Share-Based Compensation

3 Months Ended

Mar. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Share-Based Compensation

Share-Based Compensation

Stock Plan

We issue time-vesting restricted stock units ("RSUs") and nonqualified stock options ("options") to certain employees. All performance shares that were issued under the Stock Plan of our former Parent, Hilton, were converted to RSUs as of December 31, 2016. We recognized share-based compensation expense of $3 million and $2 million during the three months ended March 31, 2017 and 2016, respectively. As of March 31, 2017, unrecognized compensation costs for unvested awards were approximately $24 million, which is expected to be recognized over a weighted average period of 2.6 years. As of March 31, 2017, there were 7,705,311 shares of common stock available for future issuance.

RSUs

During the three months ended March 31, 2017, we issued 466,826 RSUs with a weighted average grant date fair value of $28.31, which generally vest 25 percent in the first year, 25 percent in the second year and 50 percent in the third year from the date of grant.

Options

During the three months ended March 31, 2017, we issued 669,658 options with an exercise price of $28.30, which generally vest 25 percent in the first year, 25 percent in the second year and 50 percent in the third year from the date of grant.

The grant date fair value of each of these option grants was determined using the Black-Scholes-Merton option-pricing model with the following assumptions:

	March 31,
	2017
Expected volatility(1)	26.3	%
Dividend yield(2)	—	%
Risk-free rate(3)	2.3	%
Expected term (in years)(4)	6.0

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⁽¹⁾  Due to limited trading history for Hilton Grand Vacations’ common stock, we did not have sufficient information available on which to base a reasonable and supportable estimate of the expected volatility of its share price. As a result, we used a weighted-average of the implied volatility and the average historical volatility of its peer group over a time period consistent with its expected term assumption. Our peer group was determined based upon companies in our industry with similar business models and is consistent with those used to benchmark its executive compensation.

⁽²⁾  At the date of grant we had no plans to pay dividends during the expected term of these options.

⁽³⁾  Based on the yields of U.S. Department of Treasury instruments with similar expected lives.

⁽⁴⁾  Estimated using the average of the vesting periods and the contractual term of the options.

As of March 31, 2017, we had 204,109 options outstanding that were exercisable.