Dunkin' Donuts 2015 Annual Report Download - page 93

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2011 Plan options vest in equal annual amounts over either a 4- or 5-year period subsequent to the grant date, and as such are
subject to a service condition, and also fully vest upon a change of control. The requisite service period over which
compensation cost is being recognized is either 4 or 5 years. The maximum contractual term of the nonexecutive and 2011 Plan
options is 7 or 10 years.
The fair value of nonexecutive and 2011 Plan options were estimated on the date of grant using the Black-Scholes option
pricing model. This model is impacted by the Company’s stock price and certain assumptions related to the Company’s stock
and employees’ exercise behavior. The following weighted average assumptions were utilized in determining the fair value of
the 2011 Plan options granted during fiscal years 2015, 2014, and 2013:
Fiscal year ended
December 26,
2015
December 27,
2014
December 28,
2013
Weighted average grant-date fair value of share options granted $ 8.66 $ 10.65 $ 9.92
Weighted average assumptions:
Risk-free interest rate 1.5% 1.5% 1.2%
Expected volatility 25.0% 26.3% 33.0%
Dividend yield 2.2% 1.8% 2.0%
Expected term (years) 4.91 4.96 6.25
The expected term was primarily estimated utilizing the simplified method. We utilized the simplified method because the
Company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term.
The risk-free interest rate assumption was based on yields of U.S. Treasury securities in effect at the date of grant with terms
similar to the expected term. Expected volatility was estimated based on historical volatility of peer companies over a period
equivalent to the expected term, as well as considering the Company’s historical volatility since its initial public offering.
Additionally, the dividend yield was estimated based on dividends currently being paid on the underlying common stock at the
date of grant. Estimated and actual forfeitures have not had a material impact on share-based compensation expense.
A summary of the status of the Company’s nonexecutive and 2011 Plan options as of December 26, 2015 and changes during
fiscal year 2015 is presented below:
Number of
shares
Weighted
average
exercise
price
Weighted
average
remaining
contractual
term (years)
Aggregate
intrinsic
value
(in millions)
Share options outstanding at December 27, 2014 3,016,769 $ 40.91 6.9
Granted 1,621,899 47.39
Exercised (286,975) 29.05
Forfeited or expired (101,935) 41.37
Share options outstanding at December 26, 2015 4,249,758 44.18 6.0 $ 12.6
Share options exercisable at December 26, 2015 1,062,581 36.39 6.0 9.1
The total grant-date fair value of nonexecutive and 2011 Plan stock options vested during fiscal years 2015, 2014, and 2013
was $7.4 million, $4.6 million, and $2.9 million, respectively. The total intrinsic value of nonexecutive and 2011 Plan stock
options exercised was $6.7 million, $3.7 million, and $4.1 million for fiscal years 2015, 2014, and 2013, respectively. As of
December 26, 2015, there was $21.4 million of total unrecognized compensation cost related to nonexecutive and 2011 Plan
options. Unrecognized compensation cost is expected to be recognized over a weighted average period of approximately
2.5 years.
Restricted stock units
The Company typically grants restricted stock units to certain employees and non-employee members of our board of directors.
Restricted stock units granted to employees generally vest in three equal installments on each of the first three annual
anniversaries of the grant date. Restricted stock units granted to our non-employee members of our board of directors generally
vest in one installment on the first anniversary of the grant date.