Papa Johns 2014 Annual Report Download - page 94

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81
18. Equity Compensation (continued)
We recorded stock-based employee compensation expense of $8.7 million in 2014, $7.4 million in 2013
and $6.9 million in 2012. The total income tax benefit recognized in the income statement for share-based
compensation arrangements was $3.2 million in 2014, $2.7 million in 2013 and $2.4 million in 2012. At
December 28, 2014, there was $7.0 million of unrecognized compensation cost related to nonvested
option awards, time-based restricted stock and performance-based restricted stock units, of which the
Company expects to recognize $4.3 million in 2015, $2.0 million in 2016 and $720,000 in 2017.
Stock Options
Options exercised included 759,000 shares in 2014, 697,000 shares in 2013 and 864,000 shares in 2012.
The total intrinsic value of the options exercised during 2014, 2013 and 2012 was $25.3 million, $13.1
million and $7.5 million, respectively. Cash received upon the exercise of stock options was $5.8 million,
$6.9 million and $12.3 million during 2014, 2013 and 2012, respectively, and the related tax benefits
realized were approximately $9.4 million, $4.8 million and $2.6 million during the corresponding periods.
Information pertaining to option activity during 2014 is as follows (number of options and aggregate
intrinsic value in thousands):
Weighted
Average
Weighted Remaining
Number Average Contractual Aggregate
of Exercise Term Intrinsic
Options Price (In Years) Value
Outstanding at December 29, 2013 2,104 $17.39
Granted 293 49.68
Exercised (759) 13.77
Cancelled (74) 31.83
Outstanding at December 28, 2014 1,564 $24.52 5.41 $48,640
Exercisable at December 28, 2014 893 $16.55 3.11 $34,872
The following is a summary of the significant assumptions used in estimating the fair value of options
granted in 2014, 2013 and 2012:
2014 2013 2012
Assumptions (weighted average):
Risk-free interest rate 1.8% 1.1% 1.1%
Expected dividend yield 1.0% 0.1% 0.0%
Expected volatility 35.7% 37.5% 37.8%
Expected term (in years) 6.0 6.0 6.0
The risk-free interest rate for the periods within the contractual life of an option is based on the U.S.
Treasury yield curve in effect at the time of grant. The expected dividend yield was estimated as the
annual dividend divided by the market price of the Company’s shares on the date of grant. Expected
volatility was estimated by using the Company’s historical share price volatility for a period similar to the
expected life of the option.