Royal Caribbean Cruise Lines 2013 Annual Report Download - page 88
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 9. STOCK-BASED EMPLOYEE
COMPENSATION
We currently have awards outstanding under three
stock-based compensation plans, which provide for
awards to our officers, directors and key employees.
The plans consist of a 1995 Incentive Stock Option
Plan, a 2000 Stock Award Plan, and a 2008 Equity
Plan. Our ability to issue new awards under the 1995
Incentive Stock Option Plan and the 2000 Stock
Award Plan terminated in accordance with the terms
of the plans in February 2005 and September 2009,
respectively. The 2008 Equity Plan, as amended, pro-
vides for the issuance of up to 11,000,000 shares of
our common stock pursuant to grants of (i) incentive
and non-qualified stock options, (ii) stock apprecia-
tion rights, (iii) restricted stock, (iv) restricted stock
units and (v) performance shares. During any calendar
year, no one individual shall be granted awards of
more than 500,000 shares. With limited exceptions,
options and restricted stock units outstanding as of
December 31, 2013 vest in equal installments over
four to five years from the date of grant. With certain
limited exceptions, options and restricted stock units
are forfeited if the recipient ceases to be a director or
employee before the shares vest. Options are granted
at a price not less than the fair value of the shares on
the date of grant and expire not later than ten years
after the date of grant.
Prior to 2012, our officers received a combination of
stock options and restricted stock units. Beginning
in 2012, our officers instead receive their long-term
incentive awards through a combination of perfor-
mance shares and restricted stock units. Each perfor-
mance share award is expressed as a target number
of performance shares based upon the fair market
value of our common stock on the date the award is
issued. The actual number of shares underlying each
award (not to exceed 200% of the target number of
performance shares) will be determined based upon
the Company’s achievement of a specified perfor-
mance target range. For the grants awarded in 2013,
the performance target is return on invested capital
(“ROIC”) for the year ended December 31, 2013, as
adjusted by the Compensation Committee of our
Board of Directors for events that are outside of man-
agement’s control. In 2013, we issued a target number
of 242,352 performance shares which will vest on the
third anniversary of the award issue date. In February
2014, the Compensation Committee of our Board of
Directors set the actual payout level at 82.0% of tar-
get for the performance shares issued in 2013.
We also provide an Employee Stock Purchase Plan
(“ESPP”) to facilitate the purchase by employees of
up to 800,000 shares of common stock in the aggre-
gate. Offerings to employees are made on a quarterly
basis. Subject to certain limitations, the purchase
price for each share of common stock is equal to
90.0% of the average of the market prices of the
common stock as reported on the New York Stock
Exchange on the first business day of the purchase
period and the last business day of each month of the
purchase period. During 2013, 2012 and 2011, 27,036,
35,927 and 28,802 shares of our common stock were
issued under the ESPP at a weighted-average price
of $33.16, $25.58 and $29.46, respectively.
Under the chief executive officer’s employment
agreement, we issued 10,086 shares of our common
stock per quarter during 2013, 2012 and 2011 to the
chief executive officer.
Total compensation expense recognized for employee
stock-based compensation for the years ended Decem-
ber 31, 2013, 2012 and 2011 was as follows:
Classification of expense
Employee Stock-Based
Compensation
(In thousands)
Marketing, selling and
administrative expenses
Total compensation expense
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 using the graded-vesting method.
We did not issue any stock options in 2013. The
assumptions used in the Black-Scholes option-pricing
model are as follows:
Dividend yield —
Expected stock price volatility
Risk-free interest rate
Expected option life years years
Expected volatility was based on a combination of
historical and implied volatilities. The risk-free interest
rate was based on United States Treasury zero coupon
issues with a remaining term equal to the expected
option life assumed at the date of grant. The expected
term was calculated based on historical experience
and represents the time period options actually remain
outstanding. We estimate forfeitures based on histori-
cal pre-vesting forfeiture rates and revise those esti-
mates as appropriate to reflect actual experience.