Burger King 2012 Annual Report Download - page 119

Table of Contents
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The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes option pricing model. The estimated fair value of
stock options, less estimated forfeitures, is amortized over the vesting period on a straight-line basis. The assumptions used in the Black-Scholes option-
pricing model are as follows:
 
Risk-free interest rate 1.03% 1.93%
Expected term (in years) 5.50 5.00
Expected volatility 35.00% 35.00%
Expected dividend yield 0.00% 0.00%
Expected volatility was based on a review of the equity volatilities of publicly-traded guideline companies. The risk-free interest rate was based on the
U.S. Treasury yield with a remaining term equal to the expected option life assumed at the date of grant. The expected term was calculated based on the
analysis of a five-year vesting period coupled with the Company’s expectations of exercise activity.
The following is a summary of option activity under the 2011 Omnibus Plan and 2012 Omnibus Plan as of and for the year ended December 31, 2012:
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




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


Options outstanding at January 1, 2012 12,537 $3.54
Granted 7,770 $ 3.97
Exercised 464 $3.54
Forfeited 3,485 $ 3.61
Options outstanding at December 31, 2012 16,358 $3.73 $210,490 8.6
Options expected to vest at December 31, 2012 14,079 $3.73 $178,917 8.6
(1) The intrinsic value represents the amount by which the fair value of our stock exceeds the option exercise price at December 31, 2012.
The number of options exercisable at December 31, 2012 was insignificant. The weighted-average estimated fair value of stock options granted was
$3.80 during 2012 and $0.58 during 2011. The total intrinsic value of stock options exercised was $5.7 million during 2012 and no options were exercised
during 2011. As of December 31, 2012, there was approximately $25.2 million of total unrecognized compensation cost, which is expected to be recognized
over a weighted-average period of 3.2 years.
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The Predecessor recorded $5.8 million of share-based compensation expense from July 1, 2010 through October 18, 2010 and $17.0 million in Fiscal
2010, in selling, general and administrative expenses.
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Prior to the 2010 Acquisition, share-based compensation expense for stock options was estimated on the grant date using a Black-Scholes option pricing
model. The Predecessor’s specific weighted-average assumptions for the risk-free interest rate, expected term, expected volatility and expected dividend yield are
discussed below.
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Source: Burger King Worldwide, Inc., 10-K, February 22, 2013 Powered by Morningstar® Document Research℠
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