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 28, 2016, there were 1.5 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 28, 2016		December 30, 2015		December 31, 2014
	(In thousands)
Stock options	$	—	$	—	$	52
Performance share awards	7,236		5,821		5,009
Restricted stock units for board members	374		814		785
Total share-based compensation	$	7,610	$	6,635	$	5,846

The income tax benefits recognized as a component of the provision for income taxes in our Consolidated Statements of Income related to share-based compensation expense were approximately $3.0 million, $2.6 million and $2.3 million during the years ended December 28, 2016, December 30, 2015 and December 31, 2014, respectively.

Stock Options

Prior to 2012, stock options were granted that vest evenly over 3 years, have a 10-year contractual life and are issued at the market value at the date of grant. There were no options granted in 2016, 2015 or 2014.

The following table summarizes information about stock options outstanding and exercisable at December 28, 2016:



	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
	(In thousands, except per share amounts)
Outstanding, beginning of year	1,338		$	3.20
Exercised	(211	)	$	4.22
Outstanding, end of year	1,127		$	3.01	2.90	$	11,110
Exercisable, end of year	1,127		$	3.01	2.90	$	11,110

The total intrinsic value of the options exercised was $1.4 million, $1.4 million and $3.0 million during the years ended December 28, 2016, December 30, 2015 and December 31, 2014, respectively.

Restricted Stock Units

We primarily grant restricted stock units containing a market condition based on the total shareholder return of our stock compared with the returns of a group of peer companies and restricted stock units containing a performance condition based on the Company's achievement of certain operating metrics. The number of shares that are ultimately issued is dependent upon the level of obtainment of the market and performance conditions. The following table summarizes the restricted stock units activity during the year ended December 28, 2016:



	Units		Weighted Average Grant Date Fair Value
	(In thousands)
Outstanding, beginning of year	1,028		$	9.55
Granted	650		$	9.47
Converted	(297	)	$	8.05
Forfeited	(15	)	$	9.74
Outstanding, end of year	1,366		$	9.84
Convertible, end of year	235		$	7.55

In February 2016, and included in the restricted stock units activity table above, we granted certain employees approximately 0.3 million performance shares that vest based on the total shareholder return (“TSR”) of our stock compared to the TSRs of a group of peer companies and 0.3 million performance shares that vest based on our Adjusted EBITDA growth rate, as defined under the terms of the award. As the TSR based performance shares contain a market condition, a Monte Carlo valuation was used to determine the grant date fair value of $9.43 per share. The performance shares based on the Adjusted EBITDA growth rate have a grant date fair value of $9.52 per share, the market value of our stock on the date of grant. The awards granted to our named executive officers also contain a performance condition based on the attainment of an operating measure for the fiscal year ended December 28, 2016. The performance period for these performance shares is the three year fiscal period beginning December 31, 2015 and ending December 26, 2018. The performance shares will vest and be earned (from 0% to 150% of the target award for each such increment) at the end of the performance period. For 2016, 2015 and 2014, the weighted average grant date fair value of awards granted was $9.47, $11.43 and $7.51, respectively.

We made payments of $2.5 million, $3.4 million and $1.1 million in cash during 2016, 2015 and 2014, respectively, related to converted restricted stock units. The intrinsic value of shares converted was $3.5 million, $4.9 million and $1.4 million, during 2016, 2015 and 2014, respectively. As of December 28, 2016 and December 30, 2015, we had accrued compensation of $3.9 million and $2.6 million, respectively, included as a component of other current liabilities and $0.3 million and $2.2 million, respectively, included as a component of other noncurrent liabilities in our Consolidated Balance Sheets (based on the fair value of the related shares for the liability classified units as of the respective balance sheet dates). As of December 28, 2016, we had $7.0 million of unrecognized compensation cost related to unvested restricted stock unit awards granted, which is expected to be recognized over a weighted average of 1.7 years.

Board Deferred Stock Units

During the quarter ended June 29, 2016, we granted 0.1 million deferred stock units (DSUs) (which are equity classified) with a weighted average grant date fair value of $10.77 per unit to non-employee members of our Board of Directors. A director may elect to convert these awards into shares of our common stock either on a specific date in the future (while still serving as a member of our Board of Directors) or upon termination as a member of our Board of Directors. During the quarter ended September 28, 2016 these awards were subsequently canceled and rescinded and replacement awards were issued. Directors who had previously elected a one-year conversion of the 2016 award received a replacement cash award. The total replacement cash award was $0.5 million and is liability classified. Directors who had previously elected conversion of the 2016 award at a later date received a replacement DSU award, which is equity classified and has a three year vesting term. The total replacement DSU award was less than 0.1 million DSUs with a weighted average grant date fair value of $10.77 per unit.

During the year ended December 28, 2016, deferred stock units with an intrinsic value of $0.1 million were converted into shares of our common stock. As of both December 28, 2016 and December 30, 2015 there were 0.9 million deferred stock units outstanding. As of December 28, 2016, we had approximately $0.3 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 2.3 years.