Wendy's 2015 Annual Report Download - page 108

THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
granted any tandem stock appreciation rights. During 2010, the Company implemented the 2010 Omnibus Award
Plan (as amended, the “2010 Plan”) for the issuance of equity awards as described above. In June 2015, the 2010 Plan
was amended with shareholder approval, to increase the number of shares of common stock available for issuance
under the plan by 20,000. All equity grants during 2015 and 2014 were issued from the 2010 Plan and it is currently
the only equity plan from which future equity awards may be granted. As of January 3, 2016, there were
approximately 41,564 shares of common stock available for future grants under the 2010 Plan. During the periods
presented in the consolidated financial statements, the Company settled all exercises of stock options and vesting of
restricted shares, including performance shares, with treasury shares.
Stock Options
The Company’s current outstanding stock options have maximum contractual terms of ten years and vest
ratably over three years or cliff vest after three years. The exercise price of options granted is equal to the market price
of the Company’s common stock on the date of grant. The fair value of stock options on the date of grant is
calculated using the Black-Scholes Model. The aggregate intrinsic value of an option is the amount by which the fair
value of the underlying stock exceeds its exercise price.
The following table summarizes stock option activity during 2015:
Number of
Options
Weighted
Average
Exercise
Price
Weighted
Average
Remaining
Contractual
Life in Years
Aggregate
Intrinsic
Value
Outstanding at December 28, 2014 ....................... 19,568 $ 6.96
Granted ............................................ 4,947 9.85
Exercised ........................................... (6,637) 6.16
Forfeited and/or expired ............................... (1,037) 13.44
Outstanding at January 3, 2016 .......................... 16,841 $ 7.73 7.6 $51,792
Vested or expected to vest at January 3, 2016 ............... 16,719 $ 7.72 7.5 $51,588
Exercisable at January 3, 2016 ........................... 8,323 $ 6.33 6.0 $37,559
The total intrinsic value of options exercised during 2015, 2014 and 2013 was $30,116, $13,948 and $28,038,
respectively. The weighted average grant date fair value of stock options granted during 2015, 2014 and 2013 was
$2.27, $2.34 and $2.72, respectively.
The weighted average grant date fair value of stock options was determined using the following assumptions:
2015 2014 2013
Risk-free interest rate ............................................... 1.76% 1.97% 1.60%
Expected option life in years .......................................... 5.62 6.35 5.62
Expected volatility ................................................. 29.2% 35.4% 45.6%
Expected dividend yield ............................................. 2.23% 2.43% 2.52%
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 industry peer group. 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
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