Cracker Barrel 2012 Annual Report Download - page 49

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requirement, the vesting of the MSU Grants is also subject to
the achievement of a specied level of operating income
during the performance period. If this performance goal is
not met, no MSU Grants will be awarded and no compensa-
tion expense will be recorded.
e fair value of the MSU Grants is determined using the
Monte-Carlo simulation model, which simulates a range of
possible future stock prices and estimates the probabilities of
the potential payouts. is model uses the average prices for
the 60-consecutive calendar days beginning 30 days prior to
and ending 30 days aer the rst business day of the perfor-
mance period. is model also incorporates the following
ranges of assumptions:
• eexpectedvolatilityisablendofimpliedvolatility
based on market-traded options on our stock and histori-
cal volatility of our stock over the period commensurate
with the three-year performance period.
• erisk-freeinterestrateisbasedontheU.S.Treasury
rate assumption commensurate with the three-year
performance period.
• eexpecteddividendyieldisbasedonourcurrent
dividend yield as the best estimate of projected
dividend yield for periods within the three-year perfor-
mance period.
e following assumptions were used for the Company’s
MSU Grants:
Year Ended
August 3, 2012 July 29, 2011
Dividend yield range 2.2% 1.6%
Expected volatility 45% 43%
Risk-free interest rate 0.3% 0.8%
e following table summarizes the shares that have been
accrued under each annual plan based upon the change in
total shareholder return at August 3, 2012:
(Shares in thousands) Total Shareholder Return Shares
2012 MSU Grants 141.0% 29
2011 MSU Grants 134.1% 51
Stock Options. Prior to 2012, stock options were granted
with an exercise price equal to the market price of the
Company’s stock on the grant date; those option awards
generally vest at a cumulative rate of 33% per year
beginning on the rst anniversary of the grant date and
expire ten years from the date of grant. No stock options
were granted in 2012.
e fair value of each option award was estimated on
the date of grant using a binomial laice-based option
valuation model, which incorporates ranges of assumptions
for inputs as shown in the following table.
Year Ended
July 29, 2011* July 30, 2010
Dividend yield range 1.7% 2.5%
Expected volatility 40% 47%
Risk-free interest rate range 0.3%- 4.6% 0.4%- 5.1%
Expected term (in years) 6.6* 6.8
* Stock options granted in 2011 were defeased and replaced with
MSU Grants (see sub-section above entitled “Performance-Based Market
Stock Units”).
A summary of the Company’s stock option activity as
of August 3, 2012, and changes during 2012 are presented in
the following table:
(Shares in thousands)
Weighted-
Average
Weighted- Remaining Aggregate
Average Contractural Intrinsic
Fixed Options Shares Price Term Value
Outstanding at July 29, 2011 1,124 $ 33.01
Granted — —
Exercised (683) 33.45
Forfeited (3) 31.58
Canceled (34) 21.88
Outstanding at August 3, 2012 404 $ 33.22 4.36 $ 12,014
Exercisable 324 $ 33.62 3.69 $ 9,512
e following table summarizes the weighted-average
grant-date fair values of options granted and the total
intrinsic values of options exercised during each of the
three years:
2012 2011 2010
Weighted-average grant-date
fair values of options granted $ — $ 16.81 $ 12.03
Total intrinsic values of options
exercised* 14,859 11,713 21,602
* e intrinsic value for stock options is dened as the dierence between the
current market value and the grant price.