Shareholders' Equity |
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Stockholders' Equity Note [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Shareholders' Equity | Shareholders' Equity Common Stock At a meeting of the Board of Directors on July 24, 2018, the Company's Board of Directors approved the extinguishment of the existing $3.0 million share repurchase program that was approved in November 2013 and replaced it with an authorization to repurchase up to $250.0 million of shares. At a meeting of the Board of Directors on October 25, 2019, the July 2018 repurchase authorization was extinguished and replaced with an authorization to purchase up to $250.0 million of shares. At a meeting of the Board of Directors on October 26, 2021, the Company's Board of Directors approved the authorization to purchase up to $500.0 million of shares under the Company's share repurchase program. The new authorization has no expiration date. In fiscal 2021, the Company acquired and retired 156,184 shares of its common stock at an average cost of $165.05 per share for a total cost of $25.8 million under the October 26, 2021 repurchase authorization. In fiscal 2020, the Company acquired and retired 315,072 shares of its common stock at an average cost of $79.38 per share for a total cost of $25.0 million under the October 25, 2019 repurchase authorization. In fiscal 2019, the Company acquired and retired under the July 2018 repurchase authorization 2,013,782 shares of its common stock at an average cost of $74.52 per share for a total cost of $150.1 million. Also in fiscal 2019, the Company acquired and retired 180,763 shares of its common stock at an average cost of $83.01 per share for a total cost of $15.0 million under the October 25, 2019 repurchase authorization. The existing share repurchase program remains authorized by the Company's Board of Directors. There is approximately $434.2 million in common stock available for repurchase under the October 26, 2021 repurchase authorization as of January 1, 2022. Share-Based Compensation The Company recognized approximately $24.9 million, $9.2 million and $13.0 million in share-based compensation expense in fiscal years 2021, 2020 and 2019, respectively. The total income tax benefit recognized in the Consolidated Statements of Income for share-based compensation expense was $6.0 million, $2.2 million and $3.1 million in fiscal years 2021, 2020 and 2019, respectively. The Company recognizes compensation expense on grants of share-based compensation awards on a straight-line basis over the vesting period of each award. The total fair value of shares and options vested was $26.1 million, $7.7 million and $23.0 million in fiscal years 2021, 2020 and 2019, respectively. On October 10, 2018, the Company entered into a retirement agreement with the prior CEO resulting in the modification of the prior CEO's unvested awards. The Company expensed the modified awards over the modified service term. The modification increased the amount of unrecognized compensation cost and reduced the weighted average period in which the Company recognized compensation cost. On December 27, 2019, the Company entered into a retirement agreement with the COO resulting in the modification of certain of the COO's unvested awards. The Company recognized the modified award values over the modified service term. The modification increased the amount of unrecognized compensation cost and reduced the weighted average period in which the Company recognized the unrecognized compensation cost. Total unrecognized compensation cost related to share-based compensation awards was approximately $30.6 million, net of estimated forfeitures, which the Company expects to recognize over a weighted average period of approximately 1.7 years as of January 1, 2022. During 2018, the Company's shareholders approved the 2018 Equity Incentive Plan ("2018 Plan"). The 2018 Plan authorizes the issuance of 2.1 million shares of common stock, plus the number of shares reserved under the prior 2013 Equity Incentive Plan that are not the subject of outstanding awards for equity-based awards and terminates any further grants under prior equity plans. Approximately 2.7 million shares were available for future grant or payment under the 2018 Plans as of January 1, 2022. Options and Stock Appreciation Rights The Company uses several forms of share-based incentive awards including non-qualified stock options and stock settled stock appreciation rights (“SARs”). SARs are the right to receive stock in an amount equal to the appreciation in value of a share of stock over the base price per share. Shares granted prior to fiscal 2020 generally vest over five years on the anniversary date while shares granted in fiscal 2020 and after generally vest over three years on the anniversary date of the grant date. Generally all grants expire 10 years from the grant date. All grants are made at prices equal to the fair market value of the stock on the grant date. For fiscal years ended January 1, 2022, January 2, 2021 and December 28, 2019, expired and canceled shares were immaterial. The table below presents share-based compensation activity for the fiscal years ended 2021, 2020 and 2019 (in millions):
The weighted average assumptions used in the Company's Black-Scholes valuation related to grants for options and SARs were as follows:
The average risk-free interest rate is based on US Treasury security rates in effect as of the grant date. The expected dividend yield is based on the projected annual dividend as a percentage of the estimated market value of the Company's common stock as of the grant date. The Company estimated the expected volatility using a weighted average of daily historical volatility of the Company's stock price over the expected term of the award. The Company estimated the expected term using historical data. Following is a summary of share-based incentive plan activity (options and SARs) for fiscal 2021:
(1) Includes 298,640 options previously granted to employees of the Rexnord PMC business. Compensation expense recognized related to options and SARs was $5.6 million, $2.8 million and $2.7 million for fiscal years 2021, 2020 and 2019, respectively. As of January 1, 2022, there was $10.1 million of unrecognized compensation cost related to non-vested options and SARs that is expected to be recognized as a charge to earnings over a weighted average period of 1.9 years. The amount of options and SARs expected to vest is materially consistent with those outstanding and not yet exercisable. Restricted Stock Awards and Restricted Stock Units Restricted stock awards ("RSAs") and restricted stock units ("RSUs") consist of shares or the rights to shares of the Company's stock. The awards are restricted such that they are subject to substantial risk of forfeiture and to restrictions on their sale or other transfer. As defined in the individual grant agreements, acceleration of vesting may occur under a change in control, or death, disability or normal retirement of the grantee. Following is the summary of RSAs activity for fiscal 2021:
The weighted average grant date fair value of awards granted was $144.73, $70.05 and $80.41 in fiscal years 2021, 2020 and 2019, respectively. RSAs vest on the one year anniversary of the grant date, provided the holder of the shares is continuously employed by or in the service of the Company until the vesting date. Compensation expense recognized related to the RSAs was $1.2 million for fiscal 2021, 2020 and 2019, respectively. As of January 1, 2022, there was $0.5 million of unrecognized compensation cost related to non-vested RSAs that is expected to be recognized as a charge to earnings over a weighted average period of 0.5 years. Following is the summary of RSUs activity for fiscal 2021:
(2) Includes 126,461 RSUs previously granted to employees of the Rexnord PMC business. The weighted average grant date fair value of awards granted was $143.44, $86.70 and $78.98 in fiscal years 2021, 2020 and 2019, respectively. RSUs granted prior to fiscal 2020 vest on the third anniversary of the grant date while RSUs granted in fiscal 2020 vest one third each year on the anniversary of the grant date, provided the holder of the shares is continuously employed by the Company until the vesting date. Compensation expense recognized related to the RSUs was $9.7 million, $3.8 million and $6.2 million for fiscal 2021, 2020 and 2019, respectively. As of January 1, 2022, there was $15.7 million of unrecognized compensation cost related to non-vested RSUs that is expected to be recognized as a charge to earnings over a weighted average period of 1.8 years. Performance Share Units Performance share unit awards ("PSUs") consist of shares or the rights to shares of the Company's stock which are awarded to associates of the Company. These shares are payable upon the determination that the Company achieved certain established performance targets and can range from 0% to 200% of the targeted payout based on the actual results. PSUs have a performance period of 3 years, vest three years from the grant date and are issued at a performance target of 100%. The PSUs have performance criteria based on a return on invested capital metric or they have performance criteria using returns relative to the Company's peer group. As set forth in the individual grant agreements, acceleration of vesting may occur under a change in control, death or disability. There are no voting rights with these instruments until vesting occurs and a share of stock is issued. Some of the PSU awards are valued using a Monte Carlo simulation method as of the grant date while others are valued using the closing market price less net present value of dividends as of the grant date depending on the performance criteria for the award. The assumptions used in the Company's Monte Carlo simulation related to grants for performance share units were as follows:
Following is the summary of PSUs activity for fiscal 2021:
The weighted average grant date fair value of awards granted was $120.19, $117.63 and $85.54 in fiscal years 2021, 2020 and 2019, respectively. Compensation expense for awards granted are recognized based on the Monte Carlo simulation value or the expected payout ratio depending upon the performance criterion for the award, net of estimated forfeitures. Compensation expense recognized related to PSUs was $8.4 million, $1.4 million and $2.9 million for fiscal 2021, 2020 and 2019, respectively. Total unrecognized compensation expense for all PSUs granted as of January 1, 2022 was $4.3 million and it is expected to be recognized as a charge to earnings over a weighted average period of 1.6 years. $4.3 million of compensation expense recognized in fiscal 2021 related to PSUs vesting upon consummation of the Rexnord Transaction as discussed below. Rexnord Transaction Certain outstanding equity-based awards held by employees of the Rexnord PMC business that related to shares of Zurn common stock were replaced by equity-based awards of the Company relating to shares of Company common stock with substantially similar terms and conditions, except that Zurn accelerated the vesting and settlement of most of the PSUs held by Rexnord PMC business employees prior to the consummation of the Rexnord Transaction. The remaining PSUs relating to shares of Zurn common stock were replaced by RSUs relating to shares of Company common stock subject to substantially the same terms and conditions as the PSUs other than performance goals, which were deemed satisfied in connection with the Transaction. A portion of the fair value of the Rexnord PMC business’s equity-based awards issued represents consideration transferred, while a portion represents future compensation expense based on the vesting terms of the equity-based awards. The amount attributable to consideration transferred for pre-combination services was calculated based on the ratio of the pre-combination service period (grant date until closing date) to the longer of the original total service period or the modified service period, if any. The aggregate fair value of outstanding awards was reduced to reflect an estimate of future forfeitures. As the Special Dividend was paid pursuant to the terms of the Merger Agreement; holders of Company equity-based awards outstanding after the Merger (including those granted in connection with the Merger to former holders of Rexnord PMC business equity-based awards) were kept whole pursuant to the existing anti-dilution provisions in the applicable plan documents. In connection with the Special Dividend, outstanding equity-based awards relating to Company common stock were adjusted in accordance with the adjustment provisions of the applicable Company equity incentive plan documents to increase the number of shares subject to such awards and, in the case of SARs, to adjust the strike price per share, in each case to preserve the intrinsic value of such awards.
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