Stock-based and Deferred Compensation Plans

Stock-based Compensation Plans

Equity Compensation Plans - The Company’s 2012 Incentive Plan permits the grants of stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards and other stock-based awards to officers, employees and directors. Upon adoption and approval of the 2012 Incentive Plan, all of the Company’s previous equity compensation plans were terminated. Existing awards under previous plans continue to vest in accordance with the original vesting schedule and will expire at the end of their original term.

As of December 27, 2015, the maximum number of shares of common stock available for issuance pursuant to the 2012 Incentive Plan was 10,437,661. On the first business day of each fiscal year, the aggregate number of shares that may be issued under the 2012 Incentive Plan automatically increases by two percent of the total shares then issued and outstanding. All outstanding stock-based compensation awards contain certain forfeiture provisions.

The Company recognized stock-based compensation expense as follows:



	FISCAL YEAR
(dollars in thousands)	2015		2014		2013
Stock options	$	10,041	$	11,946	$	11,168
Restricted stock and restricted stock units	6,758		3,857		2,026
Performance-based share units	3,596		1,190		663
	$	20,395	$	16,993	$	13,857

Stock Options - Beginning in August 2012, stock options generally vest and become exercisable over a period of four years in an equal number of shares each year. Stock options have an exercisable life of no more than ten years from the date of grant. The Company settles stock option exercises with authorized but unissued shares of the Company’s common stock. Stock options granted prior to August 2012 generally vest and become exercisable over a period of five years in an equal number of shares each year.

The following table presents a summary of the Company’s stock option activity for fiscal year 2015:



(in thousands, except exercise price and contractual life)	OPTIONS		WEIGHTED- AVERAGE EXERCISE PRICE		WEIGHTED- AVERAGE REMAINING CONTRACTUAL LIFE (YEARS)	AGGREGATE INTRINSIC VALUE
Outstanding as of December 28, 2014	9,777		$	11.59	6.2	$	120,461
Granted	1,184		25.26
Exercised	(804	)	9.58
Forfeited or expired	(439	)	21.40
Outstanding as of December 27, 2015	9,718		$	12.99	5.6	$	59,427
Vested and expected to vest as of December 27, 2015	9,662		$	12.93	5.6	$	59,417
Exercisable as of December 27, 2015	6,790		$	9.21	4.5	$	57,226

Assumptions used in the Black-Scholes option pricing model and the weighted-average fair value of option awards granted were as follows for the periods indicated:



	FISCAL YEAR
	2015			2014			2013
Assumptions:
Weighted-average risk-free interest rate (1)	1.64		%	1.82		%	1.22		%
Dividend yield (2)	1.00		%	—		%	—		%
Expected term (3)	6.3 years			6.3 years			6.3 years
Weighted-average volatility (4)	43.4		%	48.4		%	48.6		%

Weighted-average grant date fair value per option	$	10.11		$	11.37		$	9.14

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(1)	Risk-free rate is the U.S. Treasury yield curve in effect as of the grant date for periods within the contractual life of the option.


(2)	Dividend yield is the level of dividends expected to be paid on the Company’s common stock over the expected term of the option.


(3)	Expected term represents the period of time that the options are expected to be outstanding. The simplified method of estimating the expected term is used since the Company does not have significant historical exercise experience for its stock options.


(4)	Volatility is based on the historical volatilities of the Company’s stock and the stock of comparable peer companies.

The following represents stock option compensation information for the periods indicated:



	FISCAL YEAR
(dollars in thousands)	2015		2014		2013
Intrinsic value of options exercised	$	11,843	$	19,474	$	42,661
Excess tax benefits for tax deductions related to the exercise of stock options	$	702	$	2,405	$	4,304
Cash received from option exercises, net of tax withholding	$	7,440	$	9,540	$	27,786
Fair value of stock options vested	$	26,643	$	36,614	$	47,468
Tax benefits for stock option compensation expense	$	4,594	$	7,576	$	4,381

Unrecognized stock option expense	$	21,060
Remaining weighted-average vesting period	2.5 years

Restricted Stock and Restricted Stock Units - Restricted stock and restricted stock units generally vest and become exercisable in an equal number of shares each year. Restricted stock and restricted stock units issued to members of the Board of Directors (the “Board”) vest over a period of three years. For employees, restricted stock and restricted stock units vest over four years. Following is a summary of the Company’s restricted stock and restricted stock unit activity for fiscal year 2015:



(shares in thousands)	NUMBER OF RESTRICTED STOCK & RESTRICTED STOCK UNIT AWARDS		WEIGHTED-AVERAGE GRANT DATE FAIR VALUE PER AWARD
Outstanding as of December 28, 2014	946		$	20.08
Granted	606		22.80
Vested	(271	)	19.68
Forfeited	(136	)	21.44
Outstanding as of December 27, 2015	1,145		$	21.48

The following represents restricted stock and restricted stock unit compensation information as of December 27, 2015:



	FISCAL YEAR
(dollars in thousands)	2015		2014		2013
Fair value of restricted stock vested	$	5,339	$	2,680	$	1,597
Tax benefits for restricted stock compensation expense	$	2,303	$	1,298	$	817

Unrecognized restricted stock expense	$	18,638
Remaining weighted-average vesting period	2.8 years

Performance-based Share Units - Beginning in 2013, the Company granted performance-based share units (“PSUs”) to certain employees. Typically, the PSUs vest in an equal number of shares over four years. The number of units that vest is determined for each year based on the achievement of certain Company performance criteria as set forth in the award agreement and may range from zero to 200% of the annual target grant. The PSUs are settled in shares of common stock, with holders receiving one share of common stock for each performance-based share unit that vests. The fair value of PSUs is based on the closing price of the Company’s common stock on the grant date. Compensation expense for PSUs is recognized over the vesting period when it is probable the performance criteria will be achieved.

At December 27, 2015, the following performance-based share unit (“PSUs”) programs were in progress:



		TARGET NO. OF PSUs REMAINING TO GRANT (1) (shares in thousands)	MAXIMUM PAYOUT (AS A % OF TARGET NO. OF PSUs) (2)
AWARD DATE	PROGRAM		MAXIMUM PAYOUT (AS A % OF TARGET NO. OF PSUs) (2)
2/26/2013	2013 Program	29	200	%
4/24/2013	2013 Grant	6	100	%
2/27/2014	2014 Program	96	200	%
2/26/2015	2015 Program	179	200	%
3/2/2015	2015 Int’l Program	15	100	%
		324

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(1)	Represents target PSUs awarded under each of the identified programs that have not been granted for accounting purposes. These PSUs do not result in the recognition of stock-based compensation expense until the performance target has been set by the Board as of the beginning of each fiscal year. There is no effect of these PSUs on the Company’s basic or diluted shares outstanding.

(2)

Assumes achievement of target threshold of Adjusted Net Income goals for the Company or Adjusted Earnings Before Interest, Taxes (“Adjusted EBIT”) for the respective concepts for the 2013 Program or 2013 Grant, achievement of target threshold of the Adjusted EPS goal for the Company for the 2014 Program and 2015 program. Assumes achievement of target threshold of Adjusted EBIT for certain international markets for the 2015 Programs.

The following table presents a summary of the Company’s PSU activity for fiscal year 2015:



(shares in thousands)	PERFORMANCE-BASED SHARE UNITS		WEIGHTED-AVERAGE GRANT DATE FAIR VALUE PER AWARD
Outstanding as of December 28, 2014	92		$	25.08
Granted (1)	184		24.23
Vested	(67	)	24.72
Forfeited	(43	)	24.65
Outstanding as of December 27, 2015	166		$	24.11

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(1)	Share unit amounts include the number of PSUs at the target threshold in the current period grant and additional shares earned above target due to exceeding prior period performance criteria.

The following represents PSU compensation information as of December 27, 2015:



	FISCAL YEAR
(dollars in thousands)	2015
Tax benefits for PSU compensation expense (1)	$	636
Unrecognized PSU expense	$	871
Remaining weighted-average vesting period	0.3 years

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(1)	The Company recognized nominal tax benefits for PSU compensation expense during fiscal years 2014 and 2013.

Deferred Compensation Plans

Restaurant Managing Partners and Chef Partners - Restaurant Managing Partners and Chef Partners are eligible to participate in deferred compensation programs. The Company invests in various corporate-owned life insurance policies, which are held within an irrevocable grantor or “rabbi” trust account for settlement of the obligations under the deferred compensation plans. The deferred compensation obligation due to Restaurant Managing and Chef Partners was $133.2 million and $155.6 million as of December 27, 2015 and December 28, 2014, respectively. The unfunded obligation for Restaurant Managing and Chef Partners’ deferred compensation was $74.0 million and $82.6 million as of December 27, 2015 and December 28, 2014, respectively.

Other Benefit Plans

401(k) Plan - The Company has a qualified defined contribution plan that qualifies under Section 401(k) of the Internal Revenue Code of 1986, as amended. The Company incurred contribution costs of $3.7 million, $1.1 million and $2.1 million for the 401(k) Plan for fiscal years 2015, 2014 and 2013, respectively.

Deferred Compensation Plan - The Company provides a deferred compensation plan for its highly compensated employees who are not eligible to participate in the 401(k) Plan. The deferred compensation plan allows these employees to contribute a percentage of their base salary and cash bonus on a pre-tax basis. The deferred compensation plan is unfunded and unsecured.