Wendy's 2012 Annual Report Download - page 96

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THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
value of the underlying stock exceeds its exercise price. The following table summarizes stock option activity during
2012.
Number of
Options
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life in Years
Aggregate
Intrinsic
Value
Outstanding at January 1, 2012 ............................... 30,259 $6.16
Granted ................................................. 6,073 4.69
Exercised ................................................ (3,233) 4.10
Forfeited and/or expired .................................... (4,538) 6.35
Outstanding at December 30, 2012 ............................ 28,561 $6.05 5.7 $4,513
Vested or expected to vest at December 30, 2012 ................. 27,944 $6.08 5.6 $4,444
Exercisable at December 30, 2012 ............................. 19,161 $6.71 4.0 $3,457
The total intrinsic value of options exercised during 2012, 2011 and 2010 was $2,280, $1,138 and $488,
respectively. The weighted average grant date fair value for stock options granted during 2012, 2011 and 2010 was
$1.80, $1.88 and $1.47, respectively.
The grant date fair value of stock options was determined using the following assumptions:
2012 2011 2010
Risk-free interest rate ...................................................... 0.98% 1.74% 2.01%
Expected option life in years ................................................ 6.62 5.62 5.40
Expected volatility ........................................................ 45.9% 45.2% 45.2%
Expected dividend yield .................................................... 1.71% 1.59% 1.53%
The risk-free interest rate represents the U.S. Treasury zero-coupon bond yield correlating to the expected life
of the stock options granted. The expected option life represents the period of time that the stock options granted 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 our common stock. The expected dividend yield represents the Company’s
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 Company grants restricted share awards (“RSAs”) and restricted share units (“RSUs”), which cliff vest after
two or three years. For the purposes of our disclosures, the term “Restricted Shares” applies to RSAs and RSUs
collectively unless otherwise noted. The fair value of Restricted Shares granted is determined using the average of the
high and low trading prices of our common stock on the date of grant.
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