Share-Based Compensation

12 Months Ended

Dec. 29, 2021

Share-based Payment Arrangement [Abstract]

Share-Based Compensation Plans

The Denny’s Corporation 2021 Omnibus Incentive Plan (the “2021 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 29, 2021, there were 4.3 million shares available for grant under the 2021 Omnibus Plan. In addition, we have 0.7 million shares available to be issued outside of the 2021 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 (loss) was as follows:


	Fiscal Year Ended
	December 29, 2021		December 30, 2020		December 25, 2019
	(In thousands)

Employee share awards	$	12,708	$	7,104	$	5,765
Restricted stock units for board members	894		844		929
Total share-based compensation	$	13,602	$	7,948	$	6,694

The income tax benefits recognized as a component of the provision for (benefit from) income taxes in our Consolidated Statements of Operations related to share-based compensation expense were approximately $3.4 million, $2.0 million and $1.7 million during the years ended December 29, 2021, December 30, 2020 and December 25, 2019, respectively.

Employee Share Awards

Employee share awards consist of performance share units (“PSUs”) and restricted stock units ("RSUs") (which are equity classified). 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 employee share awards activity during the year ended December 29, 2021:


	Units	Weighted Average Grant Date Fair Value
	(In thousands)
Outstanding, beginning of year	1,563	$	12.91
Granted	742	$	21.83
Converted	(218)	$	17.87
Forfeited	(11)	$	14.25
Outstanding, end of year	2,076	$	15.57
Convertible, end of year	1,008	$	13.08

During the year ended December 29, 2021, as a component of our long-term compensation program, we granted certain employees approximately 0.5 million PSUs with a grant date fair value of $24.74 per share that vest based on the total shareholder return (“TSR”) of our common stock compared to the TSRs of a group of peer companies (from 0% to 200% of the target award). As the TSR based performance units contain a market condition, a Monte Carlo valuation was used to determine the grant date fair value. The performance period for these PSUs is the three year period beginning December 31, 2020 and ending December 27, 2023. The PSUs will completely vest and be earned at the end of the performance period at which point the relative TSR will be determined and the achievement percentage applied to the vested units.

We also granted certain employees approximately 0.2 million RSUs with a grant date fair value of $15.91 per share. The RSUs vest evenly over the three year period ending December 27, 2023, and are paid annually.

For 2021, 2020 and 2019, the weighted average grant date fair value of awards granted was $21.83, $10.47 and $19.02, respectively.

The grant date fair value of PSUs and the related assumptions used in the Monte Carlo simulation to record share-based compensation in each fiscal year are as follows:


	December 29, 2021			December 30, 2020			December 25, 2019
Risk-free interest rate	0.18		%	0.16		%	2.54		%
Expected term (in years)	3.0			1.25			3.0
Expected volatility	64.9		%	59.5		%	27.4		%
Expected dividend yield	0.0		%	0.0		%	0.0		%
Grant date fair value per unit	$	24.74		$	8.24		$	20.47

The risk-free interest rate was based on U.S. Treasury bond yield with a term equal to the expected life assumed at the date of grant. The expected term represents the period of time the awards are expected to be outstanding. Expected volatility was based on historical volatility of the Company. The expected dividend yield is based on the Company’s history and expectations of dividend payouts at the time of grant.

We made payments of $0.2 million, $0.2 million and $0.4 million during 2021, 2020 and 2019, respectively, related to converted performance and restricted share units. Payments relate to the payment of payroll taxes. The fair value of units converted was $4.3 million, $12.0 million and $16.9 million during 2021, 2020 and 2019, respectively. As of December 29, 2021, we had $12.7 million of unrecognized compensation cost related to unvested performance share unit awards granted, which is expected to be recognized over a weighted average of 1.8 years.

Restricted Stock Units for Board Members

During the year ended December 29, 2021, we granted approximately 0.1 million RSUs (which are equity classified) with a weighted average grant date fair value of $17.32 per unit to non-employee members of our Board. 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), upon termination as a member of our Board or in three equal annual installments commencing after termination of service as a member of our Board. During the year ended December 29, 2021, less than 0.1 million restricted stock units were converted into shares of common stock.

There were 0.8 million and 0.8 million RSUs outstanding as of December 29, 2021 and December 30, 2020, respectively. As of December 29, 2021, we had approximately $0.4 million of unrecognized compensation cost related to all unvested RSU 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 2021, 2020 or 2019.

The following table summarizes information about stock options outstanding and exercisable at December 29, 2021:


	Options	Weighted Average Exercise Price
	(In thousands, except per share amounts)
Outstanding, beginning of year	30	$	3.89
Exercised	(30)	$	3.89
Outstanding, end of year	—
Exercisable, end of year	—

The total intrinsic value of the options exercised was $0.3 million, $0.8 million and $6.6 million during the years ended December 29, 2021, December 30, 2020 and December 25, 2019, respectively.