Thrifty Car Rental 2009 Annual Report Download - page 75

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The total intrinsic value of options exercised during 2009, 2008 and 2007 was $0.6 million, $28,000,
and $1.4 million, respectively. Total cash received for non-qualified option rights exercised during
2009, 2008 and 2007 totaled $2.3 million, $30,000 and $1.1 million, respectively. The Company
deems a tax benefit to be realized when the benefit provides incremental benefit by reducing current
taxes payable that it otherwise would have had to pay absent the share-based compensation
deduction (the “with-and-without” approach). Under this approach, share-based compensation
deductions are, effectively, always considered last to be realized. Due to full utilization of the net
operating losses in 2009, the Company realized $1.3 million in tax benefits from the options
exercised. The Company did not realize any tax benefits from option exercises during 2008 or 2007.
The following table summarizes information regarding fixed non-qualified option rights that were
outstanding at December 31, 2009:
Weighted-Average Weighted- Weighted-
Range of Number Remaining Average Number Average
Exercise Outstanding Contractual Life Exercise Exercisable Exercise
Prices (In Thousands) (In Years) Price (In Thousands) Price
$0.77 - $0.97 846 8.75 0.95$ 284 0.95$
$4.44 - $11.45 1,122 9.25 4.54 16 11.45
$13.98 - $24.38 483 4.34 21.02 183 19.75
$0.77 - $24.38 2,451 8.11 6.55$ 483 8.41$
Options Outstanding Options Exercisable
Performance Shares – Performance shares are granted to Company officers and certain key
employees. No awards were granted in 2009. The awards granted in 2008 and 2007 established a
target number of shares that generally vest at the end of a three-year requisite service period
following the grant-date. The number of performance shares ultimately earned will range from zero
to 200% of the target award, depending on the level of corporate performance over each of the three
years, which is considered the performance period. Values of the performance shares earned will be
recognized as compensation expense over the period the shares are earned. The maximum
amount for which performance shares may be granted under the LTIP during any year to any
participant is 160,000 common shares. The Company recognized compensation costs of $1.9
million, $2.8 million and $6.7 million in 2009, 2008 and 2007, respectively, for performance shares
(included in the $6.2 million, $3.9 million and $7.7 million discussed above).
For the awards granted in 2008 and 2007, the expense related to performance shares is based on a
market based condition for 50% of the target award and on defined performance indicators for the
other 50% of the target award. The grant-date fair value for the performance indicator portion of the
award was based on the closing market price of the Company’s common shares at the date of grant.
The market condition based portion of the award was estimated on the date of grant using a lattice-
based option valuation model and the following assumptions: weighted-average expected life of
awards of three years, volatility factor of 35.30% and risk-free rate of 2.32% for 2008, and weighted-
average expected life of awards of three years, volatility factor of 28.10% and risk-free rate of 4.88%
for 2007.
To arrive at the assumptions used to estimate the fair value of the Company’s market condition
based performance shares, as noted above, the Company relies on observations of historical
trends, actual results and anticipated future changes. To determine expected volatility, the
Company examines historical volatility trends of the Company and its peers (defined as the Russell
2000 Index), as determined by an independent third party. In determining the expected term, the
Company observes the actual terms of prior grants and the actual vesting schedule of the grant.
The risk-free interest rate is the actual U.S. Treasury zero-coupon rate for bonds matching the
expected term of the award on the date of grant. The expected dividend yield was estimated based
on the Company’s current dividend yield, and adjusted for anticipated future changes.
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