Avis 2008 Annual Report Download - page 107

Restricted Stock Units
RSUs currently granted by the Company entitle the employee to receive one share of Avis Budget common stock upon vesting, which
occurs ratably over a four-year period for the majority of currently outstanding RSUs. The Company also employs performance and time
vesting criteria for RSU grants made to certain of the Company’s executives. The predetermined performance criteria determine the number
of RSUs that will ultimately vest and are based on growth in earnings before taxes and certain other metrics over varying periods of three to
four years. The number of performance-based RSUs that will ultimately vest may range from 0% to 100% of the target award. The annual
activity related to the Company’s RSUs consisted of (in thousands of shares):
2008
2007
2006
Number
of RSUs
Weighted
Average
Grant
Price
Number
of RSUs
Weighted
Average
Grant
Price
Number
of RSUs
Weighted
Average
Grant
Price
Balance at beginning of year
2,330
$
25.03
1,774
$
24.33
2,299
$
(*
)
Granted at fair market value
(a)
1,156
12.84
1,143
25.83
1,799
(*
)
Vested
(b)
(577
)
24.68
(382
)
24.31
(1,129
)
(*
)
Canceled
(b)
(236
)
21.05
(205
)
24.79
(1,195
)
(*
)
Balance at end of year
(c)
2,673
20.18
2,330
25.03
1,774
24.33
(*)
Weighted average grant date prices for RSU activity prior to the Cendant Separation are not meaningful due to the impact of the
Cendant Separation on the weighted average grant price of RSUs.
(a)
Reflects the maximum number of RSUs assuming achievement of all performance and time vesting criteria.
(b)
As a result of the Cendant Separation, approximately 1.2 million RSUs were canceled during third quarter 2006. Also, as a result of
the Cendant Separation, approximately 1.1 million RSUs vested and converted into shares of Avis Budget common stock, Realogy
common stock and Wyndham common stock.
Stock Appreciation Rights
SARs are settled in Company stock, have a seven-year term, and vest ratably over a four-year period or after three years with no graded
vesting prior thereto. The Company’s policy is to grant SARs with exercise prices at then-current fair market value. At December 31, 2008,
the Company had approximately 0.5 million SARs outstanding with a weighted average exercise price of $24.40, a weighted average
contractual life of 4.6 years and unrecognized compensation expense of $1 million.
The weighted average grant-
date fair value of SARs granted during 2006 was $9.05. The fair value of these SARs is estimated on the date of
grant using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield—0%; expected
volatility—32.9%; risk-free interest rate—4.9%; and expected holding period—4.9 years.
Employee Stock Purchase Plan
The Company is authorized to sell shares of its Avis Budget common stock to eligible employees under its non-compensatory employee
stock purchase plan (“ESPP”). Under the terms of the ESPP, employees may authorize the company to withhold up to 10% of their
compensation from each paycheck for the purchase of Avis Budget common stock. For amounts withheld in 2008, the purchase price of the
stock was calculated as 95% of the fair market value of Avis Budget common stock as of last business day each month. During 2008,
F
-
44
(c)
As of December 31, 2008, the Company’s outstanding RSUs had aggregate intrinsic value of $2 million. Aggregate unrecognized
compensation expense related to RSUs amounted to $42 million as of December 31, 2008. The balance of RSUs at December 31, 2008
consists of 1,696,000 related to time-based awards and 977,000 related to performance-based awards.