Note 12 – Stock-Based Compensation

The Company has in effect stock incentive plans under which stock-based awards have been granted to certain employees and members of its Board of Directors. Under these existing plans, the Company may grant options to purchase shares of common stock at prices not less than the fair market value of the stock on the date of grant, as well as restricted stock awards. Generally, the awards vest annually over a five-year period beginning one year from the date of grant. Any unexercised options expire after not more than ten years.

In May 2014, the Company's stockholders approved the 2014 Incentive Plan (2014 Plan). The 2014 Plan authorizes the award of stock-based incentives to employees and non-employee directors. Awards include options to purchase stock at specified prices during specified time periods, restricted stock, restricted stock units, stock appreciation rights, and performance awards, including cash awards. The 2014 Plan reserved 1.5 million shares of common stock which may be issued or transferred upon the exercise of options.

During the years ended December 26, 2015, December 27, 2014, and December 28, 2013, the Company recognized stock-based compensation, as a component of selling, general, and administrative expense, in its Consolidated Statements of Income of $6.2 million, $6.3 million, and $5.7 million, respectively. The tax benefit from the exercise of share-based awards was $1.0 million in 2015, $0.8 million in 2014, and $0.7 million in 2013.

Stock Options

The fair value of each option is estimated as a single award and amortized into compensation expense on a straight-line or accrual basis over its vesting period based on its vesting schedule. The weighted average grant-date fair value of options granted during 2015, 2014, and 2013 was $7.58, $9.00, and $8.77, respectively.

The Company estimates the fair value of all stock option awards as of the grant date by applying the Black-Scholes-Merton option pricing model. The use of this valuation model in the determination of compensation expense involves certain assumptions that are judgmental and/or highly sensitive including the expected life of the option, stock price volatility, risk-free interest rate, and dividend yield. Additionally, forfeitures are estimated at the time of valuation and reduce expense ratably over the vesting period. The forfeiture rate, which is adjusted periodically based on actual forfeitures, was 16.1 percent in 2015 and 16.4 percent in 2014. Due to the nature of the awards granted in 2013, a forfeiture rate was not considered necessary. The weighted average of key assumptions used in determining the fair value of options granted and a discussion of the methodology used to develop each assumption are as follows:

	2015		2014		2013

Expected term	5.5 years		5.6 years		5.9 years
Expected price volatility		26.2%		34.3%		39.7%
Risk-free interest rate		1.7%		1.7%		0.7%
Dividend yield		0.9%		1.0%		0.9%

Expected term – This is the period of time estimated based on historical experience over which the options granted are expected to remain outstanding. An increase in the expected term will increase compensation expense.

Expected price volatility – This is a measure of the amount by which a price has fluctuated or is expected to fluctuate. The Company uses actual historical changes in the market value of its stock to calculate the volatility assumption. Daily market value changes from the date of grant over a past period representative of the expected term of the options are used. An increase in the expected price volatility rate will increase compensation expense.

Risk-free interest rate – This is the U.S. Treasury rate for the week of the grant, having a term representative of the expected term of the options. An increase in the risk-free rate will increase compensation expense.

Dividend yield – This rate is the annual dividends per share as a percentage of the Company's stock price. An increase in the dividend yield will decrease compensation expense.

The total intrinsic value of options exercised was $3.1 million, $3.5 million, and $2.9 million in 2015, 2014, and 2013, respectively. The total fair value of options that vested was $0.8 million, $1.0 million, and $1.1 million in 2015, 2014, and 2013, respectively.

At December 26, 2015, the aggregate intrinsic value of all outstanding options was $10.1 million with a weighted average remaining contractual term of 5.3 years. Of the outstanding options, 789 thousand are currently exercisable with an aggregate intrinsic value of $9.9 million, a weighted average exercise price of $15.82, and a weighted average remaining contractual term of 3.7 years.

The total compensation expense not yet recognized related to unvested options at December 26, 2015 was $1.9 million with an average expense recognition period of 3.1 years.

Restricted Stock Awards

The fair value of each restricted stock award equals the fair value of the Company's stock on the grant date and is amortized into compensation expense on a straight-line or accrual basis over its vesting period based on its vesting schedule. The weighted average grant-date fair value of awards granted during 2015, 2014, and 2013 was $32.54, $28.80, and $28.32, respectively.

The aggregate intrinsic value of outstanding and unvested awards was $19.9 million at December 26, 2015. Total compensation expense for restricted stock awards not yet recognized was $14.4 million with an average expense recognition period of 3.3 years. The total fair value of awards that vested was $4.8 million, $4.2 million, and $1.8 million in 2015, 2014, and 2013, respectively.

The Company generally issues treasury shares when options are exercised or restricted stock awards are granted. A summary of the activity and related information follows:

	Stock Options					Restricted Stock Awards
(Shares in thousands)	Shares			Weighted Average Exercise Price		Shares			Weighted Average Grant Date Fair Value

Outstanding at December 27, 2014		1,127		$	17.38		727		$	25.21
Granted		223			32.59		193			32.54
Exercised		(149	)		13.95		(214	)		22.49
Forfeited		(3	)		30.61		(1	)		28.28

Outstanding at December 26, 2015		1,198			20.59		705			28.08

Approximately 1.1 million shares were available for future stock incentive awards at December 26, 2015.