Share-Based Compensation

The Company maintains several equity plans (the “Equity Plans”) which collectively provide or provided for the grant of stock options, restricted shares, tandem stock appreciation rights, restricted share units and performance shares (collectively, the “Grants”) to certain officers, other key employees, non-employee directors and consultants. The Company has not granted any tandem stock appreciation rights. During 2010, the Company implemented the 2010 Omnibus Award Plan (the “2010 Plan”) for the issuance of equity awards as described above. All equity grants during 2012 and 2011 were issued from the 2010 Plan and it is currently the only equity plan from which future equity awards may be granted. As of December 30, 2012, there were approximately 43,647 shares of common stock available for future grants under the 2010 Plan. During the periods presented in the consolidated financial statements, the Company settled all stock option exercises and the vesting of restricted shares and performance shares with treasury shares.

Stock Options

The Company’s current outstanding stock options have maximum contractual terms of ten years and vest ratably over three years or cliff vest after three years. The exercise price of options granted is equal to the market price of the Company’s common stock on the date of grant. The fair value of stock options on the date of grant are calculated using the Black-Scholes Model. The aggregate intrinsic value of an option is the amount by which the fair value of the underlying stock exceeds its exercise price. The following table summarizes stock option activity during 2012.



	Number of Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years	Aggregate Intrinsic Value
Outstanding at January 1, 2012	30,259		$	6.16
Granted	6,073		4.69
Exercised	(3,233	)	4.10
Forfeited and/or expired	(4,538	)	6.35
Outstanding at December 30, 2012	28,561		$	6.05	5.7	$	4,513
Vested or expected to vest at December 30, 2012	27,944		$	6.08	5.6	$	4,444
Exercisable at December 30, 2012	19,161		$	6.71	4.0	$	3,457

The total intrinsic value of options exercised during 2012, 2011 and 2010 was $2,280, $1,138 and $488, respectively. The weighted average grant date fair value for stock options granted during 2012, 2011 and 2010 was $1.80, $1.88 and $1.47, respectively.

The grant date fair value of stock options was determined using the following assumptions:



	2012		2011		2010
Risk-free interest rate	0.98	%	1.74	%	2.01	%
Expected option life in years	6.62		5.62		5.40
Expected volatility	45.9	%	45.2	%	45.2	%
Expected dividend yield	1.71	%	1.59	%	1.53	%

The risk-free interest rate represents the U.S. Treasury zero-coupon bond yield correlating to the expected life of the stock options granted. The expected option life represents the period of time that the stock options granted are expected to be outstanding based on historical exercise trends for similar grants. The expected volatility is based on the historical market price volatility of our common stock. The expected dividend yield represents the Company’s annualized average yield for regular quarterly dividends declared prior to the respective stock option grant dates.

The Black-Scholes Model has limitations on its effectiveness including that it was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable and that the model requires the use of highly subjective assumptions including expected stock price volatility. Employee stock option awards have characteristics significantly different from those of traded options and changes in the subjective input assumptions can materially affect the fair value estimates.

Restricted Shares

The Company grants restricted share awards (“RSAs”) and restricted share units (“RSUs”), which cliff vest after two or three years. For the purposes of our disclosures, the term “Restricted Shares” applies to RSAs and RSUs collectively unless otherwise noted. The fair value of Restricted Shares granted is determined using the average of the high and low trading prices of our common stock on the date of grant.

The following table summarizes activity of Restricted Shares during 2012:



	Number of Restricted Shares		Weighted Average Grant Date Fair Value
Non-vested at January 1, 2012	1,043		$	4.82
Granted	1,332		4.64
Vested	(446	)	4.60
Forfeited	(53	)	4.62
Non-vested at December 30, 2012	1,876		$	4.72

The total fair value of Restricted Shares that vested in 2012, 2011 and 2010 was $2,023, $3,223 and $3,348, respectively.

Performance Shares

The Company grants performance-based awards to certain officers and key employees. The vesting of these awards is contingent upon meeting a defined operational goal (a performance condition) or common stock share prices (a market condition).

The fair value of the performance condition awards granted in 2010 was determined using the average of the high and low trading prices of our common stock on the date of grant. There were no performance condition awards granted in 2012 or 2011. Share-based compensation expense recorded for performance condition awards is reevaluated at each reporting period based on the probability of the achievement of the goal. The Company recorded compensation expense of $820 for the accelerated vesting of performance condition awards in accordance with the termination provisions of the employment agreements for two senior executives in 2011 as a result of the sale of Arby’s and related announcements that the Company’s Atlanta restaurant support center would be relocated to Ohio. There was no other share-based compensation expense recorded during 2012, 2011 and 2010 for the performance condition awards as the Company determined the achievement of the defined operational goal was not probable.

The fair value of market condition awards granted in 2012, 2011 and 2010 was estimated using the Monte Carlo simulation model. The Monte Carlo simulation model utilizes multiple input variables to estimate the probability that the market conditions will be achieved and is applied to the average of the high and low trading prices of our common stock on the date of grant. The input variables are noted in the table below:



	2012		2011		2010
Risk-free interest rate	0.41	%	0.61	%	0.93	%
Expected life in years	2.99		3.02		2.98
Expected volatility	34.0	%	52.0	%	55.0	%
Expected dividend yield (a)	0.00	%	0.00	%	0.00	%

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(a)	The Monte Carlo method assumes a reinvestment of dividends.

Share-based compensation expense is recorded ratably for market condition awards during the requisite service period and is not reversed, except for forfeitures, at the vesting date without regard as to whether the market condition is met. The Company recorded compensation expense of $2,347 for the accelerated vesting of market condition awards in accordance with the termination provisions of the employment agreements for two senior executives in 2011 as a result of the sale of Arby’s discussed above.

The following table summarizes activity of performance shares during 2012:



	Performance Condition Awards				Market Condition Awards
	Shares		Weighted Average Grant Date Fair Value		Shares		Weighted Average Grant Date Fair Value
Non-vested at January 1, 2012	655		$	3.91	1,441		$	6.46
Granted	—		—		896		6.04
Dividend equivalent units issued (a)	11		—		39		—
Vested	—		—		—		—
Forfeited	(155	)	3.91		(229	)	6.37
Non-vested at December 30, 2012	511		$	3.91	2,147		$	6.38

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(a)	Dividend equivalent units are issued in lieu of cash dividends for non-vested performance shares. There is no weighted average fair value associated with dividend equivalent units.

The total fair value of awards that were accelerated to vest during 2011 was $3,615.

Modifications of Share-Based Awards

During 2011, the Company modified the terms of awards granted to 168 employees in connection with the sale of Arby’s and the announcement of the relocation of the Company’s Atlanta restaurant support center to Ohio. These modifications resulted in (1) the accelerated vesting of stock options and restricted share units upon the termination of such employees and (2) a reduction in share-based compensation expense of $614 for 2011. Of this amount, $253 is included in discontinued operations and $361 is included in “Facilities relocation costs and other transactions.”

Share-Based Compensation Expense

Total share-based compensation expense and the related income tax benefit recognized in the Company’s consolidated statements of operations were as follows:



	Year Ended
	2012			2011			2010
Stock options (a)	$	5,578		$	9,898		$	7,700
Restricted Shares	2,730			1,943			2,311
Performance Shares:
Performance Condition Shares	—			820			—
Market Condition Shares (b)	3,210			4,688			478
Compensation adjustments, net (c)	(45		)	(361		)	—
Compensation expense credited to “Stockholders’ Equity” (d)	11,473			16,988			10,489
Interest on Restricted Share dividends	—			2			3
Total share-based compensation expense	11,473			16,990			10,492
Less: Income tax benefit	(4,286		)	(6,338		)	(3,773		)
Share-based compensation expense, net of income tax benefit	$	7,187		$	10,652		$	6,719

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(a)	2011 includes expense of $3,068 for the accelerated vesting of awards in conjunction with the sale of Arby’s and the announcement of the relocation of the Company’s Atlanta restaurant support center to Ohio.


(b)	2011 includes expense of $2,347 for the accelerated vesting of awards partially offset by a credit of $384 for awards that were forfeited in conjunction with the sale of Arby’s and the announcement of the relocation of the Company’s Atlanta restaurant support center to Ohio.


(c)	Adjustments relate to modifications of share-based compensation awards.


(d)	Excludes $700 and $3,215 for 2011 and 2010, respectively, which is included in discontinued operations.

As of December 30, 2012, there was $20,291 of total unrecognized share-based compensation, which will be recognized over a weighted average amortization period of 2.2 years.