Cracker Barrel 2013 Annual Report Download - page 49

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the end of the performance period will vary in direct
proportion to a target number of shares set at the beginning
of the period, up to a maximum of 150% of target, based
on the change in the Company’s cumulative total shareholder
return over the performance period. e probability of the
actual shares expected to be earned is considered in the grant
date valuation; therefore, the expense will not be adjusted to
reect the actual units earned. In addition to a service
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
performance 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 historical
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 perfor-
mance 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 performance period.
e following assumptions were used in determining the
fair value for the Company’s MSU Grants:
Year Ended
August 2, 2013 August 3, 2012 July 29, 2011
Dividend yield range 3.0% 2.2% 1.6%
Expected volatility 27% 45% 43%
Risk-free interest rate 0.3% 0.3% 0.8%
e following table summarizes the shares that have
been accrued under the 2011 MSU Grants, 2012 MSU Grants
and the 2013 MSU Grants at August 2, 2013:
Shares
2011 MSU Grants 41,963
2012 MSU Grants 56,301
2013 MSU Grants 20,849
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 or 2013.
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*
Dividend yield range 1.7%
Expected volatility 40%
Risk-free interest rate range 0.3% - 4.6%
Expected term (in years) 6.6*
* 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 2, 2013, and changes during 2013 are presented in
the following table:
Weighted-
Average
Weighted- Remaining Aggregate
Average Contractual Intrinsic
Fixed Options Shares Price Term Value
Outstanding at August 3, 2012 403,957 $ 33.22
Granted — —
Exercised (273,706) 32.66
Forfeited — —
Canceled (29,113) 24.98
Outstanding at August 2, 2013 101,138 $ 37.12 2.61 $ 6,455
Exercisable 101,138 $ 37.12 2.61 $ 6,455