Share-based Payment Arrangements

6 Months Ended

Jul. 01, 2023

Share-based Payment Arrangements

(2) Share-based Payment Arrangements

As of July 1, 2023, the Company has an employee equity incentive plan, the 2011 equity incentive plan (the “2011 EIP”). The Company also has a stock compensation plan for members of its Board of Directors, the 2022 Directors Stock Compensation Plan (the “2022 DSCP”), which replaced the Amended and Restated 2013 Directors Stock Compensation Plan (as amended and restated, the “2013 DSCP”). The provisions of the 2022 DSCP are substantially similar to the provisions of the 2013 DSCP. 6,000,000 shares of the Company’s common stock were authorized for issuance under the 2011 EIP and 200,000 shares of the Company’s common stock were authorized for issuance under the 2022 DSCP. The 2011 EIP, 2013 DSCP and 2022 DSCP are each referred to herein as a “Plan,” and, collectively, as the “Plans.” Amounts recognized in the financial statements with respect to these Plans are as follows (in thousands):

	Twenty Six Weeks Ended						Thirteen Weeks Ended
	July 1, 2023			June 25, 2022			July 1, 2023			June 25, 2022
Total cost of the Plans during the period	$	3,126		$	5,810		$	1,274		$	3,815
Amount of related income tax benefit recognized during the period		(3,592	)		(4,270	)		(841	)		(910	)
Net cost of the Plans during the period	$	(466	)	$	1,540		$	433		$	2,905

Included in income tax benefits recognized in the twenty-six-week periods ended July 1, 2023 and June 25, 2022 were excess tax benefits from stock-based awards of $2,825,000 and $2,844,000, respectively.

As of July 1, 2023, there were 187,260 shares of the Company’s common stock reserved for issuance under the 2022 DSCP and 3,011,856 shares of the Company’s common stock reserved for issuance under the 2011 EIP.

Restricted Stock Units

The following table summarizes information regarding the Company’s outstanding restricted stock unit (“RSU”) awards with either a performance condition or a market condition under the Plans:

	Number of RSUs			Weighted Average Grant Date Fair Value
Outstanding at December 31, 2022		151,780		$	115.80
Granted		41,317		$	165.14
Shares earned in excess of target (1)		79,176		$	98.39
Vested shares, including shares earned in excess of target		(137,861	)	$	97.97
Forfeited		(554	)	$	136.18
Outstanding at July 1, 2023		133,858		$	139.01

(1) Represents additional shares earned under the February 1, 2019 and January 31, 2020 RSU awards as fiscal year 2022 financial results exceeded target performance level and under the April 24, 2018 and July 1, 2019 RSU awards as total shareholder return during the applicable performance period exceeded target performance level under each of those awards.

During the twenty-six-week period ended July 1, 2023, the Company granted RSUs with a performance condition. Outstanding RSUs at both December 31, 2022 and July 1, 2023 include RSUs with a performance condition and RSUs with a market condition, as further described below and in the Company’s 2022 Annual Report on Form 10-K.

RSUs with a performance condition granted on February 3, 2023 may vest on January 31 of 2026, 2027 and 2028 based on growth in operating income and pre-tax income per diluted share from continuing operations as compared to the results from the 2022 fiscal year.

The Company recognized approximately $1,294,000 and $4,203,000 of share-based compensation expense related to RSU awards in the twenty-six-week periods ended July 1, 2023 and June 25, 2022, respectively. As of July 1, 2023, there was a maximum of $29.8 million of total unrecognized compensation cost related to RSU awards granted under the Plans with an expected average remaining life of approximately 3.7 years. With respect to RSU awards with a performance condition, the amount of future compensation expense to be recognized will be determined based on future operating results.

Non-vested Restricted Stock and Deferred Stock Units

The following table summarizes information regarding the Company’s outstanding shares of non-vested restricted stock and Deferred Stock Units (defined below) under the Plans:

	Number of Shares and Deferred Stock Units			Weighted Average Grant Date Fair Value
Non-vested at December 31, 2022		47,795		$	138.30
Granted		22,714		$	179.32
Vested		(23,640	)	$	138.23
Non-vested at July 1, 2023		46,869		$	158.22

The fair value of each share of non-vested restricted stock issued and Deferred Stock Unit granted under the Plans is based on the fair value of a share of the Company’s common stock on the date of grant. Shares of non-vested restricted stock are generally subject to vesting in three equal annual installments either on the first, second and third anniversary of the date of the grant or the third, fourth and fifth anniversary of the date of the grant, or 100% on the first, third or fifth anniversary of the date of the grant. For restricted stock awards granted under the 2022 DSCP, each recipient may elect to defer receipt of shares and instead receive restricted stock units (“Deferred Stock Units”), which represent contingent rights to receive shares of the Company’s common stock on the date of recipient separation from service from the Board of Directors, or, if earlier, upon a change in control event of the Company. Deferred Stock Units become vested 100% on the first anniversary of the date of the grant. Deferred Stock Units do not represent actual ownership in shares of the Company’s common stock and the recipient does not have voting rights or other incidents of ownership until the shares are issued. However, Deferred Stock Units do contain the right to receive dividend equivalent payments prior to settlement into shares.

As of July 1, 2023, there was $5,691,000 of total unrecognized compensation cost related to non-vested shares of restricted stock and Deferred Stock Units granted under the Plans. The unrecognized compensation cost related to these non-vested shares of restricted stock and Deferred Stock Units is expected to be recognized over a weighted average period of 2.1 years.

Stock Options

All 1,900 stock options outstanding and exercisable at December 31, 2022 were exercised at an exercise price of $56.40 as of January 31, 2023, following which the Company had no remaining issued and outstanding vested or unvested stock options.

The total intrinsic value of stock options exercised during the twenty-six-week periods ended July 1, 2023 and June 25, 2022 was $218,000 and $369,000, respectively.

As of July 1, 2023, there was no unrecognized compensation cost related to non-vested stock options granted under the Plans.