Share-based Arrangements

9 Months Ended

Sep. 30, 2022

Share-based Payment Arrangement, Noncash Expense [Abstract]

17. SHARE-BASED ARRANGEMENTS

The Company accounts for stock options, restricted stock awards ("RSAs"), restricted stock units ("RSUs") and performance stock units ("PSUs") as equity awards and measures the cost of all share-based payments, including stock options, at fair value on the grant date and recognizes this cost in the statement of operations. The Company also has an employee stock purchase plan, which is accounted for as a liability award. Compensation expense for stock options, RSAs, RSUs and PSUs is recognized on a straight-line basis over the vesting period of the awards. Throughout the course of the vesting period, the Company monitors the achievement level for the return on invested capital ("ROIC") metric of the PSUs compared to the ROIC target and adjusts the number of shares expected to be earned, and the related compensation expense recorded thereafter, to reflect the most probable outcome. The PSUs granted in 2022 and 2021 assumed a 100% achievement level. In the third quarter of 2022, the PSUs granted in 2021 were adjusted to a 33% achievement level. Share-based compensation expense recorded for the three-month and nine-month fiscal periods ended September 30, 2022 was $1.3 million and $6.1 million, respectively. For the nine-month fiscal period ended September 30, 2022, $0.2 million was recorded to restructuring and severance costs and the remaining amounts were recorded to selling, general and administrative expenses on the Company's Condensed Consolidated Statements of Operations. Restructuring and severance costs associated with share-based compensation for the three-month fiscal period ended September 30, 2022 were not material. Share-based compensation expense recorded for the three-month and nine-month fiscal periods ended October 1, 2021 was $1.5 million and $5.7 million, respectively. Of these amounts, $0.1 million and $0.3 million was recorded to restructuring and severance costs, respectively, and the remaining amounts were recorded to selling, general and administrative expenses on the Company's Condensed Consolidated Statements of Operations.

Stock option activity was as follows:


	For the Three Months Ended			For the Nine Months Ended
	September 30, 2022			September 30, 2022
	Options	Weighted - average exercise price		Options	Weighted - average exercise price
Options outstanding at beginning of period	726,691	$	55.32	746,240	$	55.14
Granted	39,121	$	31.60	39,121	$	31.60
Exercised	(2,166)	$	42.86	(11,842)	$	41.90
Forfeited or expired	(20,505)	$	54.53	(30,378)	$	55.35
Options outstanding at September 30, 2022	743,141	$	54.10	743,141	$	54.10

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model. The following table indicates the weighted-average assumptions used in estimating fair value:


	For the Nine Months Ended
	September 30, 2022			October 1, 2021
Expected option term (years)	6.5			4.9
Expected volatility	35.5		%	35.7		%
Risk-free interest rate	2.9		%	0.5		%
Expected dividend yield	2.0		%	1.6		%
Per share fair value of options granted	$	10.22		$	14.89

17. SHARE-BASED ARRANGEMENTS (CONTINUED)

Restricted stock award and restricted stock unit activity were as follows:


	For the Three Months Ended			For the Nine Months Ended
	September 30, 2022			September 30, 2022
	Restricted Stock	Weighted- average grant date fair value		Restricted Stock	Weighted- average grant date fair value
Restricted Stock outstanding at beginning of period	152,200	$	47.87	135,351	$	53.53
Granted	18,988	$	31.60	119,003	$	40.29
Vested	(3,746)	$	50.98	(79,075)	$	49.85
Forfeited or expired	(4,221)	$	51.21	(12,058)	$	51.41
Restricted Stock outstanding at September 30, 2022	163,221	$	45.82	163,221	$	45.82

Performance stock unit activity was as follows:


	For the Three Months Ended			For the Nine Months Ended
	September 30, 2022			September 30, 2022
	Performance Stock	Weighted- average grant date fair value		Performance Stock	Weighted- average grant date fair value
Performance Stock outstanding at beginning of period	180,120	$	60.55	70,163	$	70.17
Granted	—	$	—	117,885	$	54.87
Vested	—	$	—	—	$	—
Forfeited or expired	(6,646)	$	63.87	(14,574)	$	61.29
Performance Stock outstanding at September 30, 2022	173,474	$	60.42	173,474	$	60.42

The fair value of the PSUs based on total shareholder return ("TSR")was estimated on the date of grant using a Monte-Carlo simulation model. The following table indicates the weighted-average assumptions used in estimating fair value:


	For the Nine Months Ended
	September 30, 2022			October 1, 2021
Expected term (years)	2.9			2.9
Expected volatility	39.4		%	41.3		%
Risk-free interest rate	1.7		%	0.2		%
Expected dividend yield	1.9		%	1.4		%
Per share fair value of performance stock granted	$	68.10		$	84.49