Spirit Airlines 2014 Annual Report Download - page 74

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Notes to Financial Statements—(Continued)
74
million for 2014, 2013 and 2012, respectively. During 2014, 2013 and 2012, there was $3.2 million, $2.1 million and $1.6
million tax benefit recognized in income related to stock-based compensation, respectively.
Restricted Stock and Restricted Stock Units
Restricted stock and restricted stock unit awards are valued at the fair value of the shares on the date of grant. Generally,
granted shares and units vest 25% per year on each anniversary of issuance. Each restricted stock unit represents the right to
receive one share of common stock upon vesting of such restricted stock unit. Vesting of restricted stock units is based on time-
based service conditions. In order to vest, the participant must still be employed by the Company, with certain contractual
exclusions, at each vesting event. Within 30 days after vesting, the shares underlying the award will be issued to the participant.
In the event a successor corporation in a change in control situation fails to assume or substitute for the restricted stock units,
the restricted stock units will automatically vest in full as of immediately prior to the consummation of such change in control.
In the event of death or permanent disability of a participant, the restricted stock units will automatically vest in full.
Compensation expense, net of forfeitures, is recognized on a straight-line basis over the requisite service period.
A summary of the status of the Company’s restricted stock shares (restricted stock awards and restricted stock unit
awards) as of December 31, 2014 and changes during the year ended December 31, 2014 is presented below:
Number of
Shares
Weighted-
Average
Grant Date Fair
Value ($)
Outstanding at December 31, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 336,048 22.99
Granted. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 182,464 55.14
Vested. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (111,782) 22.96
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (42,839) 25.47
Outstanding at December 31, 2014 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 363,891 38.83
There were 182,464 and 151,202 restricted stock shares granted during the years ended December 31, 2014 and
December 31, 2013, respectively. As of December 31, 2014 and December 31, 2013, there was $10.6 million and $6.1 million,
respectively, of total unrecognized compensation cost related to nonvested restricted stock to be recognized over 2.8 years and
2.7 years, respectively.
The weighted-average fair value of restricted stock granted during the years ended December 31, 2014, 2013 and 2012
was $55.14, $27.70 and $20.01, respectively. The total fair value of restricted stock shares vested during the years ended
December 31, 2014, 2013 and 2012 was $6.5 million, $4.3 million and $3.9 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 2014,
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.