Quarterly report pursuant to Section 13 or 15(d)

Stock-Based Compensation

v3.21.2
Stock-Based Compensation
9 Months Ended
Sep. 30, 2021
Share-based Payment Arrangement, Noncash Expense [Abstract]  
Stock-Based Compensation Stock-Based Compensation
The Company has a stock-based compensation plan available to grant RSUs, PSUs, SSARs, NQs, and other stock-based awards to key employees, non-employee directors, advisors, and consultants.

The Wyndham Worldwide Corporation 2006 Equity and Incentive Plan was originally adopted in 2006 and was amended and restated in its entirety and approved by shareholders on May 17, 2018, (the “Amended and Restated Equity Incentive Plan”). Under the Amended and Restated Equity Incentive Plan, a maximum of 15.7 million shares of common stock may be awarded. As of September 30, 2021, 11.3 million shares remain available.

Incentive Equity Awards Granted by the Company
During the nine months ended September 30, 2021, the Company granted incentive equity awards to key employees and senior officers totaling $34 million in the form of RSUs, $7 million in the form of PSUs, and $2 million in the form of stock options. Of these awards, the NQs and the majority of RSUs will vest ratably over a period of four years. The PSUs will cliff vest on the third anniversary of the grant date, contingent upon the Company achieving certain performance metrics.

During the nine months ended September 30, 2020, the Company granted incentive equity awards to key employees and senior officers totaling $35 million in the form of RSUs, $8 million in the form of PSUs, and $8 million in the form of stock options.
The activity related to incentive equity awards granted to the Company’s key employees and senior officers by the Company for the nine months ended September 30, 2021, consisted of the following (in millions, except grant prices):
 Balance, December 31, 2020 Granted
Vested/Exercised (a)
Forfeitures (b)
 Balance, September 30, 2021
RSUs
Number of RSUs 1.6  0.6  (0.4) —  1.8 
(c)
Weighted average grant price $ 38.22  $ 58.61  $ 44.71  $ —  $ 47.73 
PSUs
Number of PSUs 0.3  0.1  —  —  0.4 
(d)
Weighted average grant price $ 42.57  $ 59.00  $ —  $ —  $ 48.18 
SSARs
Number of SSARs 0.2  —  (0.2) —  — 
(e)
Weighted average grant price $ 34.51  $ —  $ 34.51  $ —  $ — 
NQs
Number of NQs 2.3  0.1  (0.1) —  2.3 
(f)
Weighted average grant price $ 44.15  $ 59.00  $ 44.50  $ —  $ 45.32 
(a)Upon exercise of NQs and SSARs and upon vesting of RSUs and PSUs, the Company issues new shares to participants.
(b)The Company recognizes forfeitures as they occur.
(c)Aggregate unrecognized compensation expense related to RSUs was $58 million as of September 30, 2021, which is expected to be recognized over a weighted average period of 2.6 years.
(d)There was no unrecognized compensation expense related to PSUs as these awards were not probable of vesting as of September 30, 2021. The maximum amount of compensation expense associated with these awards would be $8 million which would be recognized over a weighted average period of 2.3 years.
(e)As of September 30, 2021, all SSARs had been exercised and thus there was no unrecognized compensation expense.
(f)There were 0.9 million NQs which were exercisable as of September 30, 2021. These exercisable NQs will expire over a weighted average period of 7.2 years and carry a weighted average grant date fair value of $8.39. Unrecognized compensation expense for NQs was $9 million as of September 30, 2021, which is expected to be recognized over a weighted average period of 2.5 years.

The fair values of stock options granted by the Company during 2021 and 2020 were estimated on the date of grant using the Black-Scholes option-pricing model with the relevant weighted average assumptions outlined in the table below. Expected volatility was based on both historical and implied volatilities of the Company’s stock and the stock of comparable companies over the estimated expected life for options. The expected life represents the period of time these awards are expected to be outstanding. The risk-free interest rate is based on yields on U.S. Treasury STRIPS with a maturity similar to the estimated expected life of the options. The projected dividend yield was based on the Company’s anticipated annual dividend divided by the price of the Company’s stock on the date of the grant.

Stock Options 2021 2020
Grant date fair value $18.87 $7.27 - $7.28
Grant date strike price $59.00 $41.04
Expected volatility 44.80% 32.60% - 32.88%
Expected life 6.25 years 6.25 - 7.50 years
Risk-free interest rate 1.09% 0.95% - 1.03%
Projected dividend yield 3.12% 4.87%

Stock-Based Compensation Expense
The Company recorded stock-based compensation expense of $8 million and $24 million during the three and nine months ended September 30, 2021, and $6 million and $14 million during the three and nine months ended September 30, 2020, related to incentive equity awards granted to key employees, senior officers, and non-employee directors.

The Company paid $9 million and $2 million of taxes for the net share settlement of incentive equity awards that vested during the nine months ended September 30, 2021 and 2020.
Employee Stock Purchase Plan
The Company has an employee stock purchase plan which allows eligible employees to purchase common shares of Company stock through payroll deductions at a 10% discount off the fair market value at the grant date. The Company issued 0.1 million shares and recognized less than $1 million of compensation expense related to grants under this plan during both the nine months ended September 30, 2021 and 2020.