Sprint - Nextel 2008 Annual Report Download - page 101

SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
purchase price is equal to 95% of the market value on the last trading day of each quarterly offering period,
modified from 90% of the market value in previous periods. The aggregate number of shares purchased by an
employee may not exceed 9,000 shares or $25,000 of fair market value in any calendar year, subject to
limitations imposed by the Internal Revenue Code. As of December 31, 2009, the ESPP has approximately
85 million shares authorized for future purchases. This includes 80 million shares authorized in the second
quarter 2009 and is net of elections made in 2009 by employees participating in the fourth quarter 2009 offering
period under the ESPP to purchase about 1 million of our common shares, which were issued in the first quarter
2010. Employees purchased these shares for $3.53 per share.
Currently, we use treasury shares to satisfy share-based awards or new shares if no treasury shares are
available.
Compensation Costs
The cost of employee services received in exchange for an award of equity-based securities is measured
using the fair value of the award on the date of the grant, and that cost is recognized over the period that the
award recipient is required to provide service in exchange for the award. Any awards of liability instruments to
employees are measured at fair value at each reporting date through settlement. Share-based compensation cost
related to awards with graded vesting is recognized using the straight-line method.
Pre-tax share-based compensation charges included in net loss from our share-based award plans were
$81 million for 2009, $272 million for 2008 and $265 million for 2007. The net income tax benefit (expense)
recognized in the consolidated financial statements for share-based compensation awards was $(3) million for
2009, $101 million for 2008 and $96 million for 2007.
As of December 31, 2009, there was $97 million of total unrecognized compensation cost related to
non-vested share-based awards that are expected to be recognized over a weighted average period of 2.12 years.
Cash received from exercise under all share-based payment arrangements, net of shares surrendered for
employee tax obligations, was insignificant for 2009, $57 million for 2008 and $344 million for 2007.
Under our share-based payment plans, we had options and restricted stock units outstanding as of
December 31, 2009. Forfeitures were estimated for share-based awards using a 10.2% weighted average annual
rate.
Options
The fair value of each option award is estimated on the grant date using the Black-Scholes option
valuation model, based on several assumptions including the risk-free interest rate, volatility, expected dividend
yield and expected term. The risk-free interest rate used is based on the zero-coupon U.S. Treasury bond, with a
term equal to the expected term of the options. The volatility used is the implied volatility from traded options on
our common shares. The expected dividend yield used is estimated based on our historical dividend yield and
other factors. The expected term of options granted is estimated using the simplified method, defined as the
average of the vesting term and the contractual term as our historical data is not expected to represent the future
expected term of equity awards due to our severance activities over the last several years. Options outstanding as
of December 31, 2009 include options granted under the 2007 Plan (including options exchanged in business
combinations), the 1997 Program, the Nextel Plan and the MISOP, as discussed above.
F-35