STOCK-BASED EMPLOYEE COMPENSATION

6 Months Ended

Jun. 11, 2013

Disclosure Of Compensation Related Costs Sharebased Payments [Abstract]

STOCK-BASED EMPLOYEE COMPENSATION

4. STOCK-BASED EMPLOYEE COMPENSATION

2012 Long-Term Equity Incentive Plan

On July 16, 2012, the Company adopted the Del Frisco’s Restaurant Group, Inc. 2012 Long-Term Equity Incentive Plan (the “2012 Plan”), which allows the Company to grant stock options, restricted stock, restricted stock units, deferred stock units and other equity-based awards to directors, officers, key employees and other key individuals performing services for the Company. The 2012 Plan provides for granting of options to purchase shares of common stock at an exercise price not less than the fair value of the stock on the date of grant. Options are exercisable at various periods ranging from one to four years from the date of grant. The 2012 Plan has 2,232,800 shares authorized for issuance under the plan. There were 856,500 shares of common stock issuable upon exercise of outstanding options at June 11, 2013, and 1,376,300 shares available for future grants.

The Company recorded $238,000 and $466,000 in total stock option compensation cost during the 12 and 24 weeks ended June 11, 2013, respectively, which was expensed primarily in general and administrative costs.

The following table summarizes stock option activity during the period ended June 11, 2013:

	24 Weeks Ended June 11, 2013
	Shares			Weighted average  exercise price		Weighted  average Remaining Contractual Term		Aggregate Intrinsic  Value ($000’s)
Outstanding at beginning of year		825,000			13.09
Granted		72,000			16.58
Exercised		—			—
Forfeited		(40,500	)		13.44
Outstanding at end of period		856,500		$	13.37		9.2 years	$	5,481
Options exercisable at end of period		—		$	—		—	$	—

A summary of the status of non-vested shares as of June 11, 2013 and changes during the first and second quarters of fiscal 2013 is presented below:

	24 Weeks Ended
	June 11, 2013
	Shares			Weighted average  Grant- Date Fair Value
Non-vested shares at beginning of year		825,000		$	4.93
Granted		72,000			6.99
Vested		—			—
Forfeited		(40,500	)		5.09
Non-vested shares at end of period		856,500		$	5.10

As of June 11, 2013, there was $3.5 million of total unrecognized compensation cost related to non-vested stock options. This cost is expected to be recognized over a period of approximately 3.2 years.

The weighted average grant-date per share fair value of options granted during the year was $6.99. The fair value of each option award was estimated on the date of grant using the Black-Scholes option valuation model with the following weighted assumptions: risk-free interest rate of 0.99%, no expected dividend yield, volatility of 42.31%, and an expected option life of 6.25 years. The Black-Scholes option valuation model requires the input of highly subjective assumptions, including the expected life of the stock-based award. The assumptions above represent management’s best estimates, but these estimates involve inherent uncertainties and the application of management’s judgment. The expected term of options granted is based on a representative peer group with similar employee groups and expected behavior. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury constant maturities rate in effect at the time of grant. The Company utilized a weighted rate for expected volatility based on a representative peer group with a similar expected term of options granted. Outstanding options granted under the 2012 Plan are subject to a four year vesting period and have a ten year maximum contractual term.

In addition, the Company is required to estimate the expected forfeiture rate and only recognizes expense for those shares expected to vest. If the actual forfeiture rate is materially different from the Company’s estimate, the share-based compensation expense could be materially different.