Stock-Based Compensation

From time to time, the Company has granted nonqualified stock options, restricted stock, cash-settled and stock-settled restricted stock units and performance units to officers, other employees and non-employee directors of the Company. Currently, the Company is authorized to grant nonqualified stock options, stock appreciation rights, restricted stock, cash-settled and stock-settled restricted stock units and performance units to officers, other employees and nonemployee directors under the DineEquity, Inc. 2011 Stock Incentive Plan (the “2011 Plan”). The 2011 Plan was approved by stockholders on May 17, 2011 and permits the issuance of up to 1,500,000 shares of the Company’s common stock. The 2011 Plan will expire in May 2021.

The nonqualified stock options generally vest ratably over a three-year period in one-third increments and have a term of ten years from the grant date. Option exercise prices equal the closing price of the Company’s common stock on the New York Stock Exchange on the date of grant. Restricted stock and restricted stock units are issued at no cost to the holder and vest over terms determined by the Compensation Committee of the Company’s Board of Directors, generally three years following the grant date.

The following table summarizes the components of the Company’s stock-based compensation expense included in general and administrative expenses in the consolidated financial statements:



	Three Months Ended
	March 31,
	2013			2012
	(In millions)
Total stock-based compensation:
Equity classified awards	$	3.2		$	3.8
Liability classified awards	0.5			0.7
Total pretax compensation expense	3.7			4.5
Tax benefit	(1.4		)	(1.7		)
Total stock-based compensation expense, net of tax	$	2.3		$	2.8

As of March 31, 2013, total unrecognized compensation cost related to restricted stock and restricted stock units of $13.0 million and $8.2 million related to stock options is expected to be recognized over a weighted average period of approximately 1.8 years for restricted stock and restricted stock units and approximately 2.0 years for stock options.

Equity Classified Awards - Stock Options

The estimated fair values of the stock options granted during the three months ended March 31, 2013 were calculated using a Black-Scholes option pricing model. The following summarizes the assumptions used in the Black-Scholes model:



Risk-free interest rate	0.78		%
Weighted average historical volatility	83.4		%
Dividend yield	4.15		%
Expected years until exercise	4.61
Forfeitures	11.0		%
Weighted average fair value of options granted	$	36.00

Option balances as of March 31, 2013 and activity related to the Company’s stock options during the three months then ended were as follows:



	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2012	958,246		$	39.67
Granted	81,328		72.28
Exercised	(78,445	)	38.48
Outstanding at March 31, 2013	961,129		42.53		6.8	$	25,500,000
Vested at March 31, 2013 and Expected to Vest	919,221		41.78		6.7	$	25,100,000
Exercisable at March 31, 2013	679,959		$	36.93	6.0	$	21,700,000

The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the closing stock price of the Company’s common stock on the last trading day of the first quarter of 2013 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 31, 2013. The aggregate intrinsic value will change based on the fair market value of the Company’s common stock and the number of in-the-money options.

Equity Classified Awards - Restricted Stock and Restricted Stock Units

Outstanding balances as of March 31, 2013 and activity related to restricted stock and restricted stock units for the three months then ended is as follows:



	Restricted Stock		Weighted Average Grant Date Fair Value	Restricted Stock Units		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2012	346,563		$44.74	33,242		$41.19
Granted	84,113		$72.18	14,379		$72.04
Conversion of cash-settled restricted stock units	—		—	37,184		$72.28
Released	(89,009	)	$29.23	(39,000	)	$54.66
Forfeited	(11,602	)	$47.27	—		—
Outstanding at March 31, 2013	330,065		$55.77	45,805		$64.57

Liability Classified Awards - Restricted Stock Units



	Restricted Stock Units		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2012	37,184		$66.13
Conversion to stock-settled restricted stock units	(37,184	)	$72.28
Outstanding at March 31, 2013	—		—

The Company previously had issued shares of cash-settled restricted stock units to members of the Board of Directors. Originally these instruments were expected to be settled in cash and were recorded as liabilities based on the closing price of the Company’s common stock as of each period end. In February 2013, it was determined that these restricted stock units would be settled in shares of common stock and all outstanding restricted stock units were converted to equity classified awards. For the three months ended March 31, 2013 and 2012, $0.3 million and $0.3 million, respectively, were included in pretax stock-based compensation expense for the cash-settled restricted stock units. At December 31, 2012, liabilities of $2.4 million were included as other accrued expenses in the consolidated balance sheets.

Liability Classified Awards - Long-Term Incentive Awards

The Company has granted cash long-term incentive awards to certain employees ("LTIP awards"). Annual LTIP awards vest over a three-year period and are determined using a multiplier from 0% to 200% of the target award based on the total shareholder return of DineEquity, Inc. common stock compared to the total shareholder returns of a peer group of companies. Though LTIP awards are both denominated and paid only in cash, since the multiplier is based on the price of the Company's common stock, the awards are considered stock-based compensation in accordance with U.S. GAAP and are considered liability classified awards. For the three months ended March 31, 2013 and 2012, $0.2 million and $0.4 million, respectively, were included in stock-based compensation expense related to the LTIP awards. At March 31, 2013 and December 31, 2012, liabilities of $2.5 million and $4.5 million, respectively, were included as accrued employee compensation and benefits in the consolidated balance sheet.