Avis 2012 Annual Report Download - page 90

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F-34
behavior of employees and the option vesting periods. The risk-free interest rate is derived from the U.S. Treasury yield
curve in effect at the time of grant and, since the Company does not currently pay or plan to pay a dividend on its
common stock, the expected dividend yield was zero. Based on these assumptions, the fair value of the Company’s time-
vesting stock options issued in 2010 was estimated to be $6.16.
The weighted average fair value of stock options granted during the periods and the assumptions used to estimate those
values using the Black-Scholes option pricing model in 2010 were as follows:
2010
Expected volatility of stock price
54%
Risk-free interest rate
2.82%
Expected life of options
6 years
Dividend yield
0.0%
The annual activity of the Company’s common stock option plans consisted of (in thousands of shares):
2012
2011
2010
Number of
Options
Weighted
Average
Exercise
Price
Number
of Options
Weighted
Average
Exercise
Price
Number of
Options
Weighted
Average
Exercise
Price
Balance at beginning of year
3,432
$
7.90
5,026
$
7.22
7,196
$
11.30
Granted at fair market value
-
-
-
-
160
11.53
Exercised (a)
(756)
0.86
(1,231)
0.98
(982)
8.45
Canceled/forfeited/expired
(775)
27.04
(363)
21.97
(1,348)
28.63
Balance at end of year (c)
1,901
2.89
3,432
7.90
5,026
7.22
__________
(a) Stock options exercised during 2012 and 2011 had intrinsic values of $11 million and $18 million, respectively.
(b) As of December 31, 2012, the Company’s outstanding stock options had an aggregate intrinsic value of $32 million; there were
1.9 million “in-the-money” stock options; and the aggregate unrecognized compensation expense related to unvested stock
options was $1 million, to be recognized over 2.1 years. Approximately 1.8 million stock options are exercisable as of December
31, 2012 and approximately 32,000 stock options are eligible to vest in 2013.
The table below summarizes information regarding the Company’s outstanding stock options as of December 31, 2012
(in thousands of shares):
Outstanding Options
Range of
Exercise Prices
Number of
Options
Weighted Average
Remaining
Contractual Life
Weighted
Average
Exercise Price
Less than $5.00
1,623
6.06
$
0.79
$5.01 to $10.00
-
-
-
$10.01 to $15.00
160
7.07
11.53
$15.01 to $20.00
104
0.28
18.82
$20.01 and above
14
1.32
30.63
1,901
5.80
2.89
Restricted Stock and Stock Unit Awards
RSUs granted by the Company entitle the employee to receive one share of Avis Budget common stock upon vesting,
which occurs ratably over a 2.5-, three- or four-year period for the RSUs outstanding as of December 31, 2012. The
Company also employs performance-, market- and time-vesting criteria for RSU grants made to certain of the
Company’s employees, where the number of performance-based RSUs that will ultimately vest may range from 0% to
100% of the award.
During 2012, the Company granted 488,000 market-vesting restricted stock units, 835,000 time-based restricted stock
units and 486,000 performance-based restricted stock units under the Company’s 2007 Equity and Incentive Plan.
Vesting of all or a portion of the market-vesting and performance-based restricted stock units will occur on the third
anniversary of the grant date or as otherwise provided by the grant, subject to continued employment through such
anniversary, and (i) in the case of the market-based restricted stock units, attainment of certain Company stock price