Stock-Based Incentive Plans

General Description

From time to time, the Company has granted nonqualified stock options, restricted stock awards, 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 stock options, stock appreciation rights, restricted stock awards, cash-settled and stock-settled restricted stock units and performance units to officers, other employees and non-employee 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 for incentive stock awards. The 2011 Plan will expire in May 2021.

The IHOP Corp. 2001 Stock Incentive Plan (the “2001 Plan”) was adopted in 2001 and amended and restated in 2005 and 2008 to authorize the issuance of up to 4,200,000 shares of common stock. The 2001 Plan has expired but there are restricted stock awards and stock options issued under the 2001 Plan outstanding as of December 31, 2013.

The Stock Option Plan for Non-Employee Directors (the “Directors Plan”) was adopted in 1994 and amended and restated in 1999 to authorize the issuance of up to 400,000 shares of common stock pursuant to options to non-employee directors. The Directors Plan has expired but there are stock options issued under the Directors Plan outstanding as of December 31, 2013.

The 2005 Stock Incentive Plan for Non-Employee Directors (the “2005 Plan”) was adopted in 2005 to authorize the issuance of up to 200,000 shares of common stock to non-employee members of the Company's Board of Directors. Awards may be made in common stock, in options to purchase common stock, or in shares of Restricted Stock, or any combination thereof.

The 2011 Plan, the 2005 Plan, the 2001 Plan and the Directors Plan are collectively referred to as the “Plans.”

Stock-Based Compensation Expense

From time to time, the Company has granted stock options and restricted stock to officers, directors and employees of the Company under the Plans. The stock options generally vest ratably over a three-year period in one-third increments and have a maturity of ten years from the issuance date. Options vest immediately upon a change in control of the Company, as defined in the Plans. Option exercise prices equal the closing price on the New York Stock Exchange of the Company's common stock 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 date of grant or immediately upon a change in control of the Company, as defined in the Plans. The Company generally utilizes treasury stock or issues new shares from its authorized but unissued share pool when vested stock options are exercised, when restricted stock awards are granted and when restricted stock units settle in stock upon vesting.

The following table summarizes the Company's stock-based compensation expense included as a component of general and administrative expenses in the consolidated financial statements:



	Year Ended December 31,
	2013			2012			2011
	(In millions)
Total stock-based compensation expense:
Equity classified awards	$	9.4		$	11.4		$	9.5
Liability classified awards	0.9			4.8			1.1
Total pre-tax compensation expense	10.3			16.3			10.6
Tax benefit	(3.9		)	(6.2		)	(4.2		)
Total stock-based compensation expense, net of tax	$	6.4		$	10.1		$	6.4

As of December 31, 2013, total unrecognized compensation cost related to restricted stock and restricted stock units of $8.2 million and $4.1 million related to stock options is expected to be recognized over a weighted average period of approximately 1.83 years for restricted stock and restricted stock units and 1.57 years for stock options.

Equity Classified Awards - Stock Options

The per share fair values of the stock options granted have been estimated as of the date of grant or assumption using the Black-Scholes option pricing model. The Black-Scholes model considers, among other factors, the expected life of the option and the expected volatility of the Company's stock price. The Black-Scholes model meets the requirements of U.S. GAAP but the fair values generated by the model may not be indicative of the actual fair values of the Company's stock-based awards. The following table summarizes the assumptions used to value options granted in the respective periods:



	2013			2012			2011
Risk free interest rate	0.8		%	0.9		%	1.8		%
Weighted average historical volatility	83.4		%	84.5		%	79.1		%
Dividend yield	4.15		%	—		%	—		%
Expected years until exercise	4.6			4.7			4.6
Forfeitures	11.0		%	11.0		%	11.0		%
Weighted average fair value of options granted	$	36.00		$	33.53		$	34.31

Stock option activity for the years ended December 31, 2013, 2012 and 2011 is summarized as follows:



	Number of Shares Under Option		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value
Outstanding at December 31, 2010	1,523,710		$	24.90
Granted	233,449		53.04
Exercised	(393,075	)	17.11
Forfeited	(42,593	)	27.89
Expired	(2,851	)	47.08
Outstanding at December 31, 2011	1,318,640		32.06
Granted	147,674		51.63
Exercised	(455,217	)	20.91
Forfeited	(39,381	)	46.97
Expired	(13,470	)	38.64
Outstanding at December 31, 2012	958,246		39.67
Granted	81,328		72.28
Exercised	(225,272	)	40.31
Forfeited	(39,243	)	55.78
Outstanding at December 31, 2013	775,059		$	42.09	6.28	$	32,100,000
Vested and Expected to Vest at December 31, 2013	758,338		$	41.64	6.23	$	31,800,000
Exercisable at December 31, 2013	567,630		$	35.91	5.55	$	27,000,000

The total intrinsic value of options exercised during the years ended December 31, 2013, 2012 and 2011 was $7.5 million, $15.0 million and $14.6 million, respectively.

Cash received from options exercised under all stock-based payment arrangements for the years ended December 31, 2013, 2012 and 2011 was $9.1 million, $9.3 million and $6.7 million, respectively. The actual tax benefit realized for the tax deduction from option exercises under the stock-based payment arrangements totaled $3.7 million, $6.2 million and $5.8 million, respectively, for the years ended December 31, 2013, 2012 and 2011.

Equity Classified Awards - Restricted Stock and Restricted Stock Units

Activity in equity classified awards of restricted stock and restricted stock units for the years ended December 31, 2013, 2012 and 2011 is as follows:



	Shares of Restricted Stock		Weighted Average Grant-Date Per Share Fair Value		Restricted Stock Units		Weighted Average Grant-Date Per Share Fair Value
Outstanding at December 31, 2010	666,244		$	28.62	18,000		$	29.32
Granted	164,632		53.03		—		—
Released	(287,735	)	37.82		—		—
Forfeited	(56,608	)	31.56		—		—
Outstanding at December 31, 2011	486,533		31.08		18,000		29.32
Granted	137,852		52.23		19,152		52.23
Released	(179,465	)	13.83		(3,910	)	40.58
Forfeited	(98,357	)	44.40		—		—
Outstanding at December 31, 2012	346,563		44.74		33,242		41.19
Granted	97,812		73.11		15,804		72.04
Conversion of cash-settled restricted stock units	—		—		37,184		72.28
Released	(117,075	)	30.96		(39,000	)	54.66
Forfeited	(61,048	)	55.37		—		—
Outstanding at December 31, 2013	266,252		$	58.87	47,230		$	64.57

Liability Classified Awards - Restricted Stock Units

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. Activity in liability classified awards of restricted stock units for the years ended December 31, 2013, 2012 and 2011 is as follows:



	Cash-Settled Restricted Stock Units		Weighted Average Per Share Fair Value
Outstanding at December 31, 2010	26,000		$	64.23
Granted	15,957		64.30
Released	—		—
Outstanding at December 31, 2011	41,957		64.26
Granted	—		—
Released	(4,773	)	49.66
Outstanding at December 31, 2012	37,184		66.13
Conversion to stock-settled restricted stock units	(37,184	)	72.28
Outstanding at December 31, 2013	—

For the years ended December 31, 2013, 2012 and 2011, $0.3 million, $1.0 million and $0.5 million, respectively, was included as stock-based compensation expense related to these cash-settled restricted stock units. At December 31, 2012, a liability of $2.4 million was included as other accrued expenses in the consolidated balance sheet.

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 only paid 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 classified as liabilities. For the years ended December 31, 2013, 2012 and 2010, $0.6 million, $3.8 million and $0.6 million, respectively, were included in stock-based compensation expense related to the LTIP awards. At December 31, 2013 and 2012, liabilities of $2.8 million and $4.5 million, respectively, were included as accrued employee compensation and benefits in the consolidated balance sheet.