Share-Based Compensation

3 Months Ended

May 27, 2022

Share-Based Payment Arrangement [Abstract]

8. SHARE-BASED COMPENSATION

Performance Units

We have issued performance units (“PSUs”) to certain employees which are earned over a three-year performance period based on performance conditions established annually by the Compensation Committee within the first three months of the applicable fiscal year. The PSUs are then modified based on achievement of certain total shareholder return results relative to a comparison group of companies, which is a market condition. When the performance conditions for a fiscal year are established, or if the performance conditions involve a qualitative assessment and such assessment has been made, one-third of the PSUs issued are considered granted. Therefore, each of the three fiscal years within the performance period is considered an individual tranche of the award (referred to as "Tranche 1," "Tranche 2" and "Tranche 3," respectively).

As of May 27, 2022, the following PSUs have been issued and remained outstanding:

•428,700 PSUs to be earned over the period of 2023 through 2025 (the "2023 PSUs"),

•448,300 PSUs to be earned over the period of 2022 through 2024 (the "2022 PSUs") and

•529,500 PSUs to be earned over the period of 2021 through 2023 (the "2021 PSUs").

Once granted, the PSUs are expensed and recorded in Additional paid-in capital on the Condensed Consolidated Balance Sheets over the remaining performance period. For participants who are or become retirement-eligible during the performance period, the PSUs are expensed over the period ending on the date the participant becomes retirement-eligible.

As of May 27, 2022, the 2023 PSUs, 2022 PSUs and 2021 PSUs were considered granted as follows:

•In Q1 2023, the performance conditions were established for Tranche 1 of the 2023 PSUs, Tranche 2 of the 2022 PSUs and Tranche 3 of the 2021 PSUs, and accordingly, such tranches were considered granted in Q1 2023.

•In Q1 2022, the performance conditions were established for Tranche 1 of the 2022 PSUs and Tranche 2 of the 2021 PSUs, and accordingly, such tranches were considered granted in Q1 2022.

•In Q1 2021, the performance conditions were established for Tranche 1 of the 2021 PSUs, and accordingly, such tranche was considered granted in Q1 2021.

We used the Monte Carlo simulation model to calculate the fair value of the market conditions on the respective grant dates, which resulted in a total fair value of $5.2, $4.8 and $2.3 for the PSUs with market conditions granted in 2023, 2022 and 2021, respectively, that remain outstanding as of May 27, 2022. The Monte Carlo simulation was computed using the following assumptions:


	FY23 Award		FY22 Award				FY21 Award
	Tranche 1		Tranche 2		Tranche 1		Tranche 3		Tranche 2		Tranche 1
Risk-free interest rate (1)	2.6	%	2.3	%	0.3	%	1.6	%	0.2	%	0.2	%
Expected term	3 years		2 years		3 years		1 year		2 years		2 years
Estimated volatility (2)	52.2	%	43.8	%	53.5	%	28.7	%	61.3	%	58.1	%

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(1)Based on the U.S. Government bond benchmark on the grant date.

(2)Represents the historical price volatility of our Class A Common Stock for the three-year period preceding the grant date.

The total PSU expense and associated tax benefit recorded during the three months ended May 27, 2022 and May 28, 2021 are as follows:


	Three Months Ended
Performance Units	May 27, 2022		May 28, 2021
Expense	$	4.1	$	5.2
Tax benefit	1.0		1.3

The PSU activity for the three months ended May 27, 2022 is as follows:


Maximum Number of Shares of Nonvested Units	Total	Weighted-Average Grant Date Fair Value per Unit
Nonvested as of February 25, 2022	1,205,833	$	14.21
Granted	1,125,192	11.13

Nonvested as of May 27, 2022	2,331,025	$	12.72

As of May 27, 2022, there was $1.5 of remaining unrecognized compensation cost related to nonvested PSUs, which is expected to be recognized over a remaining weighted-average period of 2.2 years.

Restricted Stock Units

During the three months ended May 27, 2022, we awarded 1,008,424 restricted stock units ("RSUs") to certain employees. RSUs have restrictions on transfer which lapse one to three years after the date of grant, at which time the RSUs will be issued as unrestricted shares of Class A Common Stock. RSUs are expensed and recorded in Additional paid-in capital on the Condensed Consolidated Balance Sheets over the requisite service period based on the value of the shares on the grant date. For participants who are or become retirement-eligible during the service period for awards that are considered retirement-eligible, the RSUs are expensed over the period ending on the date that the participant becomes retirement-eligible.

The total RSU expense and associated tax benefit for the three months ended May 27, 2022 and May 28, 2021 are as follows:


	Three Months Ended
Restricted Stock Units	May 27, 2022		May 28, 2021
Expense	$	7.9	$	7.7
Tax benefit	2.0		1.9

The RSU activity for the three months ended May 27, 2022 is as follows:


Nonvested Units	Total	Weighted-Average Grant Date Fair Value per Unit
Nonvested as of February 25, 2022	3,445,438	$	11.86
Granted	1,008,424	11.21
Vested	(10,500)	14.27
Forfeited	(10,200)	14.37
Nonvested as of May 27, 2022	4,433,162	$	11.70

As of May 27, 2022, there was $22.1 of remaining unrecognized compensation expense related to nonvested RSUs, which is expected to be recognized over a weighted-average period of 1.9 years.