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Stock Options, Other Stock Awards and Warrants
 12 Months Ended
Dec. 26, 2021
Share-based Payment Arrangement [Abstract]  
Stock Options, Other Stock Awards and Warrants Stock Options, Other Stock Awards and Warrants
The Company has reserved 11.3 million 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 26, 2021, December 27, 2020 and December 29, 2019 was $97.8 million, $49.7 million and $28.0 million, respectively, and was recorded as follows:
(In millions)202120202019
Product development$3.7 3.3 3.3 
Selling, distribution and administration (a)(b)
94.1 46.4 24.7 
97.8 49.7 28.0 
Income tax benefit10.2 5.3 3.6 
$87.6 44.4 24.4 
(a)The 2021 increase in compensation expense reflects $20.9 million of additional expense associated with the contractual accelerated vesting of certain equity awards as a result of the passing of the Company's former CEO.
(b)The 2020 increase in compensation expense was due to additional stock options, restricted stock units, and stock performance awards granted to eligible participants as a result of the eOne acquisition.
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 26, 2021, December 27, 2020 and December 29, 2019:
(In millions)202120202019
Stock performance awards$26.9 8.4 (1.6)
Restricted stock units50.9 28.5 18.7 
Stock options18.4 11.0 9.1 
Non-employee awards1.6 1.8 1.8 
97.8 49.7 28.0 
Income tax benefit10.2 5.3 3.6 
$87.6 44.4 24.4 
Stock Performance Awards
In 2021, 2020 and 2019, 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 2023, December 2022, and December 2021 for the 2021, 2020 and 2019 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 participating in the 2019 and 2020 awards, the Stock Performance Awards also include an additional target for the Company's return on invested capital, in addition to the diluted earnings per share and revenue targets. Beginning with the 2021 awards, all employee awards will be measured on achieving diluted earnings per share, revenue and return on invested capital 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 2021, 2020 and 2019 is as follows:
(In millions, except per share data)202120202019
Outstanding at beginning of year0.6 0.5 0.6 
Granted0.2 0.4 0.3 
Forfeited— (0.1)(0.1)
Canceled(0.1)(0.2)(0.1)
Vested— — (0.2)
Outstanding at end of year0.7 0.6 0.5 
Weighted average grant-date fair value:
Granted$96.06 56.49 86.90 
Forfeited$— 80.31 92.90 
Canceled$77.33 88.25 99.58 
Vested$— 99.58 74.72 
Outstanding at end of year$75.74 69.25 87.59 
Shares granted in 2021 included additional shares related to the 2019 award, reflecting adjustments to the ultimate amount of shares to be issued based on the Company's cumulative results achieved during the performance period. These shares were excluded from the calculation of the weighted average grant-date fair value of Stock Performance awards granted in 2021. Shares canceled in 2020 and 2019 represent Stock Performance Awards granted during 2018 and 2017, respectively, that were canceled based on the failure to meet the targets set forth by the agreement.
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 number 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 2021, 2020 and 2019, the Company recognized expense, net of performance adjustments, of $26.9 million, $8.4 million and $(1.6) million, respectively, relating to Stock Performance Awards. The expense recognized in 2021 included $7.6 million of additional stock expense associated with the contractual acceleration of outstanding performance share awards upon the passing of the Company's former CEO. At December 26, 2021, the amount of total unrecognized compensation cost related to these awards is approximately $14.3 million and the weighted average period over which this will be expensed is 20 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 2021, 2020 and 2019, the Company recognized compensation expense, net of forfeitures, on these awards of $50.9 million, $28.5 million and $18.7 million, respectively. The expense recognized in 2021 included $6.0 million of additional stock expense associated with the contractual acceleration of outstanding restricted stock awards upon the passing of the Company's former CEO. At December 26, 2021, the amount of total unrecognized compensation cost related to restricted stock units is $71.6 million and the weighted average period over which this will be expensed is 20 months.
Information with respect to the remaining Restricted Stock Awards and Restricted Stock Units for 2021, 2020 and 2019 is as follows:
(In millions, except per share data)202120202019
Outstanding at beginning of year1.0 0.5 0.4 
Granted0.7 0.8 0.3 
Forfeited(0.1)(0.1)— 
Vested(0.5)(0.2)(0.2)
Outstanding at end of year1.1 1.0 0.5 
Weighted average grant-date fair value:
Granted$91.06 91.80 87.98 
Forfeited$85.88 94.01 92.56 
Vested$91.42 94.21 90.23 
Outstanding at end of year$91.78 91.56 92.54 
Stock Options
Information with respect to stock options for each of the three fiscal years ended December 26, 2021 is as follows:
(In millions, except per share data)202120202019
Outstanding at beginning of year2.8 2.4 2.3 
Granted0.6 0.8 0.7 
Exercised(0.5)(0.3)(0.5)
Expired or forfeited— (0.1)(0.1)
Outstanding at end of year2.9 2.8 2.4 
Exercisable at end of year2.1 1.5 1.3 
Weighted average exercise price:
Granted$90.31 96.79 86.66 
Exercised$65.12 55.82 58.18 
Expired or forfeited$95.59 94.32 95.71 
Outstanding at end of year$92.15 88.16 81.58 
Exercisable at end of year$92.05 82.80 73.03 
With respect to the 2.9 million outstanding options and 2.1 million options exercisable at December 26, 2021, the weighted average remaining contractual life of these options was 4.29 years and 3.83 years, respectively. The aggregate intrinsic value of the options outstanding and exercisable at December 26, 2021 was $17.4 million and $12.9 million, 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 2021, 2020 and 2019 was $21.30, $18.58 and $15.70, 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 2021, 2020 and 2019:
202120202019
Risk-free interest rate0.50 %1.38 %2.47 %
Expected dividend yield3.01 %2.81 %3.14 %
Expected volatility38 %30 %27 %
Expected option life4 years4 years4 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, for the options exercised in fiscal 2021, 2020 and 2019 were $16.0 million, $9.7 million and $24.5 million, respectively.
At December 26, 2021, the amount of total unrecognized compensation cost related to stock options was $9.4 million and the weighted average period over which this will be expensed is 21 months.
Non-Employee Awards
In 2021, 2020 and 2019, the Company granted 17,000, 30,000 and 20,000 shares of common stock, respectively, to its non-employee members of its Board of Directors. Of these shares, the receipt of 10,000 shares from the 2021 grant, 20,000 shares from the 2020 grant and 10,000 shares from the 2019 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 $1.6 million was recorded in selling, distribution and administration expense in the year ended December 26, 2021, and $1.8 million in the years ended December 27, 2020 and December 29, 2019.