Popeye's 2014 Annual Report Download - page 77

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Popeyes Louisiana Kitchen, Inc.
Notes to Consolidated Financial Statements
For Fiscal Years 2014, 2013, and 2012 — (Continued)
59
2014 2013 2012
Risk-free interest rate 1.8% 0.7% 1.0%
Expected dividend yield —% —% —%
Expected term (in years) 4.5 4.5 4.5
Expected volatility 50.6% 53.0% 55.3%
The risk-free interest rate is based on the United States treasury yields in effect at the time of grant. The expected term of options
represents the period of time that options granted are expected to be outstanding based on the vesting period, the term of the option
agreement and historical exercise patterns. The estimated volatility is based on the historical volatility of the Company’s stock
price and other factors.
The following table summarizes the non-vested stock option activity for the 52 week period ended December 28, 2014:
(shares in thousands) Shares
Weighted
Average
Grant Date Fair
Value
Unvested stock options outstanding at beginning of period 173 $ 10.68
Granted 81 17.93
Vested (97) 9.26
Canceled (17) 14.60
Unvested stock options outstanding at end of period 140 $ 15.37
Performance Stock Awards
The Company's current long-term incentive plan grants restricted stock awards pursuant to the 2006 Incentive Stock Plan which
are earned subject to the Company meeting three-year cumulative EBITDA goals. EBITDA is defined as earnings before interest,
taxes, depreciation and amortization. A three-year cumulative EBITDA goal is approved by the board of directors at the start of
the three-year performance periods. Shares are earned based on a sliding scale of performance above and below the performance
goal. The sliding scale is anchored by a minimum performance requirement of 95% of three-year cumulative EBITDA. If 95%
of the performance goal is not achieved, then no performance shares are earned. If 95% is achieved, then 50% of the targeted
shares are earned. If 100% of the performance goal is achieved, then award is paid at target. The maximum performance requirement
is 110% of cumulative EBITDA. If maximum performance is achieved, then 200% of the targeted shares are earned. Shares
earned by three-year cumulative EBITDA performance will be adjusted based on our three-year total shareholder return ("TSR")
against a broader group of restaurant companies. Shares earned will be adjusted -10% if TSR performance is in the bottom quartile,
and will be adjusted +10% if TSR performance is in the upper quartile. TSR represents stock price appreciation and dividends
over the three-year performance period. Earned performance shares cliff vest three years from the date of issuance.
The following table summarizes the restricted share awards activity for the 52 week period ended December 28, 2014:
(share awards in thousands) Shares
Weighted
Average
Grant
Date Fair
Value
Unvested performance stock awards:
Outstanding beginning of year 161 $ 24.14
Granted 65 $ 42.92
Vested (8) $ 21.43
Canceled (25) $ 20.38
Outstanding end of year 193 $ 29.88
The grant date fair values of the performance stock awards are determined using a Monte-Carlo simulation model. The weighted
average grant date fair value of restricted share awards granted during 2013 and 2012 were $36.35 and $17.34, respectively.