Spirit Airlines 2013 Annual Report Download - page 72

Notes to Financial Statements—(Continued)
72
The weighted-average fair value of restricted stock granted during the years ended December 31, 2013 and 2012 was
$27.70 and $20.01, respectively. There was no restricted stock granted during the year ended December 31, 2011. The total fair
value of restricted stock shares vested during the years ended December 31, 2013, 2012 and 2011 was $4.3 million, $3.9
million and $3.2 million respectively.
Stock Options
Stock option awards are granted with an exercise price equal to the fair market value of the Company’s common stock at
the date of grant, vest over four years of continuous service and have ten-year contractual terms. The fair value of each stock
option award is estimated on the date of grant using the Black Scholes model. There were no options granted during 2013 or
2012. For option grants during 2011, the Company’s weighted average assumptions for expected volatility, dividends, term and
risk-free interest rate were 46.25%, 0%, 6.25 years and 2.03%, respectively. Expected volatilities are based on the historical
volatility of a group of peer entities within the same industry. The expected term of options is based upon the simplified
method, which represents the average of the vesting term and the contractual term. The risk-free interest rate is based on U.S.
Treasury yields for securities with terms approximating the expected term of the option.
Prior to the Company's IPO, to the extent a market price was not available, the fair value of the Company’s common
stock was estimated using a discounted cash flow analysis and market multiples, based on management’s estimates of revenue,
driven by assumed market growth rates, and estimated costs as well as appropriate discount rates. These estimates are
consistent with the plans and estimates management uses to manage the Company’s business.
A summary of share option activity under the 2011 Plan as of December 31, 2013 and changes during the year ended
December 31, 2013 is presented below:
Number
of Options
Weighted-
Average
Exercise
Price ($)
Average
Remaining
Contractual
Term
(Years)
Aggregate
Intrinsic
Value
($000)
Outstanding at December 31, 2012 247,650 9.59 8.0 2,015
Exercised (92,400) 9.22
Forfeited or expired (98,750) 10.70
Outstanding at December 31, 2013 56,500 8.26 6.7 2,099
Exercisable at December 31, 2013 27,125 8.12 6.6 1,011
Vested or Expected to Vest at December 31, 2013 56,260 8.25 6.7 2,090
There were no options granted during the years ended December 31, 2013 or 2012. The weighted-average fair value of
option awards granted during the year ended December 31, 2011 was $5.73. The total intrinsic value of share options exercised
during the years ended December 31, 2013, 2012 and 2011 was $2.0 million, $0.7 million and $0.2 million, respectively. The
total fair value of shares vested during the years ended December 31, 2013, 2012 and 2011 was $0.2 million, $0.4 million and
$0.3 million, respectively.
As of December 31, 2013 and December 31, 2012, there was $46.7 thousand and $650.5 thousand respectively, of
total unrecognized compensation cost related to options expected to be recognized over 0.8 years and 1.99 years, respectively.
Performance Share Awards
During 2013 and 2012, the Company granted certain senior-level executives restricted stock units that vest based on
market and service conditions as part of a long-term incentive plan, which are referred to herein as performance share awards.
The number of shares of common stock underlying each award is determined at the end of a three-year performance period. In
order to vest, the senior level executive must still be employed by the Company, with certain contractual exclusions, at the end
of the performance period. At the end of the performance period, the percentage of the stock units that will vest will be
determined by ranking the Company’s total shareholder return compared to the total shareholder return of the nine peer
companies identified in the plan. Based on the level of performance, between 0% and 200% of the award may vest. Within 60
days after vesting, the shares underlying the award will be issued to the participant. In the event of a change in control of the
Company or the disability or death of a participant, the payout of any award is limited to a pro-rated portion of such award
based upon a performance assessment prior to the change-in-control date or date of disability or death.
The market condition requirements are reflected in the grant date fair value of the award, and the compensation expense,
net of forfeitures, for the award will be recognized assuming that the requisite service is rendered regardless of whether the
market conditions are achieved.