STOCK-BASED INCENTIVE COMPENSATION PLANS

The Company recognized stock-based compensation expense of $79.0 million, $89.8 million and $57.1 million, and related income tax benefits of $19.5 million, $22.3 million and $22.0 million, respectively, for the years ended November 24, 2019, November 25, 2018 and November 26, 2017, respectively. As of November 24, 2019, there was $68.6 million of total unrecognized compensation cost related to unvested equity and liability awards, which cost is expected to be recognized over a weighted-average period of 2.10 years. No stock-based compensation cost has been capitalized in the accompanying consolidated financial statements.

2016 Equity Incentive Plan

Prior to the IPO, the Company granted awards under the 2016 Equity Incentive Plan (the "2016 Plan") which provided for the granting of a variety of stock awards, including stock options, restricted stock, restricted stock units ("RSUs"), stock appreciation rights ("SARs") and cash or equity settled awards to certain employees and non-employee directors. The maximum number of shares of common stock authorized for issuance under the 2016 Plan was 80.0 million shares. Upon completion of the IPO, shares that remained available for future grants under the 2016 Plan ceased to be available and the 2019 Equity Incentive Plan became effective. Awards granted before the IPO remain outstanding according to the plan’s terms. Outstanding awards under the 2016 Plan are issuable as Class B common stock and can be voluntarily converted to Class A common stock and sold to the public.

2019 Equity Incentive Plan

In March 2019, in connection with the IPO, the Company’s stockholders adopted the Company’s 2019 Equity Incentive Plan (the “2019 Plan”) which provides for the grant of a variety of stock awards, including stock options, restricted stock, restricted stock units, stock appreciation rights, and cash or equity settled awards to certain employees and non-employee directors. The maximum number of shares of Class A common stock authorized for issuance under the 2019 Plan is 40.0 million shares. At November 24, 2019, the number of shares available for future grants under the 2019 Plan is 39.4 million shares.

2019 Employee Stock Purchase Plan

In March 2019, in connection with the IPO, the Company’s stockholders adopted the Company’s 2019 Employee Stock Purchase Plan (the “2019 ESPP”), which permits participants to purchase a total of 12.0 million shares of the Company’s Class A common stock through payroll deductions up to 10% of their earnings, subject to automatic annual increases. Unless otherwise determined by the administrator, the purchase price of the shares will be 85% of the fair market value of the Class A common stock on the date of purchase. At November 24, 2019, the number of shares available for issuance under the 2019 ESPP is 11.9 million shares. ESPP did not have a material impact on the consolidated financial statements in fiscal 2019.

Shares of common stock associated with the above plans will be issued from the Company's authorized but unissued shares and are subject to the Stockholders' Agreement that governs all shares.

Under the 2016 Plan and 2019 Plan, stock awards have a maximum contractual term of ten years, and if applicable, must have an exercise price at least equal to the fair market value of the Company's common stock on the grant date. Awards generally vest according to terms determined at the time of grant, or as otherwise determined by the Board in its discretion.

Upon the exercise of a stock-settled SAR, the participant will receive shares of common stock. The number of shares of common stock issued per SAR unit exercised is equal to (i) the excess of the per-share fair market value of the Company's common stock on the date of exercise over the exercise price of the SAR, divided by (ii) the per-share fair market value of the Company's common stock on the date of exercise.

Stock-settled RSUs which include service or performance conditions are issued to certain employees. Each stock-settled RSU is converted to a share of common stock upon vesting and do not have pre-vesting "dividend equivalent rights".

Non-employee members of the Board receive RSUs annually. The RSUs additionally have "dividend equivalent rights" of which dividends paid by the Company on its common stock are credited by the equivalent addition of RSUs.

Equity Awards

SARs. The Company grants SARs, which include service or performance conditions, to a small group of the Company's senior executives. SARs with service conditions ("Service SARs") vest from three-and-a-half to four years, and have maximum contractual lives of ten years. SARs with performance conditions ("Performance SARs") were granted prior to 2017 and are fully vested as of November 24, 2019. SARs activity during the year ended November 24, 2019 was as follows:



	Service SARs							Performance SARs
	Units		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value		Units		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Life (Years)	Aggregate Intrinsic Value
	(Units and dollars in thousands, except weighted-average exercise price)
Outstanding at November 25, 2018⁽¹⁾	17,871		$	6.36	3.4			9,217		$	6.05	3.1
Granted	1,009		14.93					—		—
Exercised	(4,763	)	4.69					(2,462	)	4.76
Forfeited	(45	)	13.3					—		4.31
Performance adjustment	—		—					879		6.20
Outstanding at November 24, 2019	14,072		$	7.51	3.3			7,634		$	6.49	2.5
Vested and expected to vest at November 24, 2019	14,072		$	7.51	3.3	$	133,359	7,634		$	6.49	2.5	$	80,176
Exercisable at November 24, 2019	10,494		$	6.74	2.5	$	107,609	7,634		$	6.49	2.5	$	80,176

_____________


(1)	All share and per-share data retroactively adjusted to reflect the ten-for-one stock split approved by the Company's stockholders in February 2019. Refer to Note 1 for more information.

The aggregate intrinsic values are calculated as the difference between the exercise price of the underlying SARs and the fair value of the Company's common stock that were in-the-money at that date.



	November 24, 2019		November 25, 2018		November 26, 2017
	(Dollars in thousands)
Aggregate intrinsic value of Service SARs exercised during the year	$	54,045	$	53,398	$	25,572
Aggregate intrinsic value of Performance SARs exercised during the year	$	27,776	$	6,777	$	883

Unrecognized future compensation costs as of November 24, 2019 of $3.1 million for Service SARs are expected to be recognized over weighted-average periods of 2.11 years.

The weighted-average grant date fair value of SARs was estimated using the Black-Scholes option valuation model. The weighted-average grant date fair values and corresponding weighted-average assumptions used in the Black-Scholes option valuation model were as follows:



	Service SARs Granted
	2019			2018			2017
Weighted-average grant date fair value⁽¹⁾	$	4.49		$	2.61		$	1.61

Weighted-average assumptions:
Expected life (in years)	5.0			4.9			4.9
Expected volatility	37.5		%	35.7		%	32.5		%
Risk-free interest rate	2.5		%	2.5		%	1.9		%
Expected dividend	2.0		%	2.5		%	2.7		%

_____________


(1)	All share and per-share data retroactively adjusted to reflect the ten-for-one stock split that was approved by the Company's stockholders in February 2019. Refer to Note 1 for more information.

RSUs. The Company grants RSUs, which include service or performance conditions, to a small group of the Company's senior executives and to select levels of the Company's management. RSUs with service conditions ("Service RSUs") granted during 2019 and 2018 vest in four annual equal installments of 25% beginning on the first anniversary of the date granted subject to continued employment. Service RSUs granted in 2017 cliff vest in three years subject to continued employment. RSUs with performance conditions ("Performance RSUs") vest at varying unit amounts, up to 200% of those awarded, based on the attainment of certain three-year cumulative performance goals over a three-year performance period subject to continued employment. There were no stock-settled RSUs granted to employees prior to 2017. Service and Performance RSU activity during the year ended November 24, 2019 was as follows:



	Service RSUs					Performance RSUs
	Units		Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Contractual Life (Years)	Units		Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Contractual Life (Years)
	(Units in thousands)
Outstanding at November 25, 2018⁽¹⁾	1,030		$	8.17	1.7	1,744		$	8.08	1.4
Granted	685		16.12			643		16.16
Vested	(110	)	8.80			—		—
Granted Replacement Awards⁽²⁾	6,542		16.67			2,083		22.71
Forfeited	(368	)	16.51			(159	)	14.93
Outstanding at November 24, 2019	7,779		$	15.56	1.6	4,311		$	16.24	1.0

_____________


(1)	All share and per-share data retroactively adjusted to reflect the ten-for-one stock split approved by the Company's stockholders in February 2019. Refer to Note 1 for more information.


(2)	In connection with the IPO, the Company’s Board of Directors approved the cancellation of the majority of the outstanding unvested cash-settled RSUs and their concurrent replacement with similar stock-settled RSUs. Other than the form of settlement, all other terms of the awards, including their vesting schedules are the same. Refer to Note 1 for more information.

The total fair value of Service RSU awards vested during 2019 was $1.6 million. Unrecognized future compensation cost as of November 24, 2019 of $44.7 million for Service RSUs and $16.6 million for Performance RSUs is expected to be recognized over a weighted-average period of 2.36 years and 1.49 years, respectively.

The grant date fair value of Service and Performance RSUs was based on the fair value of the Company’s common stock at the time of grant, unless the awards were subject to market conditions, in which case the Monte Carlo simulation model was utilized. During 2019, 2018 and 2017, the weighted-average grant date fair value for Service and Performance RSUs granted without a market condition were $15.56, $9.16 and $6.49, respectively. The weighted-average grant date fair value and corresponding weighted-average assumptions used in the Monte Carlo valuation models were as follows:



	Performance RSUs Granted as Replacement Awards			Performance RSUs Granted
	2019			2019			2018			2017
Weighted-average grant date fair value⁽¹⁾	$	28.78		$	17.95		$	10.45		$	8.23

Weighted-average assumptions:
Expected life (in years)	1.5			2.8			3.0			3.0
Expected volatility	36.3		%	37.5		%	37.2		%	33.5		%
Risk-free interest rate	2.5		%	2.3		%	2.3		%	1.4		%
Expected dividend	1.7		%	1.9		%	2.5		%	2.7		%

_____________


(1)	All share and per-share data retroactively adjusted to reflect the ten-for-one stock split approved by the Company's stockholders in February 2019. Refer to Note 1 for more information.

RSUs to the Board of Directors. The Company grants RSUs to certain members of its Board ("Board RSUs"). The total fair value of Board RSUs granted during the year ended November 24, 2019 of $2.1 million was estimated using the fair value of the Company's common stock. The total fair value of RSUs outstanding, vested and expected to vest was $10.2 million and $10.1 million as of November 24, 2019 and November 25, 2018, respectively.

Board RSUs vest in a series of three equal installments at 13 months, 24 months and 36 months following the date of grant subject to continued service. However, if the recipient's continuous service terminates for a reason other than cause after the first vesting installment, but prior to full vesting, then the remaining unvested portion of the award becomes fully vested as of the date of such termination.

Liability Awards

In connection with the IPO, on March 19, 2019 the Company's Board of Directors approved the cancellation of the majority of the outstanding unvested cash-settled restricted stock units ("RSU's") and their concurrent replacement with similar stock-settled RSUs ("Replacement Awards"), pursuant to the Company's 2016 Equity Incentive Plan (the "2016 Plan"). RSUs for certain foreign affiliates will continue to be cash-settled. Prior to the IPO, the Company granted cash settled phantom restricted stock units ("Phantom RSUs"), which included service or performance conditions, to select levels of the Company’s management. The Phantom RSUs are recorded as liabilities and their changes in fair value are recognized over the vesting period. Upon vesting of a phantom restricted stock unit, the participant will receive a cash payout in an amount equal to the vested units multiplied by the fair value of the Company’s common stock at the end of the service or performance period.

Phantom restricted stock units with service conditions ("Phantom Service RSUs") granted during 2019 and 2018 vest in four annual equal installments of 25% beginning on the first anniversary of the date granted subject to continued employment. The Phantom Service RSUs granted in 2017 cliff vest in three years subject to continued employment. Phantom restricted stock units with performance conditions ("Phantom Performance RSUs") vest at varying unit amounts, up to 200% of those awarded, based on attainment of certain three-year cumulative performance goals and subject to continued employment. There were no Phantom Performance RSUs granted prior to 2017.

Liability award activity during the year ended November 24, 2019 was as follows:



	Phantom Service RSUs						Phantom Performance RSUs
	Units		Weighted-Average Grant Date Fair Value		Fair Value At Period End		Units		Weighted-Average Grant Date Fair Value		Fair Value At Period End
	(Units in thousands)
Outstanding at November 25, 2018⁽¹⁾	9,100		$	7.59	$	14.60	1,710		$	8.22	$	14.60
Granted	1,821		14.95				504		14.88
Vested	(3,617	)	6.87				—		—
Canceled⁽²⁾	(6,542	)	9.81				(2,083	)	9.69
Performance adjustment	—		—				4		6.90
Forfeited	(218	)	8.57				(64	)	9.45
Outstanding at November 24, 2019	544		$	9.96	$	16.99	71		$	11.38	$	16.99
Expected to vest at November 24, 2019	518		$	9.84	$	16.99	65		$	11.23	$	16.99

_____________


(1)	All share and per-share data retroactively adjusted to reflect the ten-for-one stock split approved by the Company's stockholders in February 2019. Refer to Note 1 for more information.


(2)	In connection with the IPO, the Company’s Board of Directors approved the cancellation of the majority of the outstanding unvested cash-settled RSUs and their concurrent replacement with similar stock-settled RSUs. Other than the form of settlement, all other terms of the awards, including their vesting schedules are the same. Refer to Note 1 for more information.

The total fair value of Phantom Service RSU awards vested during 2019, 2018 and 2017 was $52.9 million, $17.0 million and $9.2 million, respectively. The weighted-average fair value of Phantom Service RSUs at the grant date was estimated based on the fair value of the Company's common stock. The Company accrued for $6.9 million of Phantom Service RSUs and Phantom Performance RSUs as of November 24, 2019.

Unrecognized future compensation cost as of November 24, 2019 of $3.6 million for Phantom Service RSUs and $0.6 million for Phantom Performance RSUs are expected to be recognized over a weighted-average period of 1.61 years and 1.69 years, respectively.