Wendy's 2011 Annual Report Download - page 110

THE WENDY’S COMPANY AND SUBSIDIARIES
WENDY’S RESTAURANTS, LLC AND SUBSIDIARIES
COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
Stock Options
The table below summarizes 2011 activity and includes certain additional information for The Wendy’s
Company stock options.
Common Stock Options
Options
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life in Years
Aggregate
Intrinsic
Value
Outstanding at January 2, 2011 28,074 $6.45
Granted .................................................. 5,715 $5.00
Exercised ................................................. (1,477) $4.25
Forfeited / expired .......................................... (2,053) $8.22
Outstanding at January 1, 2012 ................................ 30,259 $6.16 5.0 $15,707
Vested or expected to vest at January 1, 2012 ...................... 29,700 $6.19 4.9 $15,291
Exercisable at January 1, 2012 ................................. 21,655 $6.77 3.4 $ 9,291
The Companies’ current outstanding stock options have maximum contractual terms of ten years and, with
certain exceptions, vest ratably over three years. We settle employee stock option exercises with treasury shares. The
total intrinsic value of options exercised during 2011, 2010 and 2009 was $1,138, $488 and $784, respectively.
The weighted average fair value per share as of the grant date as calculated under the Black-Scholes Model for
stock options granted during 2011, 2010 and 2009 (which were all granted at exercise prices equal to the market price
of The Wendy’s Company Common Stock) were $1.88, $1.47 and $1.83, respectively.
The fair value of stock options on the date of grant was calculated utilizing the following weighted average
assumptions:
2011 2010 2009
Risk-free interest rate ...................................................... 1.74% 2.01% 2.46%
Expected option life in years ................................................ 5.6 5.4 5.1
Expected volatility ........................................................ 45.2% 45.2% 49.6%
Expected dividend yield .................................................... 1.59% 1.53% 1.35%
The risk-free interest rate represents the U.S. Treasury zero-coupon bond yield approximating the expected
option life of stock options granted during the respective years. The expected option life represents the period of time
that the stock options granted during the period are expected to be outstanding based on historical exercise trends for
similar grants. The expected volatility is based on the historical market price volatility of common stock for the related
options granted during the years. The expected dividend yield represents The Wendy’s Company annualized average
yield for regular quarterly dividends declared prior to the respective stock option grant dates.
The Black-Scholes Model has limitations on its effectiveness including that it was developed for use in
estimating the fair value of traded options which have no vesting restrictions and are fully transferable and that the
model requires the use of highly subjective assumptions including expected stock price volatility. Employee stock
option awards have characteristics significantly different from those of traded options and changes in the subjective
input assumptions can materially affect the fair value estimates.
Restricted Shares
The Wendy’s Company issues restricted share awards (“RSAs”) and restricted share units (“RSUs”). For the
purposes of our disclosures, the term “Restricted Shares” applies to RSAs and RSUs collectively unless otherwise
noted.
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