Cracker Barrel 2014 Annual Report Download - page 49

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Performance-Based Market Stock Units
e number of MSU Grants that will ultimately be awarded
and will vest at the end of the applicable three-year
performance period for each annual plan is based on total
shareholder return, which is dened as the change in the
Company’s stock price plus dividends paid during the
performance period. e number of shares awarded at 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 follow-
ing 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
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 performance period.
e following assumptions were used in determining the
fair value for the Company’s MSU Grants:
Year Ended
August 1, 2014 August 2, 2013 August 3, 2012
Dividend yield*** — 3.0% 2.2%
Expected volatility 25% 27% 45%
Risk-free interest rate range 0.7% - 0.8% 0.3% 0.3%
*** Dividends accrue on the 2014 MSU Grants. Dividends will be forfeited
for any 2014 MSU Grants that do not vest.
e following table summarizes the shares that have been
accrued under the 2012 MSU Grants, the 2013 MSU Grants
and 2014 MSU Grants at August 1, 2014:
Shares
2012 MSU Grants 69,438
2013 MSU Grants 35,921
2014 MSU Grants 8,897
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,
2013 or 2014.
A summary of the Company’s stock option activity as
of August 1, 2014, and changes during 2014 are presented in
the following table:
Weighted-
Average
Weighted- Remaining Aggregate
Average Contractual Intrinsic
Fixed Options Shares Price Term Value
Outstanding at August 2, 2013 101,138 $ 37.12
Granted — —
Exercised (2,423) 36.70
Forfeited — —
Canceled (11,583) 40.01
Outstanding at August 1, 2014 87,132 $ 36.75 1.95 $ 5,220
Exercisable 87,132 $ 36.75 1.95 $ 5,220