(9) Share-Based Payment Arrangements

As of December 29, 2012, the Company had two employee equity incentive plans, the 2002 employee stock option and stock incentive plan (the “ESOSIP”) and the 2011 equity incentive plan (the “2011 EIP”). The Company also has a stock compensation plan for members of its Board of Directors (the “Directors Stock Compensation Plan”). The ESOSIP, 2011 EIP and Directors Stock Compensation Plan are each referred to herein as a “Plan,” and, collectively, as the “Plans.” No further grants can be made under the ESOSIP. Amounts recognized in the financial statements with respect to these Plans are as follows (in thousands):


	Fiscal Years
	2012		2011		2010
Total cost of the Plans during the period	$	6,149	$	5,012	$	4,769
Amount of related income tax benefit recognized during the period		2,398		983		1,194

Net cost of the Plans during the period	$	3,751	$	4,029	$	3,575

Included in income tax benefits recognized in the fiscal years ended December 29, 2012 and December 31, 2011 were income tax benefits of $771,000 and $78,000, respectively, recognized on disqualifying dispositions of the Company’s Common Stock by employees who obtained shares of Common Stock through exercises of incentive stock options.

Stock Options

Options granted under the Plans generally become exercisable in either five equal annual installments commencing on the first anniversary of the date of grant or 100% on the fifth anniversary from the date of grant, subject to acceleration in certain circumstances. All options granted under the Plans expire on the tenth anniversary of the date of grant. Under the Plans, the exercise price of each option equals the fair market value of the Company’s Common Stock on the date of grant.

The fair value of each option grant on its grant date was calculated using the Black-Scholes option pricing model with the following weighted average assumptions for grants made in 2012, 2011 and 2010:


	2012			2011			2010
Expected volatility		34.0	%		35.0	%		37.0	%
Expected dividend yield		0.420	%		0.450	%		0.400	%
Risk-free interest rate		0.90	%		1.75	%		2.50	%
Expected lives (in years)		4.0			4.0			4.2

The Company utilizes historical data, including exercise patterns and employee departure behavior, in estimating the term that options will be outstanding. Expected volatility was based on historical volatility and other factors, such as expected changes in volatility arising from planned changes to the Company’s business, if any. The risk-free interest rate was based on the yield of zero coupon U.S. Treasury bonds for terms that approximated the terms of the options granted. The weighted average grant date fair value of stock options granted during 2012, 2011 and 2010 was $13.99, $12.06 and $12.03, respectively.

The following table summarizes information regarding the Company’s outstanding stock options under the Plans:


	Options Outstanding					Options Exercisable
	Number of Options			Weighted Average Exercise Price per Share		Number of Options		Weighted Average Exercise Price per Share
Options at December 26, 2009		2,557,802		$	36.86		1,225,802	$	32.43
Granted		230,250		$	37.41
Exercised		(424,354	)	$	20.73
Forfeited		(67,867	)	$	42.64

Options at December 25, 2010		2,295,831		$	39.73		936,081	$	38.85
Granted		273,000		$	41.79
Exercised		(111,355	)	$	34.84
Forfeited		(130,700	)	$	41.48

Options at December 31, 2011		2,326,776		$	40.11		1,110,743	$	39.74
Granted		329,500		$	52.03
Exercised		(846,294	)	$	39.47
Forfeited		(28,800	)	$	43.23

Options at December 29, 2012		1,781,182		$	42.56		661,865	$	40.64

The following tables summarize stock options outstanding and exercisable at December 29, 2012:


	Options Outstanding
Range of Exercise Prices Per Share	Number Outstanding		Weighted Average Remaining Contractual Term (years)		Weighted Average Exercise Price per Share
$14.62 - $ 25.00		18,019		0.8	$	18.77
$25.01 - $ 35.00		55,704		2.1	$	32.13
$35.01 - $ 40.00		458,663		6.0	$	37.89
$40.01 - $ 45.00		865,696		5.4	$	42.31
$45.01 - $ 57.83		383,100		8.4	$	51.37

		1,781,182		6.1	$	42.56


	Options Exercisable
Range of Exercise Prices Per Share	Number Exercisable		Weighted Average Remaining Contractual Term (years)		Weighted Average Exercise Price per Share
$14.62 - $ 25.00		18,019		0.8	$	18.77
$25.01 - $ 35.00		55,704		2.1	$	32.13
$35.01 - $ 40.00		131,479		4.8	$	37.11
$40.01 - $ 45.00		407,963		4.3	$	43.03
$45.01 - $ 51.99		48,700		5.0	$	47.94

		661,865		4.2	$	40.64

At December 29, 2012, the total intrinsic value of options outstanding was $16,134,000. At December 29, 2012, the total intrinsic value of options outstanding and exercisable was $7,270,000. The total intrinsic value of stock options exercised during 2012, 2011 and 2010 was $12,476,000, $1,052,000 and $9,657,000, respectively.

As of December 29, 2012, there was $6,724,000 of total unrecognized compensation cost related to non-vested stock options granted under the Plans. The unrecognized compensation cost related to these non-vested options is expected to be recognized over a weighted average period of 3.2 years.

Non-vested Restricted Stock

The 2011 EIP provides the Compensation Committee of the Board of Directors with the authority to issues shares of Common Stock of the Company, subject to certain vesting and other restrictions on transfer (“restricted stock”). Shares of restricted stock generally are granted under the 2011 EIP subject to vesting in three year annual installments or 100% on the fifth anniversary of the date of grant and the shares of restricted stock remain subject to forfeiture unless the grantee remains continuously employed with the Company or a subsidiary thereof through the applicable vesting date. The fair value of each share of non-vested restricted stock issued under the Plans is based on the fair value of a share of the Company’s Common Stock on the date of grant.

The following table summarizes information regarding the Company’s outstanding non-vested restricted stock under the Plans:


	Number of Shares			Weighted Average Grant Date Fair Value
Outstanding at December 26, 2009		11,500		$	34.82
Granted		18,354		$	42.41

Outstanding at December 25, 2010		29,854		$	39.49
Granted		22,410		$	44.82
Vested		(8,333	)	$	42.14
Forfeited		(2,938	)	$	37.13

Outstanding at December 31, 2011		40,993		$	42.03
Granted		4,151		$	54.20
Vested		(8,732	)	$	44.35
Forfeited		(1,693	)	$	45.21

Outstanding at December 29, 2012		34,719		$	42.75

As of December 29, 2012, there was $799,000 of total unrecognized compensation cost related to non-vested shares of restricted stock granted under the Plans. The unrecognized compensation cost related to these non-vested shares of restricted stock is expected to be recognized over a weighted average period of 2.0 years.

Restricted Stock Units

A restricted stock unit (“RSU”) award issued under the 2011 EIP represents a contractual right to receive one share of the Company’s Common Stock upon achievement of certain performance objectives. RSU awards typically have contractual lives of five years from the date of grant and requirements for continuous employment.

The Company has historically granted stock options and restricted stock as part of its equity incentive plans. On January 2, 2012, the Company granted 113,000 performance related stock awards in the form of RSUs to members of management. The number of RSUs that vest is determined annually, for each year in the five-year period from date of grant, by multiplying the number of RSUs granted by the sum of (a) the average of the percentage change (positive or negative) in operating income and diluted earnings per share in each of the 5 years as compared to operating income and diluted earnings per share reported in the Company’s 2011 fiscal year, plus (b) 5%, rounded to the nearest whole number, less (c) the number of RSUs from that grant that have previously vested. No dividends are paid on RSUs and RSUs have no voting rights. The fair value of an RSU is determined based on the market value of the Company’s Common Stock on the date of grant, discounted for lack of marketability for a minimum post-vesting holding requirement. The Company reports compensation expense over the life of the award based on an estimated number of shares that will vest over the life of the award, multiplied by the fair value of an RSU. The closing market price of a share of the Company’s Common Stock on the grant date was $48.15 as reported on the NASDAQ Global Select Market and the lack of marketability discount rate used for RSU award grants during 2012 was 7%. As of December 29, 2012, 113,000 performance-related RSU awards were outstanding.

The Company recognized approximately $964,000 of share-based compensation expense related to RSU awards in 2012. As of December 29, 2012, there was a maximum of $4.1 million of total unrecognized compensation cost related to RSU awards granted under the Plans with an expected average remaining life of approximately 4.0 years. The amount of future compensation expense to be recognized will be determined based on actual future operating results.

Directors’ Stock Compensation Plan

Upon election or re-election to the Board of Directors for a three year term, outside members of the Board of Directors may receive a grant of such number of restricted shares of the Company’s Common Stock equal to the quotient of $225,000 divided by the fair market value of a share of Common Stock on the date immediately following the date of such Director’s re-election or election to the Board. In 2012, 2011 and 2010, 4,151, 9,510 and 9,954 restricted shares, respectively, were granted to outside Directors upon their re-election to the Board. The restricted shares vest in three equal annual installments on the first three annual anniversary dates of the date of grant. During 2012, 2011 and 2010, $292,000, $242,000 and $98,000, respectively, of compensation cost was recorded for the grant of these restricted shares.

As of December 29, 2012, there were 7,371,358 shares of the Company’s Common Stock reserved for issuance in the aggregate under the ESOSIP and 2011 EIP. As of December 29, 2012, there were 114,808 shares of the Company’s Common Stock reserved for issuance upon the grant of Common Stock under the Directors’ Stock Compensation Plan.