Note 14: Share-Based Compensation

Stock Plan

We issue time-vesting restricted stock units (“RSUs”), time and performance-vesting restricted stock units (“PSUs”) and nonqualified stock options (“options”) to certain employees and directors. We recognized share-based compensation expense of $3 million during each of the three months ended March 31, 2018 and 2017. As of March 31, 2018, unrecognized compensation costs for unvested awards were approximately $25 million, which is expected to be recognized over a weighted average period of 2.2 years. As of March 31, 2018, there were 7,130,779 shares of common stock available for future issuance.

RSUs

During the three months ended March 31, 2018, we issued 259,366 RSUs with a weighted average grant date fair value of $46.62, which generally vest in equal annual installments over three years from the date of grant.

Options

During the three months ended March 31, 2018, we issued 305,776 options with an exercise price of $46.62, which vest over three years from the date of the grant.

The grant date fair value of these options was $14.82, which was determined using the Black-Scholes-Merton option-pricing model with the following assumptions:

Expected volatility⁽¹⁾	26.6	%
Dividend yield⁽²⁾	—	%
Risk-free rate⁽³⁾	2.7	%
Expected term (in years)⁽⁴⁾	6.0

⁽¹⁾

Due to limited trading history for our common stock, we did not have sufficient information available on which to base a reasonable and supportable estimate of the expected volatility of our share price. As a result, we used an average historical volatility of our 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 on the date of grant.

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

As of March 31, 2018, we had 388,999 options outstanding that were exercisable.

Performance Shares

During the three months ended March 31, 2018, we issued 42,095 PSUs with a grant date fair value of $46.62. The PSUs are settled at the end of a three-year performance period, with 70 percent of the PSUs subject to achievement based on the Company’s adjusted earnings before interest expense, taxes and depreciation and amortization. This metric is further adjusted by sales of VOIs under construction. The remaining 30 percent of the PSUs are subject to the achievement of certain VOI sales targets. We determined that the performance conditions for these awards are probable of achievement and, as of March 31, 2018, we recognized compensation expense based on the number of PSUs we expect to vest.