Note 16 – 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 within five years from the date of grant. Any unexercised options expire after not more than ten years.

During the years ended December 31, 2016, December 26, 2015, and December 27, 2014, the Company recognized stock-based compensation, as a component of selling, general, and administrative expense, in its Consolidated Statements of Income of $6.4 million, $6.2 million, and $6.3 million, respectively.

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 2016, 2015, and 2014 was $7.87, $7.58, and $9.00, 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. 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:

	2016		2015		2014

Expected term	6.7 years		5.5 years		5.6 years
Expected price volatility		25.6%		26.2%		34.3%
Risk-free interest rate		1.6%		1.7%		1.7%
Dividend yield		1.0%		0.9%		1.0%

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 $2.5 million, $3.1 million, and $3.5 million in 2016, 2015, and 2014, respectively. The total fair value of options that vested was $0.3 million, $0.8 million, and $1.0 million in 2016, 2015, and 2014, respectively.

At December 31, 2016, the aggregate intrinsic value of all outstanding options was $19.5 million with a weighted average remaining contractual term of 5.0 years. Of the outstanding options, 655 thousand are currently exercisable with an aggregate intrinsic value of $15.8 million, a weighted average exercise price of $16.02, and a weighted average remaining contractual term of 3.2 years.

The total compensation expense not yet recognized related to unvested options at December 31, 2016 was $1.4 million with an average expense recognition period of 2.3 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 2016, 2015, and 2014 was $34.04, $32.54, and $28.80, respectively.

The aggregate intrinsic value of outstanding and unvested awards was $28.4 million at December 31, 2016. Total compensation expense for restricted stock awards not yet recognized was $15.9 million with an average expense recognition period of 3.4 years. The total fair value of awards that vested was $4.7 million, $4.8 million, and $4.2 million in 2016, 2015, and 2014, 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 26, 2015		1,198		$	20.59		705		$	28.08
Granted		24			30.86		265			34.04
Exercised		(178	)		17.61		(188	)		25.23
Forfeited		(10	)		30.79		(73	)		28.53

Outstanding at December 31, 2016		1,034			21.24		709			31.02

Approximately 1.0 million shares were available for future stock incentive awards at December 31, 2016.