Wendy's 2013 Annual Report Download - page 104

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THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
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
one to 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.
The following table summarizes activity of Restricted Shares during 2013:
Number of
Restricted
Shares
Weighted
Average
Grant Date
Fair Value
Non-vested at December 30, 2012 .................................... 1,876 $4.72
Granted ........................................................ 1,114 7.12
Vested ......................................................... (472) 4.88
Forfeited ....................................................... (218) 5.55
Non-vested at December 29, 2013 .................................... 2,300 $5.75
The total fair value of Restricted Shares that vested in 2013, 2012 and 2011 was $2,275, $2,023 and $3,223,
respectively.
Performance Shares
The Company grants performance-based awards to certain officers and key employees. The vesting of these
awards is contingent upon meeting one or more defined operational goals (a performance condition) or common
stock share prices (a market condition).
The fair value of the performance condition awards granted in 2013 was determined using the average of the
high and low trading prices of our common stock on the date of grant. There were no performance condition awards
granted in 2012 or 2011. Share-based compensation expense recorded for performance condition awards is
reevaluated at each reporting period based on the probability of the achievement of the goal. The Company recorded
compensation expense of $820 for the accelerated vesting of performance condition awards in accordance with the
termination provisions of the employment agreements for two senior executives in 2011 as a result of the sale of
Arby’s and related announcements that the Company’s Atlanta restaurant support center would be relocated to Ohio.
There was no other share-based compensation expense recorded during 2012 and 2011 for performance condition
awards as the Company determined the achievement of the defined operational goal was not probable.
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