Jack In The Box 2013 Annual Report Download - page 71



We maintain an employee stock purchase plan (“ESPP”) for all eligible employees to purchase shares of common stock at 95% of the fair market value on the
date of purchase. Employees may authorize us to withhold up to 15% of their base compensation during any offering period, subject to certain limitations. A
maximum of 200,000 shares of common stock may be issued under the plan. As of September 29, 2013, 111,701 shares of common stock were available for
future issuance under this plan.
Compensation expense — The components of share-based compensation expense recognized in each year are as follows ( in thousands):



Stock options
$5,075
$3,549
$5,118
Performance share awards
2,311
897
443
Nonvested stock awards
430
408
602
Nonvested stock units
3,356
1,874
1,727
Deferred compensation for directors
220
155
172
Total share-based compensation expense
$11,392
$6,883
$8,062
Associated tax benefits
$2,094
$1,115
$1,290
Stock options — Prior to fiscal 2007, options granted had contractual terms of 10 or 11 years and employee options generally vested over a 4-year period.
Beginning fiscal 2007, option grants have contractual terms of 7 years and employee options vest over a 3-year period. Options may vest sooner for employees
meeting certain age and years of service thresholds. Prior to 2009, we granted options to non-management directors that vested 6 months from the date of grant.
All option grants provide for an option exercise price equal to the closing market value of the common stock on the date of grant.
The following is a summary of stock option activity for fiscal 2013:














Options outstanding at September 30, 2012
4,648,587
$22.95
Granted
376,793
$27.49
Exercised
(2,584,413)
$23.99
Forfeited
(28,701)
$22.20
Expired
(7,410)
$12.50
Options outstanding at September 29, 2013
2,404,856
$22.59
3.67
$42,111
Options exercisable at September 29, 2013
1,588,209
$22.45
2.76
$28,027
Options exercisable and expected to vest at September 29, 2013
2,394,255
$22.58
3.66
$41,953
The aggregate intrinsic value in the table above is the amount by which the current market price of our stock on September 29, 2013 exceeds the exercise price.
We use a valuation model to determine the fair value of options granted which requires the input of highly subjective assumptions, including the expected
volatility of the stock price. The following table presents the weighted-average assumptions used for stock option grants in each year, along with the related
weighted-average grant date fair value:



Risk-free interest rate
1.09%
1.98%
1.19%
Expected dividends yield
—%
—%
—%
Expected stock price volatility
42.24%
39.84%
43.17%
Expected life of options (in years)
6.50
6.64
6.05
Weighted-average grant date fair value
$11.84
$7.37
$8.25
The risk-free interest rate was determined by a yield curve of risk-free rates based on published U.S. Treasury spot rates in effect at the time of grant and has
a term equal to the expected life of the related options. The dividend yield assumption is based on the Company’s history and expectations of dividend
payouts. The expected stock price volatility in all years represents an average of the implied volatility and the Company’s historical volatility. The expected life
of the options represents the period of time the options are expected to be outstanding and is based on historical trends.
F-29