Share-Based Compensation

12 Months Ended

Dec. 25, 2019

Share-based Payment Arrangement [Abstract]

Share-Based Compensation Plans

We maintain four share-based compensation plans under which stock options and other awards granted to our employees and directors are outstanding. Currently, the Denny’s Corporation 2017 Omnibus Incentive Plan (the “2017 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, 2019, there were 2.6 million shares available for grant under the 2017 Omnibus Plan. In addition, we have 0.7 million shares available to be issued outside of the 2017 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, 2019		December 26, 2018		December 27, 2017
	(In thousands)
Performance share awards	$	5,765	$	5,039	$	7,838
Restricted stock units for board members	929		999		703
Total share-based compensation	$	6,694	$	6,038	$	8,541

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 $1.7 million, $1.6 million and $3.3 million during the years ended December 25, 2019, December 26, 2018 and December 27, 2017, respectively.

Performance Share Units

We primarily grant performance share 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 performance share 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 performance share units activity during the year ended December 25, 2019:



	Units		Weighted Average Grant Date Fair Value
	(In thousands)
Outstanding, beginning of year	1,688		$	12.65
Granted	631		$	19.02
Vested	(631	)	$	9.48
Forfeited	(7	)	$	14.48
Outstanding, end of year	1,681		$	16.22
Convertible, end of year	586		$	12.59

During the year ended December 25, 2019, and included in the performance share 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 common stock compared to the TSRs of a group of peer companies and 0.3 million performance shares that vest based on our Adjusted EPS 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 $20.47 per share. The performance shares based on the Adjusted EPS growth rate have a grant date fair value of $17.58 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 25, 2019. The performance period for these performance shares is the three year fiscal period beginning December 27, 2018 and ending December 29, 2021. 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 2019, 2018 and 2017, the weighted average grant date fair value of awards granted was $19.02, $16.97 and $12.59, respectively.

We made payments of $0.4 million, $0.2 million and $3.9 million in cash during 2019, 2018 and 2017, respectively, related to converted performance share units. Payments in 2019 and 2018 relate to the payment of payroll taxes. The intrinsic value of units converted was $16.9 million, $9.8 million and $5.0 million during 2019, 2018 and 2017, respectively. As of December 25, 2019 and December 26, 2018, we had accrued compensation of $0.1 million and $0.4 million, respectively, included as a component of other current liabilities and $0.2 million and $0.2 million, respectively, included as a component of other noncurrent liabilities in our Consolidated Balance Sheets, which represents future estimated payroll taxes. As of December 25, 2019, we had $8.8 million of unrecognized compensation cost related to unvested performance share unit awards granted, which is expected to be recognized over a weighted average of 1.7 years.

Restricted Stock Units

During the year ended December 25, 2019, we granted approximately 0.1 million restricted stock units (which are equity classified) with a weighted average grant date fair value of $19.44 per unit to non-employee members of our Board of Directors. The restricted stock units vest after a one year service period. A director may elect to convert these awards into shares of common stock on a specific date in the future (while still serving as a member of our Board of Directors), upon termination as a member of our Board of Directors or in three equal annual installments commencing after termination of service as a member of our Board. During the year ended December 25, 2019, 0.1 million restricted stock units were converted into shares of common stock.

There were 0.7 million and 0.8 million restricted stock units outstanding as of December 25, 2019 and December 26, 2018, respectively. As of December 25, 2019, we had approximately $0.3 million of unrecognized compensation cost related to all unvested restricted stock unit awards outstanding, which is expected to be recognized over a weighted average of 0.4 years.

Stock Options

Prior to 2012, stock options were granted that vest evenly over three 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 2019, 2018 or 2017.

The following table summarizes information about stock options outstanding and exercisable at December 25, 2019:



	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value
	(In thousands, except per share amounts)
Outstanding, beginning of year	502		$	3.02
Exercised	(362	)	$	2.68
Outstanding, end of year	140		$	3.89	1.1	$	2,284
Exercisable, end of year	140		$	3.89	1.1	$	2,284

The total intrinsic value of the options exercised was $6.6 million, $4.9 million and $2.3 million during the years ended December 25, 2019, December 26, 2018 and December 27, 2017, respectively.