ServiceMagic 2012 Annual Report Download - page 99

IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
that would have been received by the option holders had all option holders exercised their options on December 31, 2012. This amount changes
based on the fair market value of IAC's common stock. The total intrinsic value of stock options exercised during the years ended December 31,
2012 , 2011 and 2010 is $84.8 million , $70.6 million and $16.4 million , respectively.
The fair value of each stock option award is estimated on the grant date using the Black-Scholes option pricing model. Approximately 3.6
million , 2.6 million and 2.4 million stock options were granted by the Company during the years ended December 31, 2012 , 2011 and 2010 ,
respectively.
The Black-Scholes option pricing model incorporates various assumptions, including expected volatility and expected term. During 2012,
2011 and 2010, expected stock price volatilities were estimated based on the Company's historical volatility. The risk-free
interest rates are based
on U.S. Treasury yields for notes with comparable terms as the awards, in effect at the grant date. The following are the weighted average
assumptions used in the Black-Scholes option pricing model:
The weighted average fair value of stock options granted during the years ended December 31, 2012 , 2011 and 2010 with exercise prices
equal to the market prices of IAC's common stock on the date of grant are $10.69 , $11.08 and $6.38 , respectively. The weighted average
exercise price and weighted average fair value of stock options granted during the years ended December 31, 2012 and 2010 with exercise prices
greater than the market value of IAC's common stock on the date of grant are $ 60.00 and $ 7.61 , and $ 32.00 and $ 11.05 , respectively. There
are no stock options issued during the year ended December 31, 2011 with exercise prices greater than the market value of IAC's common stock
on the date of grant.
Cash received from stock option exercises and the related tax benefit realized for the years ended December 31, 2012 , 2011 and 2010 are:
$58.2 million and $74.3 million ; $89.8 million and $25.5 million ; and $39.1 million and $8.6 million , respectively.
Restricted Stock Units and Performance-based Stock Units
RSUs and PSUs are awards in the form of phantom shares or units, denominated in a hypothetical equivalent number of shares of IAC
common stock and with the value of each RSU and PSU equal to the fair value of IAC common stock at the date of grant. RSUs and PSUs may
be settled in cash, stock or both, as determined by the Committee at the time of grant. Each RSU and PSU grant is subject to service-based
vesting, where a specific period of continued employment must pass before an award vests. PSUs also include performance-
based vesting, where
certain performance targets set at the time of grant must be achieved before an award vests. The Company recognizes expense for all RSUs and
PSUs for which vesting is considered probable. For RSU grants, the expense is measured at the grant date as the fair value of IAC common stock
and expensed as non-
cash compensation over the vesting term. For PSU grants, the expense is measured at the grant date as the fair value of IAC
common stock and expensed as non-cash compensation over the vesting term if the performance targets are considered probable of being
achieved.
Nonvested RSUs and PSUs outstanding at December 31, 2012 and changes during the year ended December 31, 2012 are as follows:
74
Years Ended December 31,
2012
2011 2010
Expected volatility
31
%
30
%
30
%
Risk-free interest rate
0.6
%
2.3
%
2.4
%
Expected term
4.4 years
6.1 years
5.6 years
Dividend yield
1.2
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