NOTE 12: STOCK-BASED COMPENSATION

On March 1, 2013 the Compensation Committee of the Board adopted the 2013 Equity Incentive Plan (the “Equity Incentive Plan”) for the purpose of granting stock awards to directors, officers and employees of the Company and its subsidiaries. Stock awarded pursuant to the Equity Incentive Plan is limited to five percent of the outstanding Common Stock on a fully diluted basis as of the Effective Date. There are 5,263,000 shares of Common Stock authorized for issuance under the Equity Incentive Plan. As of March 31, 2016, the Company had 587,649 shares of Common Stock available for grant.

The Equity Incentive Plan provides for the granting of non-qualified stock options (“NSOs”), restricted stock units (“RSUs”), performance share units (“PSUs”) and restricted and unrestricted stock awards (collectively “Equity Awards”). Pursuant to ASC Topic 718, “Compensation-Stock Compensation,” the Company measures stock-based compensation costs on the grant date based on the estimated fair value of the award and recognizes compensation costs on a straight-line basis over the requisite service period for the entire award. The Company’s Equity Incentive Plan allows employees to surrender to the Company shares of vested common stock upon vesting of their stock awards or at the time they exercise their NSOs in lieu of their payment of the required withholdings for employee taxes. The Company does not withhold taxes on Equity Awards in excess of minimum required statutory requirements.

Holders of RSUs and PSUs also receive DEUs until the RSUs or PSUs vest. See Note 11 for further information. The number of DEUs granted for each RSU or PSU is calculated based on the value of the dividends per share paid on the Company’s Common Stock and the closing price of the Company’s Common Stock on the dividend payment date. The DEUs vest with the underlying RSU or PSU.

NSO and RSU awards generally vest 25% on each anniversary of the date of the grant. Under the Equity Incentive Plan, the exercise price of an NSO award cannot be less than the market price of the Common Stock at the time the NSO award is granted and has a maximum contractual term of 10 years. PSU awards cliff vest at the end of the three-year performance periods, depending on the period specified in each respective PSU agreement. The number of PSUs that ultimately vest depends on the Company’s performance relative to specified financial targets for fiscal years 2016, 2017 and 2018. Unrestricted stock awards have been issued to certain members of the Board as compensation for retainer fees and long-term awards. The Company intends to facilitate settlement of all vested awards in Common Stock, with the exception of certain RSUs granted to non-US based employees which the Company expects to settle in cash.

The Company estimates the fair value of NSO awards using the Black-Scholes option-pricing model, which incorporates various assumptions including the expected term of the awards, volatility of the stock price, risk-free rates of return and dividend yield. The Company determines the fair value of PSU, RSU and unrestricted and restricted stock awards by reference to the quoted market price of the Class A Common Stock on the date of the grant.

Stock-based compensation expense for the three months ended March 31, 2016 and March 29, 2015 totaled $8 million in each period.

A summary of activity and weighted average exercise prices related to the NSOs is reflected in the table below.



	Three Months Ended March 31, 2016
	Shares		Weighted Avg. Exercise Price
Outstanding, beginning of period	1,374,456		$	60.62
Granted	1,241,354		29.22
Forfeited	(44,240	)	43.26
Cancelled	(9,112	)	58.44
Outstanding, end of period	2,562,458		$	45.71
Vested and exercisable, end of period	605,559		$	61.11

A summary of activity and weighted average fair values related to the RSUs is reflected in the table below.



	Three Months Ended March 31, 2016
	Shares		Weighted Avg. Fair Value
Outstanding, beginning of period	839,789		$	58.39
Granted	764,973		29.31
Dividend equivalent units granted	9,044		35.95
Vested	(277,580	)	58.38
Dividend equivalent units vested	(4,993	)	41.64
Forfeited	(21,264	)	47.29
Dividend equivalent units forfeited	(332	)	39.72
Outstanding and nonvested, end of period (1)	1,309,637		$	41.51

(1) Includes 19,954 RSUs which were granted to foreign employees and which the Company expects to settle in cash. The fair value of these RSUs at March 31, 2016 was not material. These RSUs generally vest over a four year period.

A summary of activity and weighted average fair values related to the unrestricted stock awards is as follows:



	Three Months Ended March 31, 2016
	Shares		Weighted Avg. Fair Value
Outstanding, beginning of period	—		$	—
Granted	16,898		33.73
Vested	(16,898	)	33.73
Outstanding and nonvested, end of period	—		$	—

A summary of activity and weighted average fair values related to the PSUs is reflected in the table below.



	Three Months Ended March 31, 2016
	Shares		Weighted Avg. Fair Value
Outstanding, beginning of period	106,964		$	65.50
Granted (1)	34,728		30.96
Dividend equivalent units granted	734		36.19
Vested	(55,720	)	65.06
Dividend equivalent units vested	(1,009	)	41.64
Forfeited	(948	)	65.06
Outstanding and nonvested, end of period	84,749		$	42.79

(1) Represents shares of PSUs for which performance targets have been established and which are deemed granted under U.S. GAAP.

As of March 31, 2016, the Company had not yet recognized compensation cost on nonvested awards as follows (dollars in thousands):



	Unrecognized Compensation Cost		Weighted Average Remaining Recognition Period
Nonvested awards	$	81,291	3.1