Jack In The Box 2014 Annual Report Download - page 74

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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 28, 2014, 107,646 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):
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Stock options
$ 2,660
$ 5,075
$ 3,549
Performance share awards
3,923
2,311
897
Nonvested stock awards
310
430
408
Nonvested stock units
3,247
3,356
1,874
Deferred compensation for directors
218
220
155
Total share-based compensation expense
$ 10,358
$ 11,392
$ 6,883
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 2014:
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
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

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
Options outstanding at September 29, 2013
2,404,856
$22.59
Granted
215,248
$47.29
Exercised
(1,397,603)
$22.70
Forfeited
(30,059)
$30.88
Expired
(2,872)
$12.82
Options outstanding at September 28, 2014
1,189,570
$26.74
4.26
$ 46,379
Options exercisable at September 28, 2014
775,174
$21.95
3.62
$ 33,935
Options exercisable and expected to vest at September 28, 2014
1,189,570
$26.74
4.26
$ 46,379
The aggregate intrinsic value in the table above is the amount by which the current market price of our stock on September 28, 2014 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:
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Risk-free interest rate
2.05%
1.09%
1.98%
Expected dividends yield
—%
—%
—%
Expected stock price volatility
39.18%
42.24%
39.84%
Expected life of options (in years)
6.50
6.50
6.64
Weighted-average grant date fair value
$ 20.04
$ 11.84
$ 7.37
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 at the grant date. We declared our first dividend on May 9, 2014. 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.
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