Spirit Airlines 2012 Annual Report Download - page 74

Notes to Financial Statements—(Continued)
On May 9, 2011, the Company's board of directors adopted, and the Company's stockholders approved, the 2011 Equity Incentive Award Plan, or 2011 Plan. Under
the 2011 Plan, 3,000,000 new shares of common stock are reserved for issuance pursuant to a variety of stock-based compensation awards, including stock options, stock
appreciation rights or SARs, restricted stock awards, restricted stock unit awards, deferred stock awards, dividend equivalent awards, stock payment awards and
performance share awards and other stock-based awards, plus the number of shares remaining available for future awards under our 2005 Stock Plan. The number of shares
reserved for issuance or transfer pursuant to awards under the 2011 Plan will be increased by the number of shares represented by awards outstanding under the Company's
2005 Stock Plan that are forfeited or lapse unexercised and which, following the effective date of the 2011 Plan, are not issued under the Company's 2005 Stock Plan. No
further awards will be granted under the 2005 Stock Plan, and all outstanding awards will continue to be governed by their existing terms. As of December 31, 2012 and
December 31, 2011 , 2,689,490 and 3,336,614 shares of the Company’s common stock, respectively, remained available for future issuance under the 2011 Plan.
Restricted stock and restricted stock unit awards are valued at the fair value of the shares on the date of grant if vesting is based on a service or a performance
condition. Granted shares and units vest 25% per year on each anniversary of issuance. Each restricted stock unit represents the right to receive one share of common stock
upon vesting of such restricted stock unit. Compensation expense is recognized on a straight-line basis over the requisite service period.
Stock option awards are granted with an exercise price equal to the fair market value of the Company’s common stock at the date of grant, vest over four years of
continuous service, and have ten -year contractual terms. The fair value of each stock option award is estimated on the date of grant using the Black Scholes model. There
were no options granted during 2012. For option grants during 2011, the Company’s weighted average assumptions for expected volatility, dividends, term, and risk-free
interest rate were 46.25% , 0% , 6.25 years and 2.03% , respectively. For option grants during 2010, the Company’s weighted average assumptions for expected volatility,
dividends, term, and risk-free interest rate were 51.6% , 0% , 6.25 years and 2.12% , respectively. Expected volatilities are based on the historical volatility of a group of
peer entities within the same industry. The expected term of options is based upon the simplified method, which represents the average of the vesting term and the
contractual term. The risk-free interest rate is based on U.S. Treasury yields for securities with terms approximating the expected term of the option.
Prior to the Company's IPO, to the extent a market price was not available, the fair value of the Company’s common stock was estimated using a discounted cash flow
analysis and market multiples, based on management’s estimates of revenue, driven by assumed market growth rates, and estimated costs as well as appropriate discount
rates. These estimates are consistent with the plans and estimates management uses to manage the Company’s business. Share-based compensation cost is included within
salaries, wages and benefits in operating expenses in the accompanying statements of operations and amounted to $4.3 million , $0.5 million and $0.6 million for 2012 ,
2011 , and 2010 respectively. During 2012 , 2011 , and 2010, there was $1.6 million , $0.2 million and $0.4 million tax benefit recognized in income, respectively.
A summary of share option activity under the 2011 Plan as of December 31, 2012 and changes during the year ended December 31, 2012 is presented below:
There were no options granted during the year ended December 31, 2012 . The weighted-average fair value of option awards granted during the years ended
December 31, 2011 and 2010 was $5.73 , and $4.06 , respectively. The total intrinsic value of share options exercised during the years ended December 31, 2012 and 2011
was $0.7 million and $0.2 million , respectively. There were no options exercised during the year ended December 31, 2010 . The total fair value of shares vested during the
years ended December 31, 2012 , 2011 and 2010 was $0.4 million , $0.3 million and $0.2 million , respectively.
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Number
of Shares
Weighted-
Average
Exercise
Price ($)
Average
Remaining
Contractual
Term
(Years)
Aggregate
Intrinsic
Value
($000)
Outstanding at December 31, 2011
312,000
9.33
8.9
1,946
Exercised
(57,725
)
8.16
Forfeited or expired
(6,625
)
9.74
Outstanding at December 31, 2012
247,650
9.59
8.0
2,015
Exercisable at December 31, 2012
70,900
9.29
7.9
598
Vested or Expected to Vest at December 31, 2012
238,932
9.56
8.0
1,951