Papa Johns 2013 Annual Report Download - page 87
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18.EquityCompensation(continued)
The followingis asummaryof thesignificantassumptionsused inestimatingthefairvalue ofoptions
grantedin2013,2012and2011:
2013 2012 2011
Assumptions(weightedaverage):
Risk-freeinterestrate 1.1% 1.1% 1.5%
Expecteddividendyield 0.1% 0.0% 0.0%
Expectedvolatility 37.5% 37.8% 41.2%
Expectedterm(inyears) 6.0 6.0 3.7
The risk-free interest rate for the periods within the contractual life of an option is based on the U.S.
Treasury yield curve in effect at the time of grant. The expected dividend yield was estimated as the
annual dividend divided by the market price of the Company’s shares on the date of grant. Expected
volatilitywasestimatedbyusingtheCompany’shistoricalsharepricevolatilityforaperiodsimilartothe
expectedlifeoftheoption.
Options granted in 2013 and 2012 generally vest in equal installments over three years and expire ten
yearsaftergrant.Theexpectedtermfortheseoptionsrepresentstheperiodoftimethatoptionsgranted
areexpectedtobeoutstandingandwascalculatedusingthesimplifiedmethodprescribedbySecurities
andExchangeCommissionrulesandregulationsastherewasinsufficienthistoricaldetailtobeusedasan
alternative basisto estimatingthe term.Theexpectedtermforoptions grantedin 2011that expirefive
yearsfromthegrantdatewasbasedonananalysisofactualhistoricalexercisesandforfeitures.
Theweightedaveragegrant-datefairvaluesofoptionsgrantedduring2013,2012and2011was$9.87,
$7.04 and $4.75, respectively. The Company granted 498,000, 508,000 and 806,000 options in 2013,
2012and2011,respectively.
RestrictedStock
In2013,2012and2011,wegrantedsharesofrestrictedstockthatweretime-basedandgenerallyvestin
equalinstallmentsoverthreeyears.Theserestrictedsharesareintendedtofocusparticipantsonourlong-
range objectives, while at the same time serving as a retention mechanism. We consider time-based
restrictedstockawardstobeparticipatingsecuritiesbecauseholdersofsuchshareshavenon-forfeitable
dividend rights. In 2013, we declared dividends totaling $86,000 ($0.25 per share) to holders of time-
based restricted stock. Additionally, we granted approximately 111,000 shares of performance-based
restricted stock units to executive management. These awards cliff-vest at the end of three years, in
February2015,basedupontheCompany’sachievementofacompoundedannualgrowthrateofearnings
pershareandtheachievementofcertainsalesandunitgrowthmetrics.Thefairvalueofbothtime-and
performance-based restricted stock is based on the market price of the Company’s shares on the grant
date.