Expedia 2005 Annual Report Download - page 84

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Expedia, Inc.
Notes to Consolidated Financial Statements Ì (Continued)
The following table presents a summary of our stock options outstanding and exercisable at
December 31, 2005:
Options Outstanding Options Exercisable
Weighted- Weighted-
Average Remaining Average
Price Per Contractual Exercise
Range of Exercise Prices Shares Share Life (Years) Shares Price
(In thousands) (In thousands)
$ 0.01 - $ 5.00 ÏÏÏÏÏÏÏÏÏÏÏÏ 1,942 $ 2.95 3.2 1,940 $ 2.95
$ 5.01 - $ 8.00 ÏÏÏÏÏÏÏÏÏÏÏÏ 499 $ 6.26 2.2 431 $ 6.22
$ 8.01 - $12.00 ÏÏÏÏÏÏÏÏÏÏÏÏ 11,999 $ 8.88 2.1 11,184 $ 8.80
$12.01 - $18.00 ÏÏÏÏÏÏÏÏÏÏÏÏ 3,470 $14.57 6.2 2,393 $14.64
$18.01 - $25.00 ÏÏÏÏÏÏÏÏÏÏÏÏ 4,497 $21.47 4.6 4,366 $21.49
$25.01 - $35.00 ÏÏÏÏÏÏÏÏÏÏÏÏ 3,198 $28.28 8.7 694 $27.24
$35.01 - $45.00 ÏÏÏÏÏÏÏÏÏÏÏÏ 2,038 $38.11 7.7 608 $37.63
$45.01 - $55.00 ÏÏÏÏÏÏÏÏÏÏÏÏ 10 $54.58 4.1 10 $54.58
$55.01 - $65.00 ÏÏÏÏÏÏÏÏÏÏÏÏ 5 $58.30 4.0 5 $58.30
$65.01 - $97.00 ÏÏÏÏÏÏÏÏÏÏÏÏ 48 $79.39 3.9 48 $79.39
$ 0.01 - $97.00 ÏÏÏÏÏÏÏÏÏÏÏÏ 27,706 $15.71 4.3 21,679 $13.01
Evaluation of Estimated Equity Award Forfeitures
In 2005, we changed the estimated forfeiture rates we use in the determination of our stock-based
compensation expense; this change was a result of an assessment that included an analysis of the actual
number of equity awards that had been forfeited to date compared to prior estimates and an evaluation of
future estimated forfeitures. We periodically evaluate our forfeiture rates and update the rates we use in
the determination of our stock-based compensation expense. We recorded a cumulative benefit from the
change in estimate of approximately $43.4 million, which reduced non-cash compensation expense in the
consolidated statements of income for the year ended December 31, 2005.
Modification of Stock-Based Awards
In connection with the Spin-Off, all existing IAC stock-based awards, which included RSUs, stock
options and warrants, were converted as follows:
‚ each vested stock option to purchase shares of IAC common stock converted into an option to
purchase shares of IAC common stock and an option to purchase shares of Expedia common stock,
‚ each unvested stock option to purchase shares of IAC common stock converted into a stock option
to purchase shares of common stock of the applicable company for which the employee worked
following the Spin-Off,
‚ all RSUs converted into RSUs of the applicable company for which the employee worked following
the Spin-Off, and
‚ each vested and unvested warrant converted into a warrant to purchase shares of IAC common
stock and a warrant to purchase shares of Expedia common stock.
The adjustments to the number of shares subject to each option and the option exercise prices were
based on the relative market capitalization of IAC and Expedia following the Spin-Off. These
modifications resulted in a one-time expense of $5.4 million due to the increase in the estimated fair value
F-27