Dollar Rent A Car 2011 Annual Report Download - page 75

Deferred Compensation and Retirement Plans
In 2009, the Company adopted a 2009 Deferred Compensation Plan wherein key executives will receive contributions equal to 15% of such executives’
current annual base compensation for the year ended December 31, 2009 and thereafter. Under this Plan, participants are immediately vested in the
Company’s contributions. Expense related to these plans for contributions made by the Company totaled $0.9 million, $0.8 million and $0.8 million
in 2011, 2010 and 2009, respectively.
The balance in the deferred compensation and retirement plans, which is reflected in accrued liabilities, was $5.8 million and $3.9 million as of
December 31, 2011 and 2010, respectively.
Share-Based Payment Plans
Long-Term Incentive Plan
The Company has a long-term incentive plan (“LTIP”) for employees and non-employee directors under which the Human Resources and
Compensation Committee of the Board of Directors of the Company (the “Committee”) is authorized to provide for grants in the form of incentive
option rights, non-qualified option rights, tandem appreciation rights, free-standing appreciation rights, restricted stock, restricted stock units,
performance shares, performance units and other awards to key employees and non-employee directors that may be payable or related to common stock
or factors that may influence the value of common stock. The Company issues new shares from remaining authorized common stock to satisfy option
exercises and grants under the LTIP. At December 31, 2011, the Company’s common stock authorized for issuance under the LTIP was 2,083,550
shares. The Company has 247,517 shares available for future LTIP awards at December 31, 2011 after reserving for the maximum potential shares
that could be awarded under existing LTIP grants.
Compensation cost for non-qualified option rights, performance shares and restricted stock awards is recognized based on the fair value of the awards
granted at the grant-date and is amortized to compensation expense on a straight-line basis over the requisite service periods of the stock awards, which
are generally the vesting periods. The Company recognized compensation costs of $4.1 million, $4.8 million and $6.2 million during 2011, 2010 and
2009, respectively, for such awards. 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. The total income tax benefit recognized in the
statements of income for share-based compensation payments was $1.6 million, $1.9 million and $2.7 million for 2011, 2010 and 2009, respectively.
Option Rights Plan – Under the LTIP, the Committee may grant non-qualified option rights to key employees and non-employee directors. The
exercise prices for non-qualified option rights are equal to the fair market value of the Company’s common stock at the date of grant. The non-qualified
option rights have a term not exceeding ten years from the date of grant. The maximum number of shares for which option rights may be granted under
the LTIP to any participant during any calendar year is 285,000.
During 2011 and 2010, there were no stock option awards granted. The Black-Scholes option valuation model was used to estimate the fair value of the
2009 stock option awards at the date of the grant. The Company used the simplified method to estimate the weighted-average expected life of the options
granted. The Company used a blended volatility rate that combines market-based measures of implied volatility with historical price volatility as the
most appropriate indicator of the Company’s expected price volatility in 2009. The risk-free interest rate is the implied zero-coupon yield for U.S.
Treasury securities having a maturity approximately equal to the expected life at the time of grant.
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