Share-Based Compensation

3 Months Ended

Apr. 01, 2023

Share-Based Payment Arrangement [Abstract]

Share-Based Compensation

Share-Based Compensation

Merger Transaction

Prior to July 24, 2022, under its long-term stock incentive plan, the Company had several share-based compensation award types, including stock options, restricted stock units and performance share unit awards (collectively, the “Pre-Merger Awards”). In connection with the Merger, outstanding vested stock option awards were canceled and converted to the right to receive a fixed amount of cash equal to the intrinsic value of the awards and were paid in August 2022. Performance share units (“PSUs”) granted to certain key, non-executive employees in March 2021 were paid in cash in September 2022 with the applicable total shareholder return metric determined using a per share price equal to the Merger Consideration and the EBITDA-based metric determined based on target performance.

Resulting from the Merger, unvested restricted stock units were cancelled and converted into a contingent contractual right to receive a payment in cash equal to the Merger consideration per award and unvested stock options were cancelled and converted into a contingent contractual right to receive a payment in cash equal to the intrinsic value of the awards, subject to the same vesting conditions as the original awards.

Resulting from the Merger, unvested PSUs that were granted to key employees and executives in March 2020 and to executives in March 2021 were cancelled and converted into a contingent contractual right to receive a cash payment from the Company equal to the product of the number of PSUs earned under the terms of the applicable award agreement, with the applicable total stockholder return metric determined using a per share price equal to the Merger consideration and the EBITDA-based metric determined based on actual performance as of the end of the three-year performance period applicable to such PSUs. PSUs granted in March 2020 vested and were paid out in cash during the three months ended April 1, 2023. PSUs granted in March 2021 to executives are expected to be paid out in cash in the first quarter of 2024. The Pre-Merger Awards are accounted for under ASC Topic 710.

As of April 1, 2023, the Company has liabilities of $14.9 million classified within employee-related liabilities on its Condensed Consolidated Balance Sheet related to the Pre-Merger Awards that will be settled in cash. For the three months ended April 1, 2023, the Company paid out $89.5 million of cash to settle Pre-Merger Awards, which mainly related to those PSUs granted in March 2020 and vested in March 2023.

Incentive Units

Beginning in the fourth quarter of 2022, pursuant to an incentive unit grant agreement, certain participants were granted incentive units in Camelot Return Ultimate, L.P. (the “Partnership”). The incentive units provide the holder with the opportunity to receive, upon certain vesting events and subject to Partnership repurchase rights and conditions, a return based upon the appreciation of the Partnership’s equity value from the date of grant. The incentive units vest over a five-year period on a straight-line basis. For the three months ended April 1, 2023, the Company granted 27 thousand incentive units at an average grant date fair value of $49.76 per incentive unit.

Compensation Expense

For the three months ended April 1, 2023, the Company recognized $2.5 million of expense from incentive units and a gain of $4.8 million from the Pre-Merger Awards. The gain recognized on the Pre-Merger Awards during the three months ended April 1, 2023 related to the Company updating its vesting expectations for certain PSU awards which have a range of payouts based on an EBITDA-based metric.

As of April 1, 2023, the Company estimates that unrecognized expense is expected to be recognized over a weighted-average period of 4.3 years totaling $46.5 million, of which $9.5 million relates to Pre-Merger Awards and $37.0 million relates to incentive units.