Stock-Based Compensation

9 Months Ended

Sep. 30, 2011

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

9. Stock-Based Compensation

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 nonqualified stock options, stock appreciation rights, restricted stock awards, 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 for incentive stock awards. The 2011 Plan will expire in May 2021.

The nonqualified stock options generally vest over a three-year period and have a term of ten years from the effective issuance 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 awards 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.

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,
	2011			2010			2011			2010
	(In millions)
Pre-tax compensation expense	$	1.6		$	4.7		$	8.0		$	12.9
Tax provision	(0.6		)	(1.9		)	(3.2		)	(5.1		)
Total stock-based compensation expense, net of tax	$	1.0		$	2.8		$	4.8		$	7.8

As of September 30, 2011, $7.8 million and $8.9 million (including estimated forfeitures) of total unrecognized compensation cost related to restricted stock and stock options, respectively, is expected to be recognized over a weighted average period of 1.55 years for restricted stock and 1.46 years for stock options.

The estimated fair values of the options granted during 2011 were calculated using a Black-Scholes option pricing model. The following summarizes the assumptions used in the Black-Scholes model:

Risk-free interest rate	1.77		%
Weighted average historical volatility	82.7		%
Dividend yield	—
Expected years until exercise	4.84
Forfeitures	11.0		%
Weighted average fair value of options granted	$	34.72

Option balances as of September 30, 2011 and activity related to the Company’s stock options during the nine 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, 2010	1,523,710		$	24.90
Granted	229,449		$	53.21
Exercised	(378,866	)	$	16.70
Forfeited	(43,444	)	$	28.22
Outstanding at September 30, 2011	1,330,849		$	32.01	6.85	$	13,961,000
Vested at September 30, 2011 and Expected to Vest	1,152,655		$	32.70	6.62	$	11,257,000
Exercisable at September 30, 2011	614,321		$	33.98	4.97	$	4,435,000

The aggregate intrinsic value in the table above represents the total pre-tax 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 2011 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, 2011. The amount of 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.

A summary of restricted stock activity for the nine months ended September 30, 2011 is presented below:

	Restricted Stock		Weighted Average Grant Date Fair Value		Restricted Stock Units	Weighted Average Grant Date Fair Value
Outstanding at December 31, 2010	666,244		$	28.62	18,000	$	29.32
Granted	142,574		$	54.10	—	—
Released	(267,565	)	$	39.76	—	—
Forfeited	(52,810	)	$	29.96	—	—
Outstanding at September 30, 2011	488,443		$	29.80	18,000	$	29.32

The Company has issued 44,957 shares of cash-settled restricted stock units to members of the Board of Directors, of which 41,957 are outstanding at September 30, 2011. As these instruments only can be settled in cash, they are recorded as liabilities based on the closing price of the Company’s common stock as of September 30, 2011. For the nine months ended September 30, 2011 and 2010, $0.3 million and $1.1 million, respectively, were included as pre-tax stock-based compensation expense for the cash-settled restricted stock units.