Travelzoo 2012 Annual Report Download - page 120

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The Company accounts for its employee stock options under the fair value method, which requires stock-based compensation to be
estimated using the fair value on the date of grant using an option-pricing model. The value of the portion of the award that is expected to vest is
recognized as expense over the related employees’ requisite service periods in the Company’s consolidated statements of income. Cash flows
resulting from tax deductions in excess of the compensation cost recognized for those options (excess tax benefits) are classified as financing
cash flows. For fiscal year 2011, the Company recorded $268,000 of excess tax benefit.
In October 2001, the Company granted to each director fully vested and exercisable options to purchase 30,000 shares of common stock
with an exercise price of $2.00 per share for their services as a director in 2000 and 2001. A total of 210,000 options were granted. The options
expired in October 2011. During the years ended December 31, 2004, 2005, 2008 and 2011, 150,000 options, 17,275 options, 30,000
options and
12,725 options, respectively, were exercised.
In March 2002, Travelzoo Inc. granted to each director options to purchase 5,000 shares of common stock with an exercise price of $3.00
per share that vested in connection with their services as a director in 2002. A total of 35,000 options were granted. In October 2002, 1,411
options were cancelled upon the resignation of a director. The options expired in March 2012. During the years ended December 31, 2011, 2008
and 2004, 5,000 options, 5,000 options and 23,589 options, respectively, were exercised.
In January 2009, 2,158,349 options were exercised at $1.00 per share. As described in Note 1, these options were granted in 2001 as part
of the combination and merger of entities founded by the Company’s majority stockholder, Ralph Bartel.
In November 2009, the Company granted to one of its employees options to purchase 300,000 shares of common stock with an exercise
price of $14.97 , of which 75,000 options vest and become exercisable annually starting on July 1, 2011. The options expire in November 2019.
As of December 31, 2012 , 150,000 of the options are vested and 300,000 options are outstanding.
In January 2012, the Company granted, subject to shareholder approval, certain employees options to purchase 100,000 shares of common
stock with an exercise price of $28.98 , of which 25,000 options vest and become exercisable annually starting on January 23, 2013. The options
expire in January 2022.
Total stock-based compensation for fiscal years 2012, 2011 and 2010 was $1.2 million , $750,000 and $750,000 , respectively.
The Company utilized the Black-Scholes option pricing model to value the stock options granted in 2009 and 2012. The Company does
not have enough historical exercise data to estimate the expected life of the options and therefore used an expected life of 6.25 years , as defined
under the simplified method, which is using an average of the contractual term and vesting period of the stock options. The risk-free interest rate
used for the award is based on the U.S. Treasury yield curve in effect at the time of grant. The Company used a forfeiture rate of 0% as the
Company does not have enough historical forfeiture data to estimate the forfeiture rate. To the extent the actual forfeiture rate is different from
what we have anticipated, stock-based compensation related to these options will be different from our expectations.
The fair value of 2009 and 2012 stock options was estimated using the Black-Scholes option pricing model with the following weighted-
average assumptions:
As of December 31, 2012, there was approximately $1.1 million of unrecognized stock-
based compensation expense related to outstanding
2009 stock options. This amount is expected to be recognized over 1.5 years . To the extent the actual forfeiture rate is different from what we
have anticipated, stock-based compensation related to these options will be different from our expectations.
As of December 31, 2012, there was approximately $1.5 million of unrecognized stock-
based compensation expense related to outstanding
2012 stock options. This amount is expected to be recognized over 3.1 years . To the extent the actual
62
2009
2012
Weighted-average fair value of options granted per share
$
11.56
$
19.08
Historical volatility
93
%
74
%
Risk-free interest rate
2.56
%
1.11
%
Dividend yield
—
—
Expected life in years
6.25
6.25