to exchange all stock options (vested and unvested) under the Incentive Program (‘‘LTIP’’), which is a program administered
1999 Charter Communications Option Plan and 2001 Stock under the 2001 Stock Incentive Plan. Under the LTIP, employ-
Incentive Plan that had an exercise price over $10 per share for ees of Charter and its subsidiaries whose pay classifications
shares of restricted Charter Class A common stock or, in some exceed a certain level are eligible to receive stock options, and
instances, cash. Based on a sliding exchange ratio, which varied more senior level employees are eligible to receive stock options
depending on the exercise price of an employees outstanding and performance shares. The stock options vest 25% on each of
options, if an employee would have received more than the first four anniversaries of the date of grant. The performance
400 shares of restricted stock in exchange for tendered options, shares vest on the third anniversary of the grant date and shares
Charter issued that employee shares of restricted stock in the of Charter Class A common stock are issued, conditional upon
exchange. If, based on the exchange ratios, an employee would Charter’s performance against financial performance measures
have received 400 or fewer shares of restricted stock in established by Charter’s management and approved by its board
exchange for tendered options, Charter instead paid the of directors as of the time of the award. Charter granted
employee cash in an amount equal to the number of shares the 6.9 million shares in January 2004 under this program and
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