9. Shareholders’ Equity and Stock-Based Compensation

Shareholders may convert their shares of Class B Common Stock into shares of Common Stock at any time. Class B Common Stock shareholders are substantially restricted in their ability to transfer their Class B Common Stock. Holders of Common Stock are entitled to cash dividends per share equal to 110% of all dividends declared and paid on each share of the Class B Common Stock. Holders of Class B Common Stock are entitled to ten votes per share while holders of Common Stock are entitled to one vote per share on any matters brought before the shareholders of the Company. Liquidation rights are the same for both classes of stock.

Through December 26, 2019, the Company’s Board of Directors has approved the repurchase of up to 11,687,500 shares of Common Stock to be held in treasury. The Company intends to reissue these shares upon the exercise of stock options and for savings and profit-sharing plan contributions. The Company purchased 30,139, 82,722 and 28,898 shares pursuant to these authorizations during fiscal 2019, fiscal 2018 and fiscal 2017, respectively. At December 26, 2019, there were 2,756,561 shares available for repurchase under these authorizations.

The Company’s Board of Directors has authorized the issuance of up to 750,000 shares of Common Stock for The Marcus Corporation Dividend Reinvestment and Associate Stock Purchase Plan. At December 26, 2019, there were 430,582 shares available under this authorization.

Shareholders have approved the issuance of up to 4,937,500 shares of Common Stock under various equity incentive plans. Stock options granted under the plans to employees generally become exercisable either 40% after two years, 60% after three years, 80% after four years and 100% after five years of the date of grant, or 50% after two years, 75% after three years and 100% after four years of the date of grant, depending on the date of grant. The options generally expire ten years from the date of grant as long as the optionee is still employed with the Company.

Awarded shares of non-vested stock cumulatively vest either 25% after three years of the grant date, 50% after five years of the grant date, 75% after ten years of the grant date and 100% upon retirement, or 50% after three years of the grant date and 100% after five years of the grant date, or 50% after two years of the grant date and 100% after four years of the grant date, depending on the date of grant. The non-vested stock may not be sold, transferred, pledged or assigned, except as provided by the vesting schedule included in the Company’s equity incentive plan. During the period of restriction, the holder of the non-vested stock has voting rights and is entitled to receive all dividends and other distributions paid with respect to the stock. Non-vested stock awards and shares issued upon option exercises are issued from previously acquired treasury shares. At December 26, 2019, there were 588,834 shares available for grants of additional stock options, non-vested stock and other types of equity awards under the current plan.

Stock-based compensation, including stock options and non-vested stock awards, is expensed over the vesting period of the awards based on the grant date fair value.

The Company estimated the fair value of stock options using the Black-Scholes option pricing model with the following assumptions used for awards granted during fiscal 2019, fiscal 2018 and fiscal 2017:


	Year Ended	Year Ended	Year Ended
	December 26, 2019	December 27, 2018	December 28, 2017

Risk-free interest rate	2.50 – 2.60%	2.70 – 2.80%	2.08 – 2.20%
Dividend yield	1.70%	2.10%	2.10%
Volatility	27 – 32%	28 – 33%	34 – 43%
Expected life	6 – 8 years	6 – 8 years	7 – 8 years

Total pre-tax stock-based compensation expense was $3,523,000, $2,691,000 and $2,411,000 in fiscal 2019, fiscal 2018 and fiscal 2017, respectively. The recognized tax benefit on stock-based compensation was $1,127,000, $2,617,000 and $1,227,000 in fiscal 2019, fiscal 2018 and fiscal 2017, respectively. The increase in the recognized tax benefit during fiscal 2018 was primarily due to an increase in stock options exercised where the market price was significantly greater than the grant date fair value of the stock options.

A summary of the Company’s stock option activity and related information follows:


	December 26, 2019				December 27, 2018				December 28, 2017
			Weighted-				Weighted-				Weighted-
			Average				Average				Average
			Exercise				Exercise				Exercise
	Options		Price		Options		Price		Options		Price
	(options in thousands)
Outstanding at beginning of period		1,450	$	21.25		1,629	$	18.08		1,563	$	15.94
Granted		329		41.67		336		27.59		273		31.08
Exercised		(97)		15.60		(478)		14.74		(133)		17.04
Forfeited		(41)		30.58		(37)		23.35		(74)		22.37
Outstanding at end of period		1,641		25.46		1,450		21.25		1,629		18.08
Exercisable at end of period		802	$	18.22		699	$	15.87		988	$	14.69
Weighted-average fair value of options granted during the period	$	11.79			$	7.87			$	10.54

Exercise prices for options outstanding as of December 26, 2019 ranged from $10.00 to $41.90. The weighted-average remaining contractual life of those options is 6.4 years. The weighted-average remaining contractual life of options currently exercisable is 4.5 years. There were 1,587,000 options outstanding, vested and expected to vest as of December 26, 2019, with a weighted-average exercise price of $25.13 and an intrinsic value of $14,567,000. Additional information related to these options segregated by exercise price range is as follows:


	Exercise Price Range
	$10.00 to		$18.35 to		$27.01 to
	$18.34		$27.00		$41.90
	(options in thousands)

Options outstanding		464		610		567
Weighted-average exercise price of options outstanding	$	14.03	$	23.22	$	37.22
Weighted-average remaining contractual life of options outstanding		3.1		7.0		8.4
Options exercisable		464		218		120
Weighted-average exercise price of options exercisable	$	14.03	$	19.80	$	31.54

The intrinsic value of options outstanding at December 26, 2019 was $14,693,000 and the intrinsic value of options exercisable at December 26, 2019 was $11,579,000. The intrinsic value of options exercised was $2,135,000, $10,373,000 and $1,770,000 during fiscal 2019, fiscal 2018 and fiscal 2017, respectively. As of December 26, 2019, total remaining unearned compensation cost related to stock options was $5,314,000, which will be amortized to expense over the remaining weighted-average life of 2.7 years.

A summary of the Company’s non-vested stock activity and related information follows:


	December 26, 2019			December 27, 2018			December 28, 2017
		Weighted-			Weighted-			Weighted-
		Average			Average			Average
		Fair			Fair			Fair
	Shares	Value		Shares	Value		Shares	Value
	(options in thousands)
Outstanding at beginning of period	158	$	18.98	137	$	21.94	143	$	19.30
Granted	39		38.24	52		29.02	37		29.12
Vested	(23)		18.60	(31)		16.41	(36)		18.78
Forfeited	—		—	—		—	(7)		22.86
Outstanding at end of period	174	$	29.16	158	$	18.98	137	$	21.94

The Company expenses awards of non-vested stock based on the fair value of the Company’s common stock at the date of grant. As of December 26, 2019, total remaining unearned compensation related to non-vested stock was $3,015,000, which will be amortized over the weighted-average remaining service period of 2.8 years.