Stock-Based Compensation

12 Months Ended

Jan. 02, 2021

Share-based Payment Arrangement [Abstract]

Under the Corporation’s 2017 Stock-Based Compensation Plan (the "Plan"), effective May 9, 2017, the Corporation may award options to purchase shares of the Corporation’s common stock and grant other stock awards to executives, managers, and key personnel. Upon shareholder approval of the Plan in May 2017, no future awards were granted under the Corporation’s 2007 Stock-Based Compensation Plan, but all outstanding awards previously granted under that plan shall remain outstanding in accordance with their terms. As of January 2, 2021, there were approximately 1.6 million shares available for future issuance under the Plan. The Plan is administered by the Human Resources and Compensation Committee of the Board. Forms of awards issued under the Plan include stock options, restricted stock units based on a service condition ("RSUs"), and restricted stock units based on both performance and service conditions ("PSUs"). The Corporation uses common shares held in treasury to satisfy share option exercises and distributions of shares related to vested RSUs and PSUs.

RSUs awarded under the Plan prior to 2020 generally cliff-vest after three years, while RSUs awarded starting in 2020 generally vest ratably over three years. PSUs were awarded starting in 2020, and generally vest at the end of a three year period, subject to a performance metric based on the Corporation's cumulative profitability during the period. PSUs and RSUs awarded starting in 2020 generally accrue cash dividends during the vesting periods, with payment made when earned shares are distributed to participants. Stock options awarded to members under the Plan must be at exercise prices equal to or exceeding the fair market value of the Corporation’s common stock on the date of grant. Stock options are generally subject to four-year cliff vesting and must be exercised within 10 years from the date of grant.

The Corporation measures stock-based compensation expense at grant date, based on the fair value of the award, and recognizes expense over the employees' requisite service periods, adjusted for an estimated forfeiture rate for those shares not expected to vest. Additionally, expense related to PSUs is periodically adjusted for the probable number of shares to be awarded at the end of the three year performance period.

Compensation cost charged against operations for the Plan and the 2017 MSPP described in "Note 10. Accumulated Other Comprehensive Income (Loss) and Shareholders' Equity" in the Notes to Consolidated Financial Statements was as follows (in thousands):


	2020		2019		2018
Compensation cost	$	7,827	$	6,830	$	7,317

The total income tax benefit recognized in the Consolidated Statements of Comprehensive Income for share-based compensation arrangements was as follows (in thousands):


	2020		2019		2018
Income tax benefit	$	1,925	$	1,545	$	1,582

RSUs

The following table summarizes the changes in RSUs:


	Number of Shares	Weighted-Average Grant Date Fair Value
Nonvested as of December 30, 2017	37,000	$	38.38
Granted	23,224	40.44
Vested	(12,000)	51.54
Forfeited	(2,500)	28.90
Nonvested as of December 29, 2018	45,724	$	36.49
Granted	10,000	36.05
Vested	(24,823)	33.30
Forfeited	(9,289)	40.22
Nonvested as of December 28, 2019	21,612	$	38.41
Granted	173,766	36.78
Vested	(6,968)	40.77
Forfeited	(5,930)	37.50
Nonvested as of January 2, 2021	182,480	$	36.80

As of January 2, 2021, there was $1.5 million of unrecognized compensation cost related to RSUs, which the Corporation expects to recognize over a weighted-average period of 0.9 years. The total value of shares vested was as follows (in thousands):


	2020		2019		2018
Value of shares vested	$	284	$	827	$	618

PSUs

The following table summarizes the changes in PSUs:


	Number of Shares	Weighted-Average Grant Date Fair Value








Nonvested as of December 28, 2019	—	$	—
Granted	157,266	37.64
Vested	—	—
Forfeited	(9,440)	38.08
Nonvested as of January 2, 2021	147,826	$	37.62

As of January 2, 2021, there was $0.8 million of unrecognized compensation cost related to PSUs, which the Corporation expects to recognize over a weighted-average period of 1.1 years.

Stock Options

Stock-based compensation expense related to stock options was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions by grant year:


	2019		2018
Expected term	5 years		5 years
Expected volatility (weighted-average)	33.86	%	34.12	%
Expected dividend yield (weighted-average)	2.98	%	2.97	%
Risk-free interest rate (weighted-average)	2.52	%	2.66	%

There were no stock options granted in 2020.

Expected volatilities were based on historical volatility as the Corporation does not expect that future volatility over the expected term of the options is likely to differ from the past. The Corporation used a calculation method based on the historical daily frequency for a period of time equal to the expected term. The Corporation used the current dividend yield as there are no plans to substantially increase or decrease its dividends. The Corporation used historical exercise experience to determine the expected term. The risk-free interest rate was selected based on yields from treasury securities as published by the Federal Reserve equal to the expected term of the options. The amount of stock-based compensation expense recognized during a period is also based on the portion of the stock options that are ultimately expected to vest. The Corporation estimates pre-vesting forfeitures at the time of grant by analyzing historical data and revises those estimates in subsequent periods if actual forfeitures differ from those estimates.

The following table summarizes the changes in outstanding stock options:


	Number of Shares	Weighted Average Exercise Price
Outstanding as of December 30, 2017	3,562,284	$	34.63
Granted	788,301	38.53
Exercised	(647,759)	26.28
Forfeited or Expired	(75,821)	38.36
Outstanding as of December 29, 2018	3,627,005	$	36.89
Granted	637,763	39.64
Exercised	(921,900)	30.29
Forfeited or Expired	(120,143)	39.29
Outstanding as of December 28, 2019	3,222,725	$	39.24

Exercised	(188,734)	29.24
Forfeited or Expired	(27,813)	42.38
Outstanding as of January 2, 2021	3,006,178	$	39.84

A summary of the Corporation’s non-vested stock options and changes during the year are presented below:


	Number of Shares	Weighted Average Grant-Date Fair Value
Non-vested as of December 28, 2019	1,602,573	$	10.32

Vested	(385,648)	9.36
Forfeited	(21,608)	10.60
Non-vested as of January 2, 2021	1,195,317	$	10.62

As of January 2, 2021, there was $1.2 million of unrecognized compensation cost related to stock option awards, which the Corporation expects to recognize over a weighted-average period of 1.0 years.

Information about stock options expected to vest or currently exercisable is as follows:


	January 2, 2021
	Number of Shares	Weighted-Average Exercise Price		Weighted-Average Remaining Exercisable Period (years)	Aggregate Intrinsic Value ($000s)
Expected to vest	1,138,149	$	40.57	7.4	$	1,514
Exercisable	1,810,861	$	39.38	4.8	$	—

Other information for the last three years is as follows (in thousands):


	2020		2019		2018
Total fair value of options vested	$	3,608	$	11,470	$	7,204
Total intrinsic value of options exercised	$	1,527	$	5,981	$	8,917
Cash received from exercise of stock options	$	5,519	$	27,926	$	17,021
Tax benefit realized from exercise of stock options	$	376	$	1,353	$	1,928
Weighted-average grant-date fair value of options granted	$	—	$	9.84	$	9.72

Deferred Compensation

The following table details deferred compensation, which is a combination of cash and stock, and the affected line item in the Consolidated Balance Sheets where deferred compensation is presented (in thousands):


	January 2, 2021		December 28, 2019
Current maturities of other long-term obligations	$	1,490	$	850
Other long-term liabilities	8,649		9,740
Total deferred compensation	$	10,139	$	10,590

Total fair-market value of deferred compensation	$	7,207	$	7,503