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 from 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						Nine Months Ended
	September 30,						September 30,
	2013			2012			2013			2012
	(In millions)
Total stock-based compensation:
Equity classified award expense	$	1.2		$	2.2		$	7.1		$	8.8
Liability classified award (credit) expense	(0.8		)	1.9			(0.9		)	2.4
Total pretax stock-based compensation expense	0.4			4.1			6.2			11.2
Tax benefit	(0.2		)	(1.6		)	(2.4		)	(4.3		)
Total stock-based compensation expense, net of tax	$	0.2		$	2.5		$	3.8		$	6.9

As of September 30, 2013, total unrecognized compensation cost of $9.1 million related to restricted stock and restricted stock units and $5.1 million related to stock options is expected to be recognized over a weighted average period of 1.8 years for restricted stock and restricted stock units and 1.7 years for stock options.

Equity Classified Awards - Stock Options

The estimated fair value of the stock options granted during the nine months ended September 30, 2013 was 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	4.6
Forfeitures	11.0	%
Weighted average fair value of options granted	$36.00

Option balances as of September 30, 2013 and activity related to stock options for the nine months ended September 30, 2013 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	(153,454	)	$36.40
Forfeited	(39,243	)	$55.78
Outstanding at September 30, 2013	846,877		$42.65	6.24	$	21,878,000
Vested at September 30, 2013 and Expected to Vest	824,671		$42.14	6.17	$	21,683,000
Exercisable at September 30, 2013	637,782		$37.31	5.49	$	19,650,000

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 third 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 September 30, 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 September 30, 2013 and activity related to restricted stock and restricted stock units for the nine months ended September 30, 2013 were 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	88,606		$72.16	15,387		$72.04
Conversion of cash-settled restricted stock units	—		—	37,184		$72.28
Released	(112,625	)	$30.09	(39,000	)	$54.66
Forfeited	(53,551	)	$54.76	—		—
Outstanding at September 30, 2013	268,993		$57.84	46,813		$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 September 30, 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, pursuant to the terms of the Plan, 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 nine months ended September 30, 2013 and 2012, $0.3 million and $0.6 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 sheet.

Liability Classified Awards - Long-Term Incentive Awards

The Company has granted cash long-term incentive awards (“LTIP awards”) to certain employees. 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. Although LTIP awards are both denominated and paid only in cash, because 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 liability classified awards. For the nine months ended September 30, 2013 and 2012, a credit of $1.2 million and an expense of $1.8 million, respectively, were included in total stock-based compensation expense related to the LTIP awards. At September 30, 2013 and December 31, 2012, liabilities of $1.1 million and $4.5 million, respectively, related to LTIP awards were included as accrued employee compensation and benefits in the consolidated balance sheets.