Stockholders' Equity

12 Months Ended

Jul. 02, 2016

Stockholders' Equity Note [Abstract]

Stockholders' Equity

Stockholders' Equity

We issue Class A shares of our common stock, and each share is entitled to one vote and is freely transferable.

In August 2015, our Board of Directors authorized a $100,000 increase in our share repurchase program, bringing the total amount authorized to $275,000 as of July 2, 2016. Under this repurchase program, we repurchased 510,841 shares totaling $34,524 in fiscal year 2016, 266,426 shares totaling $17,597 in fiscal year 2015 and 204,819 totaling $11,672 in fiscal year 2014. All of these repurchases were in open market transactions. As of July 2, 2016, we had approximately $94,043 remaining under this authorization.

Share-Based Payment Plans

On November 6, 2013, our shareholders approved the G&K Services, Inc. Restated Equity Incentive Plan (2013) ("Restated Plan"). The total number of authorized shares under the Restated Plan is 4,000,000, of which 1,600,000 of the awards granted under the Restated Plan can be stock appreciation rights, restricted stock, restricted stock units, deferred stock units or stock. As of July 2, 2016, 1,206,048 equity awards were available for grant.

The Restated Plan allows us to grant share-based awards, including restricted stock and options to purchase our common stock, to our key employees and non-employee directors. Stock options are granted for a fixed number of shares with an exercise price equal to the fair market value of the shares at the date of grant. Exercise periods for the stock options are generally limited to a maximum of 10 years and a minimum of one year and generally vest over three years. Restricted stock grants to employees generally vest over five years. We issue new shares upon the grant of restricted stock or exercise of stock options.

Compensation cost for share-based compensation plans is recognized on a straight-line basis over the requisite service period of the award. The share-based compensation reflects estimated forfeitures adjusted for actual forfeiture experience. The amount of compensation cost that has been recognized in the Consolidated Statements of Operations was $6,749, $6,219 and $6,318 for fiscal years 2016, 2015 and 2014, respectively. As share-based compensation expense is recognized, a deferred tax asset is recorded that represents an estimate of the future tax deduction from the exercise of stock options or release of restrictions on the restricted stock. At the time share-based awards are exercised, cancelled, expire or restrictions lapse, we recognize adjustments to additional paid-in capital or income tax expense. The total net income tax benefit recognized in the Consolidated Statements of Operations for share-based compensation arrangements was $2,423, $2,333 and $2,243 for fiscal years 2016, 2015 and 2014, respectively. No amount of share-based compensation expense was capitalized during the periods presented.

On August 23, 2012, our Chairman and Chief Executive Officer was granted a performance based restricted stock award (the "Performance Award"). The Performance Award has both a financial performance component and a service component. In fiscal year 2016126,000 restricted shares were issued under the Performance Award.

The fair value of each stock option grant is estimated on the date of grant using the Black-Scholes or similar option pricing model using the assumptions noted in the following table. Expected volatility is based on the historical volatility of our stock, as we believe that is the best estimate of volatility over the term of the options. We use historical data to estimate option exercises and employee terminations within the valuation model. The expected term of the options granted is derived from historical data and represents the period of time that options granted are expected to be outstanding. The risk free interest rate for each option is the interpolated market yield on a U.S. Treasury bill with a term comparable to the expected term of the granted stock option.

	For the Fiscal Years
	2016	2015	2014
Expected share price volatility	24.6% - 25.3%	27.6% - 28.7%	27.4% - 27.7%
Weighted average volatility	25.3%	28.2%	27.5%
Expected dividend yield	1.7% - 2.1%	1.8% - 2.4%	2.0%
Expected term (in years)	5	5	5 - 6
Risk free rate	1.2% - 1.5%	1.3% - 1.7%	1.6% - 2.0%

A summary of stock option activity under our plans as of July 2, 2016, and changes during the year then ended is presented below:

	Shares		Weighted Average Exercise Prices		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at June 27, 2015	632,287		$	32.31
Granted	185,442		71.17
Exercised	(89,135	)	24.23
Forfeited or expired	(11,185	)	61.53
Outstanding at July 2, 2016	717,409		$	42.90	6.75	$	24,255
Exercisable at July 2, 2016	415,503		$	27.79	5.41	$	20,324

The weighted-average fair value of stock options on the date of grant during fiscal years 2016, 2015 and 2014 was $14.19, $11.74 and $12.16, respectively. The total intrinsic value of stock options exercised was $4,016, $14,874 and $12,093 for fiscal years 2016, 2015 and 2014, respectively.

We received proceeds from the exercise of stock options of $2,160, $6,283 and $8,748 in fiscal years 2016, 2015 and 2014, respectively.

A summary of the status of our non-vested shares of restricted stock as of July 2, 2016 and changes during the fiscal year ended July 2, 2016, is presented below:

	Shares		Weighted-Average Grant-Date Fair Value
Non-vested at June 27, 2015	224,121		$	47.45
Granted	201,032		70.26
Vested	(165,822	)	56.80
Forfeited	(11,556	)	49.25
Non-vested at July 2, 2016	247,775		$	59.61

As of July 2, 2016, there was $11,125 of total unrecognized compensation expense related to non-vested share-based compensation arrangements. That expense is expected to be recognized over a weighted-average period of 2.0 years. The total fair value of restricted shares vested during the fiscal years ended 2016, 2015 and 2014 was $9,419, $3,691 and $2,757, respectively.