Avis 2006 Annual Report Download - page 96

Table of Contents
All components of accumulated other comprehensive income are net of tax except currency translation adjustments, which exclude income
taxes related to indefinite investments in foreign subsidiaries.
The Company may grant stock options, stock appreciation rights, restricted shares and restricted stock units (“RSUs”) to its employees,
including directors and officers of the Company and its affiliates. Beginning in 2003, the Company changed the method by which it
provides stock-based compensation to its employees by significantly reducing the number of stock options granted and instead, issuing
RSUs as a form of compensation. Additionally, in 2006, the Company began to issue stock settled stock appreciation rights (“SARs”) to
certain executives. The Company is authorized to grant up to 33 million shares of its common stock under its active stock plans and at
December 31, 2006, approximately 13 million shares were available for future grants under the terms of these plans. The Company may
settle employee stock option exercises with treasury shares. The Company issues shares related to vested RSUs from treasury shares.
Stock Options
Following the spin-
offs of Realogy and Wyndham, all previously outstanding time and performance vesting and time vesting stock options
vested and converted into stock options of Avis Budget, Realogy and Wyndham. Although no stock options were granted during 2006, the
Company may grant stock options that vest based on performance and/or time vesting criteria. The predetermined performance criteria
determine the number of options that will ultimately vest and are based on growth in earnings before taxes and certain revenue metrics
over varying periods of three to four years.
The annual activity of the Company’s common stock option plans consisted of (in thousands of shares):
18.
Stock
-
Based Compensation
2006 2005 2004
Number
of
Options
Weighted
Average
Exercise
Price
(e)
Number
of
Options
Weighted
Average
Exercise
Price
(e)
Number
of
Options
Weighted
Average
Exercise
Price
(e)
Balance at beginning of year
12,890
$
27.12
15,071
$
26.73
18,823
$
25.80
Granted at fair market value
(a)
-
-
100
30.55
318
34.66
Granted in connection with PHH spin-off
(b)
-
-
627
(*)
-
-
Exercised
(c)
(576
)
15.69
(2,380
)
17.01
(3,787
)
21.90
Forfeited
(1,277
)
31.36
(528
)
30.32
(283
)
28.98
Balance at end of year
(d)
11,037
27.22
12,890
27.12
15,071
26.73
(*)
Not meaningful.
(a)
Reflects the maximum number of options assuming achievement of all performance and time vesting criteria.
(b)
As a result of the spin-off of PHH, the Company granted incremental options and reduced the exercise price of each stock option.
(c)
Stock options exercised during 2006, 2005 and 2004 had intrinsic value of $23 million, $223 million and $335 million, respectively.
(d)
As of December 31, 2006, the Company’s outstanding “in-the-money” stock options had aggregate intrinsic value of $20 million.
Aggregate unrecognized compensation expense related to outstanding stock options was zero as of December 31, 2006.
F
-
39
(e)
As a result of the spin-offs of Realogy and Wyndham on July 31, 2006, the exercise price of each option was adjusted downward by
a proportionate value. Such amounts were then revised to reflect the one-for-ten reverse stock split, which became effective on
September 5, 2006.