Stock-Based Compensation

9 Months Ended

May 29, 2021

Note 4. Stock-Based Compensation

The Company accounts for all share-based payments in accordance with Accounting Standards Codification Topic 718, “Compensation—Stock Compensation,” as subsequently amended. Stock-based compensation expense included in Operating expenses for the thirteen- and thirty-nine-week periods ended May 29, 2021 and May 30, 2020 was as follows:


	Thirteen Weeks Ended				Thirty-Nine Weeks Ended
	May 29,		May 30,		May 29,		May 30,
	2021		2020		2021		2020
Stock options	$	539	$	1,089	$	1,760	$	2,818
Restricted share awards		—		1		—		185
Restricted stock units		3,486		2,970		10,604		8,885
Performance share units		325		171		883		385
Associate Stock Purchase Plan		63		54		160		190
Total		4,413		4,285		13,407		12,463
Deferred income tax benefit		(1,094)		(1,068)		(3,298)		(3,116)
Stock-based compensation expense, net	$	3,319	$	3,217	$	10,109	$	9,347

Stock Options

The Company discontinued its grants of stock options in fiscal year 2020. The fair value of each option grant in previous fiscal years was estimated on the date of grant using the Black-Scholes option pricing model.

A summary of the Company’s stock option activity for the thirty-nine-week period ended May 29, 2021 is as follows:


	Options	Weighted-Average Exercise Price per Share		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding on August 29, 2020	1,539	$	75.76
Granted	—		—
Exercised	(392)		73.88
Canceled/Forfeited	(8)		79.63
Outstanding on May 29, 2021	1,139	$	76.38	2.9	$	20,525
Exercisable on May 29, 2021	900	$	74.89	2.5	$	17,549

The unrecognized share-based compensation cost related to stock option expense at May 29, 2021 was $1,906 and will be recognized over a weighted-average period of 1.0 year. The total intrinsic value of options exercised, which represents the difference between the exercise price and the market value of the Company’s Class A Common Stock measured at each individual exercise date, during the thirty-nine-week periods ended May 29, 2021 and May 30, 2020 was $5,719 and $2,574, respectively.

Performance Share Units

Beginning in fiscal year 2020, the Company began granting performance share units (“PSUs”) as part of its long-term stock-based compensation program. PSUs cliff vest after a three year performance period based on the achievement of specific performance goals as set forth in the applicable award agreement. Based on the extent to which the targets are achieved, vested shares may range from 0% to 200% of the target award amount.

The following table summarizes all transactions related to PSUs under the MSC Industrial Direct Co., Inc. 2015 Omnibus Incentive Plan (the “2015 Omnibus Incentive Plan”) (based on target award amounts) for the thirty-nine-week period ended May 29, 2021:


	Shares	Weighted-Average Grant Date Fair Value
Non-vested PSUs at August 29, 2020	28	$	76.32
Granted	31		74.79
Vested	—		—
Canceled/Forfeited	(1)		75.55
Non-vested PSUs at May 29, 2021 ⁽¹⁾	58	$	75.52

⁽¹⁾Excludes 7 shares of accrued incremental dividend equivalent rights on outstanding PSUs granted under the 2015 Omnibus Incentive Plan.

The fair value of each PSU is the closing stock price on the New York Stock Exchange (the “NYSE”) of the Company’s Class A Common Stock on the date of grant. Upon vesting, subject to the achievement of specific performance goals, a portion of the PSU award may be withheld to satisfy the statutory income tax withholding obligation. The remaining PSUs will be settled in shares of the Company’s Class A Common Stock when vested, if at all. These awards accrue dividend equivalents on the underlying PSUs (in the form of additional stock units) based on dividends declared on the Company’s Class A Common Stock and these dividend equivalents are paid to the award recipient in the form of unrestricted Class A Common Stock on the vesting dates of the underlying PSUs, subject to the same performance vesting requirements. The unrecognized share-based compensation cost related to the PSUs at May 29, 2021 was $2,839 and is expected to be recognized over a weighted-average period of 2.0 years.

Restricted Stock Units

A summary of the Company’s non-vested restricted stock unit (“RSU”) award activity under the 2015 Omnibus Incentive Plan for the thirty-nine-week period ended May 29, 2021 is as follows:


	Shares	Weighted-Average Grant Date Fair Value
Non-vested RSUs at August 29, 2020	482	$	76.73
Granted	235		75.16
Vested	(162)		74.68
Canceled/Forfeited	(21)		76.76
Non-vested RSUs at May 29, 2021 ⁽¹⁾	534	$	76.66

⁽¹⁾Excludes approximately 80 shares of accrued incremental dividend equivalent rights on outstanding RSUs granted under the 2015 Omnibus Incentive Plan.

The fair value of each RSU is the closing stock price on the NYSE of the Company’s Class A Common Stock on the date of grant. Upon vesting, a portion of the RSU award may be withheld to satisfy the statutory income tax withholding obligation. The remaining RSUs will be settled in shares of the Company’s Class A Common Stock when vested, if at all. These awards accrue dividend equivalents on the underlying RSUs (in the form of additional stock units) based on dividends declared on the Company’s Class A Common Stock and these dividend equivalents are paid to the award recipient in the form of unrestricted Class A Common Stock on the vesting dates of the underlying RSUs. The unrecognized share-based compensation cost related to the RSUs at May 29, 2021 was $32,064 and is expected to be recognized over a weighted-average period of 2.8 years.