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Share-Based Compensation
 12 Months Ended
Dec. 30, 2023
Share-Based Payment Arrangement [Abstract]  
Share-Based Compensation Share-Based Compensation
Our shareowners approved our Amended and Restated Primo Water Corporation Equity Incentive Plan (the “Amended and Restated Equity Plan”) in May 2016, and approved the Primo Water Corporation 2018 Equity Incentive Plan (“2018 Equity Plan” and together with the Amended and Restated Equity Plan, the “Equity Plans”) in May 2018. Awards under the Equity Plans may be in the form of incentive stock options, non-qualified stock options, restricted shares, restricted share units, performance shares, performance units, stock appreciation rights, and stock payments to employees, directors and outside consultants. The Equity Plans are administered by the Human Resources and Compensation Committee (“HRCC”) of the Board of Directors or any other Board committee as may be designated by the Board of Directors from time to time. Under the Amended and Restated Equity Plan, 20,000,000 shares are reserved for future issuance, and under the 2018 Equity Plan, 8,000,000 shares are reserved for future issuance, subject to adjustment upon a share split, share dividend, recapitalization, and other similar transactions and events. Shares that are issued under the Equity Plans are applied to reduce the maximum number of shares remaining available for issuance under the Equity Plans; provided that the total number of shares available for issuance under the Equity Plans are reduced two shares for each share issued pursuant to a “full-value” award (i.e., an award other than a stock option or stock appreciation right).
Shares to be issued pursuant to Time-based RSUs, Performance-based RSUs, or stock options that are forfeited, expired, or are canceled or settled without the issuance of shares return to the pool of shares available for issuance under the Equity Plans. As of December 30, 2023, there were approximately 819,000 shares available for future issuance under the Amended and Restated Equity Plan, and approximately 1,406,000 shares available for future issuance under the 2018 Equity Plan.
The table below summarizes the share-based compensation expense for the fiscal years ended December 30, 2023, December 31, 2022, and January 1, 2022. Share-based compensation expense is recorded in SG&A expenses in the Consolidated Statements of Operations. As referenced below: (i) “Performance-based RSUs” represent restricted share units with performance-based vesting, (ii) “Time-based RSUs” represent restricted share units with time-based vesting, (iii) “Stock options” represent non-qualified stock options, (iv) “Director share awards” represent common shares issued in consideration of the annual Board retainer fee to non-management members of our Board, and (v) the “ESPP” represents the Primo Water Corporation Employee Share Purchase Plan, under which common shares are issued to eligible employees at a discount through payroll deductions.
For the Fiscal Year Ended
(in millions of U.S. dollars)December 30, 2023December 31, 2022January 1, 2022
Stock options$0.2 $0.8 $3.0 
Performance-based RSUs9.3 6.5 7.4 
Time-based RSUs3.9 8.4 5.5 
Director share awards1.3 1.2 1.3 
ESPP0.2 0.3 0.3 
Total 1
$14.9 $17.2 $17.5 
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1     Includes $0.8 million, $0.8 million, and $2.0 million of share-based compensation expense from our discontinued operations, which is included in Net income (loss) from discontinued operations, net of income taxes on the Consolidated Statements of Operations for the fiscal years ended December 30, 2023, December 31, 2022 and January 1, 2022, respectively.
The tax benefit recognized related to share-based compensation expense for the fiscal years ended December 30, 2023, December 31, 2022, and January 1, 2022 was $3.0 million, $3.4 million, and $2.2 million, respectively.
As of December 30, 2023, the unrecognized share-based compensation expense and the weighted-average number of years over which we expect it to be recognized were as follows:
(in millions of U.S. dollars, except years)Unrecognized share-based compensation expense as of December 30, 2023Weighted-average years expected to recognize compensation
Performance-based RSUs$11.9 2.4 years
Time-based RSUs4.3 2.0 years
Total$16.2 
Stock Options
During the fiscal years ended December 30, 2023 and December 31, 2022, no stock options were granted to employees. During the fiscal year ended January 1, 2022, approximately 18,000 stock options were granted to certain employees under the Equity Plans at a weighted-average exercise price of $17.79 per share. The weighted-average grant date fair value of the stock options granted during the year ended January 1, 2022 was estimated to be $5.47 per share using the Black-Scholes option pricing model. The contractual term of a stock option granted is fixed by the Amended and Restated Equity Plan and cannot exceed ten years from the grant date.
The grant date fair value of stock options granted during the fiscal year ended January 1, 2022 was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:
For the Fiscal Year Ended
January 1, 2022
Risk-free interest rate1.2 %
Average expected life (years)6.0
Expected volatility35.9 %
Expected dividend yield1.4 %
The following table summarizes the activity for stock options:
Number of Stock options (in thousands)Weighted-average exercise priceWeighted-average contractual term (years)Aggregate intrinsic value (in thousands)
Outstanding as of January 2, 20217,270 $13.07 6.5$20,659.3 
Granted18 17.79 
Exercised(2,382)10.32 17,439.4 
Forfeited or expired(51)13.62 
Outstanding as of January 1, 20224,855 $14.42 6.0$15,588.1 
Exercised(126)10.65 729.9 
Forfeited or expired(205)14.51 
Outstanding as of December 31, 20224,524 $14.52 5.2$6,482.0 
Exercised(364)13.48 771.5 
Forfeited or expired(479)16.89 
Outstanding as of December 30, 20233,681 $14.31 4.5$4,502.4 
Exercisable as of December 30, 20233,677 $14.31 4.5$4,502.4 
Vested or expected to vest as of December 30, 20233,681 $14.31 4.5$4,502.4 
The aggregate intrinsic value amounts in the table above represent the difference between the closing price of our common shares on the New York Stock Exchange on December 29, 2023, December 30, 2022, and December 31, 2021 which was $15.05, $15.54, and $17.63, respectively, and the exercise price, multiplied by the number of in-the-money stock options as of the same date.
The total amount of cash received from the exercise of stock options during the fiscal years ended December 30, 2023, December 31, 2022, and January 1, 2022 was $4.6 million, $0.8 million, and $23.8 million, respectively, with an associated tax benefit of $0.1 million, nil, and $1.3 million, respectively.
The total fair value of options that vested during the fiscal years ended December 30, 2023, December 31, 2022, and January 1, 2022 was $4.2 million, $8.3 million, and $16.7 million, respectively.
Other Awards
During the year ended December 30, 2023, we granted 76,024 common shares to the non-management members of our Board of Directors under the Equity Plans with a grant date fair value of approximately $1.3 million. The common shares were issued in consideration of the directors’ annual Board retainer fee and were vested upon issuance.
During the year ended December 30, 2023, we granted 28,000 Performance-based RSUs subject to the prior year vesting schedule and objectives. We also granted 412,000 Performance-based RSUs, which vest at the end of a three-year performance period beginning on the first day of our 2024 fiscal year and ending on the last day of our 2026 fiscal year ("2024 Performance Awards"). The number of shares ultimately awarded will be based upon the performance payout rate, which can range from 0% to 200% of the awards granted. During 2023, the HRCC determined that the 2024 Performance Awards will vest based on the Company’s achievement of average annual return on invested capital ("ROIC") and Relative TSR for the applicable performance period (the “Performance Objectives”). The number of Performance-based RSUs that may vest, and the related unrecognized compensation cost is subject to change based on the Performance Objectives achieved during the vesting period. Additionally, we granted 231,000 Time-based RSUs, which vest over two to three years in equal annual installments on the first, second and third anniversaries of the date of grant and include a service condition.
The grant date fair value of the 2024 Performance Awards was estimated at the grant date using the Monte-Carlo simulation model with the following weighted-average assumptions:
For the Fiscal Year Ended
December 30, 2023
Risk-free interest rate4.3 %
Average expected life (years)3.07
Expected volatility28.5 %
Beginning TSR price$14.67
The risk-free rate is based on the U.S. Treasury yield in effect at the grant date with a term equal to the simulation period used in the Monte-Carlo simulation model. The simulation period is equal to the performance periods associated with the performance shares. Volatility is based on the Company's historical data. Beginning TSR price is equal to the average closing price for the last eight trading days immediately prior to the grant date.
The following table summarizes the activity for the Company's other awards:
Number of Performance-based RSUs (in thousands)Weighted-average grant date fair valueNumber of Time-based RSUs (in thousands)Weighted-average grant date fair value
Balance as of January 2, 20211,185 $15.27 548 $14.75 
Awarded484 17.06 665 16.50 
Awarded in connection with modification119 17.46 — — 
Issued(467)17.46 (266)14.59 
Forfeited(75)15.02 (62)14.88 
Balance as of January 1, 20221,246 $15.65 885 $16.10 
Awarded529 15.20 413 15.10 
Awarded in connection with modification44 14.61 — — 
Issued(319)14.61 (420)15.74 
Forfeited(49)16.10 (29)16.42 
Outstanding as of December 31, 20221,451 $15.65 849 $15.78 
Awarded440 18.46 231 14.72 
Awarded in connection with modification228 13.88 — — 
Issued(515)13.88 (460)15.54 
Forfeited(101)16.26 (76)15.52 
Outstanding as of December 30, 20231,503 $16.61 544 $15.29 
Vested or expected to vest as of December 30, 20231,865 $16.55 544 $15.29 
The total fair value of Performance-based RSUs vested and issued during the fiscal years ended December 30, 2023, December 31, 2022 and January 1, 2022 was $7.1 million, $4.7 million and $8.1 million, respectively.
The total fair value of Time-based RSUs vested and issued during the fiscal years ended December 30, 2023, December 31, 2022, and January 1, 2022 was $7.1 million, $6.6 million, and $3.9 million, respectively.
Employee Share Purchase Plan
The Company has maintained the Primo Water Corporation Employee Share Purchase Plan (the “ESPP”) since 2015. The ESPP qualifies as an “employee share purchase plan” under Section 423 of the Internal Revenue Code of 1986 (“IRC”), as amended. Substantially all employees are eligible to participate in the ESPP and may elect to participate at the beginning of any quarterly offering period. The ESPP authorizes the issuance, and the purchase by eligible employees, of up to 3,000,000 shares of Primo common shares through payroll deductions. As of December 30, 2023, 2,091,606 shares remained available for issuance under the ESPP. Eligible employees who choose to participate may purchase Primo common shares at 90% of market value on the first or last day of the quarterly offering period, whichever is lower. The minimum contribution which an eligible employee may make under the ESPP is 1% of the employee’s eligible compensation, with the maximum contribution limited to 15% of the employee’s eligible compensation. At the end of each quarterly offering period for which the employee participates, the total amount of each employee’s payroll deduction for that offering period will be used to purchase Primo common shares. The Company recognized $0.2 million, $0.3 million and $0.3 million of share-based compensation expense in SG&A expenses in the Consolidated Statements of Operations for the years ended December 30, 2023, December 31, 2022, and January 1, 2022, respectively.