Stock-Based Employee Compensation

12 Months Ended

Dec. 30, 2014

Stock-Based Employee Compensation [Abstract]

Stock-Based Employee Compensation

(15) Stock-Based Employee Compensation

2012 Long-Term Equity Incentive Plan

In connection with the IPO, the Company adopted the Del Frisco’s Restaurant Group, Inc. 2012 Long-Term Equity Incentive Plan (the “2012 Plan”), which allows the Company’s Board of Directors 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 date of grant. The 2012 Plan has 2,232,800 shares authorized for issuance under the plan. There are 1,429,000 shares of common stock issuable upon exercise of currently outstanding options at December 30, 2014, and 689,925 shares available for future grants.

The following table details the Company’s total stock option compensation costs during the years ended December 31, 2013 and December 30, 2014 as well as where the costs were expensed (in thousands):

	Fiscal Year Ended
	December 25,		December 31,		December 30,
	2012		2013		2014
Restaurant operating expenses	$	74	$	332	$	442
General and administrative costs		304		1,357		2,125
Total stock compensation cost	$	378	$	1,689	$	2,567

The following table summarizes stock option activity during 2014:

	December 30, 2014
	Shares	Weighted average exercise price		Weighted average Remaining Contractual Term	Aggregate Intrinsic Value ($000's)
Outstanding at beginning of year	1,492,775	$	17.01
Granted	82,375		22.65
Exercised	(85,400)		13.93
Forfeited	(60,750)		18.76
Outstanding at end of period	1,429,000	$	17.45	8.17 years	$	8,640
Options exercisable at end of period	454,750	$	16.12	7.97 years	$	3,335

The intrinsic value of options exercised during fiscal 2014 was $759. A summary of the status of non-vested shares as of December 30, 2014 and changes during fiscal 2014 is presented below:

	December 30, 2014
	Shares		Weighted average Grant-Date Fair Value
Non-vested shares at beginning of year	1,326,375	$	6.84
Granted	82,375		8.85
Vested	(375,000)		6.61
Forfeited	(59,500)		7.41
Non-vested shares at end of period	974,250	$	7.08

As of December 30, 2014, there was $5,603 of total unrecognized compensation cost related to non-vested stock options. This cost is expected to be recognized over a period of approximately 2.2 years. The total fair value of shares vested during fiscal 2014 was $2,477.

The following table details the values from and assumptions for the Black-Scholes option pricing model for stock options issued during the fiscal years ended December 25, 2012, December 31, 2013 and December 30, 2014.

	2012	2013	2014
Weighted average grant date fair value	$4.82	$8.30	$8.85
Weighted average risk-free interest rate	0.58%	1.44%	1.91%
Weighted average expected life	5.40 years	5.49 years	5.91 years
Weighted average volatility	40.21%	41.65%	38.00%
Expected dividend	—	—	—

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 Company’s 2012 Equity Incentive 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.