Stock Options, Other Stock Awards and Warrants

12 Months Ended

Dec. 29, 2019

Share-based Payment Arrangement [Abstract]

Stock Options, Other Stock Awards and Warrants

Stock Options, Other Stock Awards and Warrants

The Company has reserved 7,503 shares of its common stock for issuance upon exercise of options and other awards granted or to be granted under stock incentive plans for employees and for non-employee members of the Board of Directors (collectively, the “plans”). These awards generally vest and are expensed in equal annual amounts over three to five years. The plans provide that options be granted at exercise prices not less than the market value of the underlying common stock on the date the option is granted and options and share awards are adjusted for such changes as stock splits and stock dividends. Options are exercisable for periods of no more than seven years after date of grant. Upon exercise in the case of stock options, grant in the case of restricted stock or vesting in the case of performance based contingent stock and restricted stock unit grants, shares are issued out of available treasury shares. The Company’s current plan permits the granting of awards in the form of stock, stock appreciation rights, stock awards and cash awards in addition to stock options.

Total compensation expense related to stock options, restricted stock units, including those awards made to non-employee members of its Board of Directors, and stock performance awards for the years ended December 29, 2019, December 30, 2018 and December 31, 2017 was $28,044, $27,892 and $56,032, respectively, and was recorded as follows:

	2019		2018	2017
Product development	$	3,348	3,466	3,312
Selling, distribution and administration	24,696		24,426	52,720
	28,044		27,892	56,032
Income tax benefit	3,648		2,832	9,574
	$	24,396	25,060	46,458

The following table represents total stock compensation expense, net of performance adjustments, by award type related to stock performance awards, restricted stock units, stock options and awards made to non-employee members of the Company’s Board of Directors, for the years ended December 29, 2019, December 30, 2018 and December 31, 2017:

	2019			2018	2017
Stock performance awards	$	(1,573	)	842	27,522
Restricted stock units	18,744			17,897	20,573
Stock options	9,113			7,393	6,342
Non-employee awards	1,760			1,760	1,595
	28,044			27,892	56,032
Income tax benefit	3,648			2,832	9,574
	$	24,396		25,060	46,458

Stock Performance Awards

In 2019, 2018 and 2017, as part of its annual equity grant to executive officers and certain other employees, the Company issued contingent stock performance awards (the “Stock Performance Awards”). These awards provide the recipients with the ability to earn shares of the Company’s common stock based on the Company’s achievement of stated cumulative operating performance targets over the three fiscal years ended December 2021, December 2020, and December 2019 for the 2019, 2018 and 2017 awards, respectively. Each Stock Performance Award has a target number of shares of common stock associated with such award which may be earned by the recipient if the Company achieves the stated diluted earnings per share and revenue targets. For certain employees, the Stock Performance Awards also include an additional return on invested capital target in addition to the diluted earnings per share and revenue targets. The ultimate amount of the award may vary from 0% to 200% of the target number of shares, depending on the cumulative results achieved.

Information with respect to Stock Performance Awards for 2019, 2018 and 2017 is as follows:

	2019			2018		2017
Outstanding at beginning of year	633			900		1,074
Granted	281			250		428
Forfeited	(58		)	(49	)	(28	)
Canceled	(146		)	—		—
Vested	(239		)	(468	)	(574	)
Outstanding at end of year	471			633		900
Weighted average grant-date fair value:
Granted	$	86.90		88.18		99.58
Forfeited	$	92.90		86.27		74.86
Canceled	$	99.58		—		—
Vested	$	74.72		61.86		52.21
Outstanding at end of year	$	87.59		86.58		77.27

Shares canceled in 2019 represent Stock Performance Awards granted during 2017 that were canceled based on the failure to meet the targets set forth by the agreement. Shares granted in 2018 included 14 additional shares related to the 2016 award, reflecting increases in the ultimate amount of shares to be issued based on the Company's cumulative results achieved during the performance period. Shares granted in 2017 included 227 additional shares related to the 2015 award. These shares were excluded from the calculation of the weighted average grant-date fair value of Stock Performance awards granted in 2018 and 2017.

Stock Performance Awards are valued at the market value of the underlying common stock at the dates of grant and are expensed over the performance period. On a periodic basis, the Company reviews the actual and forecasted performance of the Company against the stated targets for each award. The total expense is adjusted upward or downward based on the expected amount of shares to be issued as defined in the respective stock performance award agreement. If minimum targets as detailed under the award are not met, no additional compensation expense will be recognized and any previously recognized compensation expense will be reversed. During 2019, it was determined that it was no longer probable that targets would be met for certain Stock Performance Awards and, as a result, a portion of the previously recognized expense related to those awards was reversed. During 2019, 2018 and 2017, the Company recognized expense, net of performance adjustments, of $(1,573), $842 and $27,522, respectively, relating to Stock Performance Awards. At December 29, 2019, the amount of total unrecognized compensation cost related to these awards is approximately $16,655 and the weighted average period over which this will be expensed is 24 months.

Restricted Stock Units

The Company, as part of its annual equity grant to executive officers and certain other employees, issues restricted stock or grants restricted stock units. These shares or units are nontransferable and subject to forfeiture for periods prescribed by the Company. These awards are valued at the market value of the underlying common stock at the date of grant and are subsequently amortized over the periods during which the restrictions lapse, generally three years. During 2019, 2018 and 2017, the Company recognized compensation expense, net of forfeitures, on these awards of $18,744, $17,897 and $20,573, respectively. At December 29, 2019, the amount of total unrecognized compensation cost related to restricted stock units is $25,148 and the weighted average period over which this will be expensed is 22 months.

In October 2012, as part of an Amended and Restated Employment Agreement, (the “Agreement”), the Company’s Chief Executive Officer was awarded 587 shares to be granted in two tranches across 2013 and 2014, which were expensed from 2013 through 2018. These awards provided the recipient with the ability to earn shares of the Company’s common stock based on the Company’s achievement of four stated stock price hurdles and continued employment through December 30, 2018. In August 2014, the Agreement was further amended to include additional requirements. Specifically, if the third and fourth stock price hurdles were achieved, the number of shares ultimately issued was dependent on the average stock price for the thirty day period immediately prior to December 30, 2018. This amendment did not result in any incremental fair value to the award which was used to record compensation expense for the award. At December 30, 2018, all requirements of the Agreement were met and 587 shares were issued.

Excluding the aforementioned award for 587 shares, information with respect to the remaining Restricted Stock Awards and Restricted Stock Units for 2019, 2018 and 2017 is as follows:

	2019			2018		2017
Outstanding at beginning of year	434			636		795
Granted	259			257		203
Forfeited	(44		)	(40	)	(41	)
Vested	(198		)	(419	)	(321	)
Outstanding at end of year	451			434		636
Weighted average grant-date fair value:
Granted	$	87.98		97.45		98.88
Forfeited	$	92.56		93.45		68.01
Vested	$	90.23		67.34		57.58
Outstanding at end of year	$	92.54		94.22		75.13

Stock Options

Information with respect to stock options for each of the three fiscal years ended December 29, 2019 is as follows:

	2019			2018		2017
Outstanding at beginning of year	2,310			2,579		2,768
Granted	740			538		458
Exercised	(546		)	(736	)	(597	)
Expired or forfeited	(60		)	(71	)	(50	)
Outstanding at end of year	2,444			2,310		2,579
Exercisable at end of year	1,284			1,391		1,661
Weighted average exercise price:
Granted	$	86.66		98.10		98.80
Exercised	$	58.18		45.64		49.31
Expired or forfeited	$	95.71		93.81		57.33
Outstanding at end of year	$	81.58		74.78		62.12
Exercisable at end of year	$	73.03		61.59		50.02

With respect to the 2,444 outstanding options and 1,284 options exercisable at December 29, 2019, the weighted average remaining contractual life of these options was 4.18 years and 2.83 years, respectively. The aggregate intrinsic value of the options outstanding and exercisable at December 29, 2019 was $59,090 and $42,008, respectively. Substantially all unvested outstanding options are expected to vest.

The Company uses the Black-Scholes valuation model in determining the fair value of stock options. The expected life of the options used in this calculation is the period of time the options are expected to be outstanding and has been determined based on historical exercise experience. The weighted average fair value of options granted in fiscal 2019, 2018 and 2017 was $15.70, $19.26 and $18.25, respectively. The fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions used for grants in the fiscal years 2019, 2018 and 2017:

	2019		2018		2017
Risk-free interest rate	2.47	%	2.57	%	1.85	%
Expected dividend yield	3.14	%	2.57	%	2.31	%
Expected volatility	27	%	27	%	24	%
Expected option life	4 years		4 years		5 years

The intrinsic values, which represent the difference between the fair market value on the date of exercise and the exercise price of the option, of the options exercised in fiscal 2019, 2018 and 2017 were $24,483, $38,909 and $31,406, respectively.

At December 29, 2019, the amount of total unrecognized compensation cost related to stock options was $11,691 and the weighted average period over which this will be expensed is 22 months.

Non-Employee Awards

In 2019, 2018 and 2017, the Company granted 18, 20 and 16 shares of common stock, respectively, to its non-employee members of its Board of Directors. Of these shares, the receipt of 10 shares from the 2019 grant, 11 shares from the 2018 grant and 10 shares from the 2017 grant has been deferred to the date upon which the respective director ceases to be a member of the Company’s Board of Directors. These awards were valued at the market value of the underlying common stock at the date of grant and vested upon grant. In connection with these grants, compensation cost of $1,760 was recorded in selling, distribution and administration expense in the year ended December 29, 2019, $1,760 in the year ended December 30, 2018 and $1,595 in the year ended December 31, 2017.