Share-Based Compensation

Share-Based Compensation Plans

We maintain three share-based compensation plans under which stock options and other awards granted to our employees and directors are outstanding. Currently, the Denny's Corporation 2012 Omnibus Incentive Plan (the "2012 Omnibus Plan") is used to grant share-based compensation to selected employees, officers and directors of Denny’s and its affiliates. However, we reserve the right to pay discretionary bonuses, or other types of compensation, outside of this plan. At December 25, 2013 there were 3.6 million shares available for grant under the 2012 Omnibus Plan. In addition, we have 0.8 million shares available to be issued outside of the 2012 Omnibus Plan pursuant to the grant or exercise of employment inducement awards of stock options and restricted stock units in accordance with NASDAQ Listing Rule 5635(c)(4).

Share-Based Compensation Expense

Total share-based compensation expense included as a component of net income was as follows:



	Fiscal Year Ended
	December 25, 2013		December 26, 2012		December 28, 2011
	(In thousands)
Stock options	$	558	$	909	$	1,069
Restricted stock units	3,488		2,050		2,369
Board deferred stock units	806		537		781
Total share-based compensation	$	4,852	$	3,496	$	4,219

Stock Options

Options granted to date generally vest evenly over 3 years, have a 10-year contractual life and are issued at the market value at the date of grant.

The following table summarizes information about stock options outstanding and exercisable at December 25, 2013:



	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
	(In thousands)					(In thousands)
Outstanding, beginning of year	3,099		$	3.28
Exercised	(899	)	3.29
Forfeited	(5	)	3.89
Expired	(4	)	0.54
Outstanding, end of year	2,191		3.28		5.05	$	9,032
Exercisable, end of year	1,944		3.20		4.80	$	8,163

The aggregate intrinsic value represents the difference between the market price of our stock on December 25, 2013 and the exercise price, multiplied by the number of options that have an exercise price that is less than the market price of our stock. The aggregate intrinsic value of the options exercised was $2.6 million, $1.7 million and $3.6 million during the years ended December 25, 2013, December 26, 2012 and December 28, 2011, respectively.

There were no options granted during the years ended December 25, 2013 and December 26, 2012. The weighted average fair value per option of options granted during the year ended December 28, 2011 was $1.98. As of December 25, 2013, we had approximately $0.1 million of unrecognized compensation cost related to unvested stock option awards outstanding, which is expected to be recognized over a weighted average of 0.1 years.

Restricted Stock Units

We primarily grant restricted stock units containing performance conditions. These conditions are generally based on either the Total Shareholder Return of our stock compared with the returns of a group of peer companies or our stock's achievement of certain stock price thresholds. The following table summarizes information about restricted stock units activity:



	Fiscal Year Ended
	December 25, 2013				December 26, 2012				December 28, 2011
	Units		Weighted Average Grant Date Fair Value		Units		Weighted Average Grant Date Fair Value		Units		Weighted Average Grant Date Fair Value
	(In thousands, except per share amounts)
Outstanding, beginning of year	933		$	4.30	1,276		$	3.19	1,450		$	2.92
Granted	331		8.05		397		6.05		416		3.99
Vested	(430	)	2.83		(445	)	3.28		(535	)	3.07
Forfeited	(2	)	4.63		(295	)	3.37		(55	)	3.42
Outstanding, end of year	832		6.55		933		4.30		1,276		3.19

Of the amounts outstanding as of December 25, 2013 and December 26, 2012, 0.7 million and 0.8 million, respectively, were nonvested. The fair value of shares that vested during the years ended December 25, 2013, December 26, 2012 and December 28, 2011, were $3.1 million, $1.9 million and $2.0 million, respectively.

In January 2013, we granted approximately 0.3 million performance shares and related performance-based target cash awards of $2.1 million to certain employees. As these awards contain a market condition, a Monte Carlo valuation was used to determine the performance shares' grant date fair value of $8.05 per share and the payout probability of the target cash awards. The awards granted to our named executive officers also contain a performance condition based on certain operating measures for the fiscal year ended December 25, 2013. The performance period is the three year fiscal period beginning December 27, 2012 and ending December 30, 2015. The performance shares and cash awards will vest and be earned (from 0% to 200% of the target award for each such increment) at the end of the performance period based on the Total Shareholder Return of our stock compared with the Total Shareholder Returns of a group of peer companies. As of December 25, 2013, approximately 0.3 million performance shares and performance-based target cash awards of $2.1 million were outstanding under this award.

During the years ended December 25, 2013, December 26, 2012 and December 28, 2011, we made payments of $1.2 million, $1.0 million and $0.8 million in cash and issued shares of 0.3 million, 0.2 million and 0.3 million, respectively.

The amount of accrued compensation included as a component of other current liabilities and other noncurrent liabilities in our Consolidated Balance Sheets was $0.7 million and $1.9 million, respectively, at December 25, 2013 and $0.4 million and $0.9 million, respectively, at December 26, 2012 (based on the fair value of the related shares for the liability classified units as of the respective balance sheet dates). As of December 25, 2013, we had $4.3 million of unrecognized compensation cost related to unvested restricted stock unit awards granted, which is expected to be recognized over a weighted average of 1.2 years.

Board Deferred Stock Units

During the year ended December 25, 2013, we granted 0.1 million deferred stock units (which are equity classified) with a weighted average grant date fair value of $5.95 per unit to non-employee members of our Board of Directors. A director may elect to convert these awards into shares of common stock either on a specific date in the future (while still serving as a member of the Board of Directors) or upon termination as a member of the Board of Directors. During the year ended December 25, 2013, less than 0.1 million deferred stock units were converted into shares of common stock. Approximately 0.8 million and 0.7 million of these units were outstanding as of December 25, 2013 and December 26, 2012, respectively. As of December 25, 2013, we had approximately $0.2 million of unrecognized compensation cost related to all unvested deferred stock unit awards outstanding, which is expected to be recognized over a weighted average of 0.3 years.