Stock Options, Other Stock Awards and Warrants

12 Months Ended

Dec. 30, 2018

Stock Options, Other Stock Awards and Warrants [Abstract]

Stock Options, Other Stock Awards and Warrants

(14) Stock Options, Other Stock Awards and Warrants

The Company has reserved 8,495 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 30, 2018, December 31, 2017 and December 25, 2016 was $27,892, $56,032 and $61,624, respectively, and was recorded as follows:

	2018		2017		2016

Cost of sales	$	—		—		200
Product development		3,466		3,312		3,248
Selling, distribution and administration		24,426		52,720		58,176
		27,892		56,032		61,624
Income tax benefit		2,832		9,574		20,298
	$	25,060		46,458		41,326

The following table represents total stock compensation expense 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 30, 2018, December 31, 2017 and December 25, 2016:

	2018		2017		2016

Stock performance awards	$	842		27,522		34,248
Restricted stock units		17,897		20,573		19,908
Stock options		7,393		6,342		5,838
Non-employee awards		1,760		1,595		1,630
		27,892		56,032		61,624
Income tax benefit		2,832		9,574		20,298
	$	25,060		46,458		41,326

Stock Performance Awards

In 2018, 2017 and 2016, 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 2020, December 2019, and December 2018 for the 2018, 2017 and 2016 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 2018, 2017 and 2016 is as follows:

		2018		2017		2016

Outstanding at beginning of year			900		1,074		992
	Granted		250		428		529
	Forfeited		(49)		(28)		(23)
	Vested		(468)		(574)		(424)
Outstanding at end of year			633		900		1,074

Weighted average grant-date fair value:
	Granted	$	88.18		99.58		74.69
	Forfeited	$	86.27		74.86		61.86
	Vested	$	61.86		52.21		47.21
Outstanding at end of year		$	86.58		77.27		62.19

Shares granted in 2018 include 14 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. These shares are excluded from the calculation of the weighted average grant-date fair value of Stock Performance awards granted in 2018. Similarly, shares granted in 2017 included 227 additional shares related to the 2015 award, and shares granted in 2016 included 276 additional shares related to the 2014 award. These shares were excluded from the calculation of the weighted average grant-date fair value of Stock Performance awards granted in 2017 and 2016.

During 2018, 2017 and 2016, the Company recognized $842, $27,522 and $34,248, respectively, of expense relating to Stock Performance Awards. 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 2018, 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. At December 30, 2018, the amount of total unrecognized compensation cost related to these awards is approximately $15,516 and the weighted average period over which this will be expensed is 23 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 2018, 2017 and 2016, the Company recognized compensation expense, net of forfeitures, on these awards of $17,897, $20,573 and $19,908, respectively. At December 30, 2018, the amount of total unrecognized compensation cost related to restricted stock units is $25,152 and the weighted average period over which this will be expensed is 23 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 2017. 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 31, 2017. 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 31, 2017. 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 31, 2017, 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 2018, 2017 and 2016 is as follows:

		2018		2017		2016

Outstanding at beginning of year			636		795		955
	Granted		257		203		245
	Forfeited		(40)		(41)		(41)
	Vested		(419)		(321)		(364)
Outstanding at end of year			434		636		795

Weighted average grant-date fair value:
	Granted	$	97.45		98.88		75.23
	Forfeited	$	93.45		68.01		59.37
	Vested	$	67.34		57.58		43.89
Outstanding at end of year		$	94.22		75.13		61.65

Stock Options

Information with respect to stock options for each of the three fiscal years ended December 30, 2018 is as follows:

		2018		2017		2016

Outstanding at beginning of year			2,579		2,768		3,445
	Granted		538		458		492
	Exercised		(736)		(597)		(1,143)
	Expired or forfeited		(71)		(50)		(26)
Outstanding at end of year			2,310		2,579		2,768

Exercisable at end of year			1,391		1,661		1,708

Weighted average exercise price:
	Granted	$	98.10		98.80		74.42
	Exercised	$	45.64		49.31		41.75
	Expired or forfeited	$	93.81		57.33		56.43
Outstanding at end of year		$	74.78		62.12		53.21
Exercisable at end of year		$	61.59		50.02		45.50

With respect to the 2,310 outstanding options and 1,391 options exercisable at December 30, 2018, the weighted average remaining contractual life of these options was 3.90 years and 2.81 years, respectively. The aggregate intrinsic value of the options outstanding and exercisable at December 30, 2018 was $30,574 and $29,652, 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 2018, 2017 and 2016 was $19.26, $18.25 and $13.01, 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 2018, 2017 and 2016:

	2018	2017	2016
Risk-free interest rate	2.57%	1.85%	1.16%
Expected dividend yield	2.57%	2.31%	2.74%
Expected volatility	27%	24%	26%
Expected option life	4 years	5 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 2018, 2017 and 2016 were $38,909, $31,406 and $47,992, respectively.

At December 30, 2018, the amount of total unrecognized compensation cost related to stock options was $10,096 and the weighted average period over which this will be expensed is 22 months.

Non-Employee Awards

In 2018, 2017 and 2016, the Company granted 20, 16 and 23 shares of common stock, respectively, to its non-employee members of its Board of Directors. Of these shares, the receipt of 11 shares from the 2018 grant, 10 shares from the 2017 grant and 16 shares from the 2016 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 30, 2018, $1,595 in the year ended December 31, 2017 and $1,630 in the year ended December 25, 2016.