11.	Stock Plans

Incentive Compensation Plans, Inducement Option and Winfrey Option

On May 6, 2008 and May 12, 2004, respectively, the Company’s shareholders approved the 2008 Stock Incentive Plan (the “2008 Plan”) and the 2004 Stock Incentive Plan (the “2004 Plan”). On May 6, 2014, the Company’s shareholders approved the 2014 Stock Incentive Plan (as amended and restated, the “2014 Plan”, and together with the 2004 Plan and the 2008 Plan, the “Stock Plans”), which replaced the 2008 Plan and 2004 Plan for all equity-based awards granted on or after May 6, 2014. The 2014 Plan is designed to promote the long-term financial interests and growth of the Company by attracting, motivating and retaining employees with the ability to contribute to the success of the business and to align compensation for the Company’s employees over a multi-year period directly with the interests of the shareholders of the Company. The Company’s Board of Directors or a committee thereof administers the 2014 Plan.

Under the 2014 Plan, grants may take the following forms at the Company’s Board of Directors’ Compensation and Benefit Committee’s (the “Compensation Committee”) discretion: non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock units (“RSUs”), restricted stock and other stock-based awards. As of May 9, 2017, the maximum number of shares of common stock available for grant under the 2014 Plan was 8,500, subject to increase and adjustment as set forth in the 2014 Plan.

Under the 2014 Plan, the Company also grants fully-vested shares of its common stock to certain members of its Board of Directors. Additionally, the Company granted such shares to director members of the Interim Office of the Chief Executive Officer. While these shares are fully vested, the directors are restricted from selling these shares while they are still serving on the Company’s Board of Directors. During the fiscal years ended December 30, 2017, December 31, 2016 and January 2, 2016, the Company granted to members of the Company’s Board of Directors an aggregate of 30, 36 and 50 fully-vested shares, respectively, and recognized compensation expense of $664, $451 and $507, respectively. During the fiscal year ended December 30, 2017, the Company granted to director members of the Interim Office of the Chief Executive Officer an aggregate of 40 fully vested shares and recognized compensation expense of $604.

In fiscal 2017, as part of an initial equity award, the Company granted a stock option to purchase 500 shares of its common stock (the “Inducement Option”) to its new President and Chief Executive Officer upon commencement of her employment. The Inducement Option vests proportionately over four years on each anniversary of the grant date and expires on the seven-year anniversary of the grant date. While the Inducement Option was granted in reliance on an employment inducement exemption and not awarded pursuant to the 2014 Plan, it is subject to the same terms and conditions of the 2014 Plan.

The Company’s long-term equity incentive compensation program has historically included time-vesting non-qualified stock option and/or restricted stock unit (including performance-based stock unit with both time- and performance-vesting criteria (“PSUs”)) awards.

From time to time, the Company has granted fully-vested shares of its common stock to individuals in connection with special circumstances. In fiscal 2015, the Company granted an aggregate of 105 fully-vested shares of its common stock to individuals under such special circumstances. In fiscal 2015, the Company also granted special performance-based stock option awards.

Under the Winfrey Option Agreement, in fiscal 2015, the Company granted Ms. Winfrey a fully-vested non-qualified stock option to purchase 3,513 shares of its common stock as more fully described in Note 4.

The Company issues common stock for share-based compensation awards from treasury stock. The total compensation cost that has been charged against income for share-based compensation awards was $14,949, $6,527, and $24,771 for the fiscal years ended December 30, 2017, December 31, 2016 and January 2, 2016, respectively. Such amounts have been included as a component of selling, general and administrative expenses. The total income tax benefit recognized in the income statement for all share-based compensation awards was $3,580, $1,849 and $8,170 for the fiscal years ended December 30, 2017, December 31, 2016, and January 2, 2016, respectively. The tax benefits realized from options exercised and RSUs and PSUs vested totaled $7,210, $2,114 and $274 for the fiscal years ended December 30, 2017, December 31, 2016 and January 2, 2016, respectively. No compensation costs were capitalized. As of December 30, 2017, there was $46,735 of total unrecognized compensation cost related to the Inducement Option and stock options, RSUs and PSUs granted under the Stock Plans. That cost is expected to be recognized over a weighted-average period of approximately 1.9 years.

Stock Option Awards Under Stock Plans and Inducement Option

Stock Option Awards with Time-Vesting Criteria

Stock options with time-vesting criteria (“Time-Vesting Options”) are exercisable based on the terms and conditions outlined in the applicable agreement for each award. Time-Vesting Options outstanding at December 30, 2017 and December 31, 2016 vest over a period of three to five years and the expiration term is seven to ten years. Time-Vesting Options outstanding at December 30, 2017 and December 31, 2016 have an exercise price between $3.97 and $63.59 per share.

The fair value of each of these option awards is estimated on the date of grant using the Black-Scholes option pricing model with the weighted average assumptions noted in the following table. Expected volatility is based on the historical volatility of the Company’s common stock. Since the Company’s option exercise history is limited, it has estimated the expected term of these options (other than the options with a seven-year term) to be the midpoint between the vesting period and the contractual term of each option. For options with a seven-year contractual term, the expected term is equal to 7 years. The risk-free interest rate is based on the U.S. Treasury yield curve in effect on the date of grant which most closely corresponds to the expected term of the Time-Vesting Options. The dividend yield is based on the Company’s historic average dividend yield.

	December 30,	December 31,		January 2,
	2017	2016		2016
Dividend yield	0.0%	0.0%		0.0%
Volatility	51.3%-51.7%	49.6%-51.4%		41.0%
Risk-free interest rate	2.17%	1.24%-2.26%		1.84%-1.89%
Expected term (years)	6.0-7.0		6.0		6.0

Stock Option Awards with Time- and Performance-Vesting Criteria

The Company had awarded stock options with both time- and performance-vesting criteria (“T&P Options”). As of the end of fiscal 2017 and fiscal 2016, there were no outstanding T&P Options. The T&P Options were exercisable based on the terms outlined in the applicable agreements for each award. During fiscal 2015, the Company granted 37 T&P Options to certain employees that would have vested based on the achievement of both time- and performance-vesting criteria. The time-vesting criteria would have been 100% satisfied on the third anniversary of the date of the grant and the performance-vesting criteria was contingent upon meeting or exceeding certain stock price hurdles. With respect to the performance-vesting criteria, the stock options would have fully vested in 20% increments upon the first date that the average closing stock price for the 20 consecutive preceding trading days was equal to or greater than specified stock price hurdles. The fair value of the T&P Options was estimated on the date of grant and was based on the likelihood of the Company achieving the performance conditions. The Company estimated the fair value using a Monte Carlo simulation that used various assumptions that included expected volatility, a risk-free rate and an expected term.

Expected volatility was based on the historical volatility of the Company’s common stock. The risk-free interest rate was based on the U.S. Treasury yield curve in effect on the date of grant which most closely corresponds to the performance measurement period. The expected term represented the period from the grant date to the end of the five year performance period. Compensation expense on T&P Options was recognized ratably over the three year required service period as this period was longer than the derived service period calculated by the Monte Carlo simulation.

	December 30,		December 31,		January 2,
	2017		2016		2016
Dividend yield	0%		0%		0%
Volatility	0%		0%		40.5%
Risk-free interest rate	0.00%		0.00%		1.60%
Expected term (years)		0.0		0.0		5.0

On May 7, 2015, the Company’s shareholders approved an amendment to the 2014 Plan to permit a one-time stock option exchange program under which the Company would offer eligible employees the opportunity to exchange certain eligible T&P Options on a (a) two-for-one basis for new stock options for all eligible employees, other than the Company’s then-Chief Executive Officer (i.e., so that the new stock options would cover half as many shares as the corresponding surrendered options) and (b) 3.5- for-one basis for new stock options for the Company’s then-Chief Executive Officer (i.e., so that the new stock options would cover a number of shares equal to the quotient of the number of shares covered by the corresponding surrendered options divided by 3.5). The option exchange program was designed to create better incentives for employees to remain with the Company and contribute to the attainment of its business and financial objectives.

On May 22, 2015, the Company launched a tender offer in connection with the option exchange program which expired on June 22, 2015. Pursuant to the offer, employees tendered options to purchase 1,700 shares of common stock (representing 99.6% of the total shares of common stock underlying the options eligible for exchange) with a weighted-average exercise price of $24.68 per share. The Company cancelled and replaced those options on June 22, 2015 with options to purchase 734 shares of common stock with an exercise price of $5.25 per share, which was the closing price per share of the Company’s common stock on the New York Stock Exchange on June 22, 2015. The replacement options vest over three years, with 25% vesting on each of the first and second anniversaries of the date of grant and 50% vesting on the third anniversary of the date of grant. The option exchange resulted in an incremental stock option expense of $1,599, which was determined by comparing the fair value of the T&P Option as calculated based on a Monte Carlo simulation, to the fair value of the replacement options, as calculated using the Black-Scholes option pricing model, for the eligible options at the time of exchange. This incremental expense, along with the unamortized expense associated with the cancelled options, is being recognized ratably over the new vesting period of the replacement options, which is three years.

Option Activity

A summary of all option activity under the Stock Plans and with respect to the Inducement Option and the Winfrey Option (see Note 4 for additional disclosure regarding the Winfrey Option) for the fiscal year ended December 30, 2017 is presented below:

						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
	Shares			Price		Life (Yrs.)		Value
Outstanding at December 31, 2016		5,113		$	11.76
Granted		1,302		$	45.95
Exercised		(275	)	$	13.94
Cancelled		(256	)	$	35.86
Outstanding at December 30, 2017		5,884		$	18.17		7.3	$	163,681
Exercisable at December 30, 2017		4,214		$	10.60		7.4	$	144,138

The weighted-average grant-date fair value of all options granted was $15.21, $5.79 and $4.86, for the fiscal years ended December 30, 2017, December 31, 2016 and January 2, 2016, respectively. The total intrinsic value of Time-Vesting Options exercised was $5,930, $117 and $17 for the fiscal years ended December 30, 2017, December 31, 2016 and January 2, 2016, respectively.

Cash received from Time-Vesting Options exercised during the fiscal years ended December 30, 2017, December 31, 2016 and January 2, 2016 was $5,475, $139 and $95, respectively.

Restricted Stock Unit Awards with Time-Vesting Criteria

RSUs are exercisable based on the terms outlined in the applicable award agreements. The RSUs generally vest over a period of two to four years. The fair value of RSUs is determined using the closing market price of the Company’s common stock on the date of grant. A summary of RSU activity under the Stock Plans for the fiscal year ended December 30, 2017 is presented below:

				Weighted-Average
				Grant-Date Fair
	Shares			Value
Outstanding at December 31, 2016		1,138		$	14.15
Granted		682		$	31.58
Vested		(671	)	$	15.21
Forfeited		(72	)	$	15.74
Outstanding at December 30, 2017		1,077		$	24.22

The weighted-average grant-date fair value of RSUs granted was $31.58, $12.68 and $5.55 for the fiscal years ended December 30, 2017, December 31, 2016 and January 2, 2016, respectively. The total fair value of RSUs vested during the fiscal years ended December 30, 2017, December 31, 2016 and January 2, 2016 was $10,211, $5,145 and $1,804, respectively.

Performance-Based Stock Unit Awards with Time- and Performance-Vesting Criteria

In fiscal 2017, the Company granted 98.5 PSUs in May 2017 and 47.9 PSUs in July 2017, all having both time- and performance-vesting criteria. The time-vesting criteria for these PSUs will be satisfied on May 15, 2020. The performance-vesting criteria for these PSUs will be satisfied if the Company has achieved, in the case of the May 2017 awards, certain annual operating income objectives and, in the case of the July 2017 award, certain net income or operating income objectives, as applicable for each performance year, in each fiscal year over a three-year period (i.e., fiscal 2017 through fiscal 2019) (each, a “2017 Award Performance Year”). When the performance measure has been met for a particular 2017 Award Performance Year, that portion of units is “banked” for potential issuance following the satisfaction of the time-vesting criteria. Such portion of units to be “banked” shall be equal to (x) the target number of PSUs granted for the applicable 2017 Award Performance Year multiplied by (y) the applicable achievement percentage, rounded down to avoid the issuance of fractional shares. If all of these awards fully meet the time-vesting criteria and the minimum performance condition is attained in each 2017 Award Performance Year, depending on the Company’s performance achievement, the number of shares of the Company’s common stock issuable under these PSUs range from 113.9 to 244.0. The Company is currently accruing compensation expense to what it believes is the probable outcome upon vesting.

Additionally, in fiscal 2016, the Company granted 289.9 PSUs having both time- and performance-vesting criteria. The time-vesting criteria for these PSUs will be satisfied on the third anniversary of the grant date (i.e., May 16, 2019). The performance-vesting criteria for these PSUs will be satisfied if the Company has achieved a Debt Ratio (as defined in the applicable term sheet for these PSU awards and based on a Debt to EBITDAS ratio (each, as defined therein)) at levels at or above a “threshold” level performance of 4.5x over the performance period from December 31, 2017 to December 29, 2018. Pursuant to these awards, the number of PSUs that become vested, if any, upon the satisfaction of both vesting criteria, shall be equal to (x) the target number of PSUs granted multiplied by (y) the applicable Debt Ratio achievement percentage, rounded down to avoid the issuance of fractional shares. If all of these awards fully meet the time-vesting criteria and the minimum performance condition is attained, depending on the Company’s Debt Ratio achievement, the number of shares of the Company’s common stock issuable under these PSUs range from 61.1 to 305.4. The Company is currently accruing compensation expense to what it believes is the probable outcome upon vesting.

The fair value of PSUs is determined using the closing market price of the Company’s common stock on the date of grant. A summary of PSU activity under the 2014 Plan for the fiscal year ended December 30, 2017 is presented below:

				Weighted-Average
				Grant-Date Fair
	Shares			Value
Outstanding at December 31, 2016		198		$	13.19
Granted		146		$	27.22
Vested		0		$	0
Forfeited		(14	)	$	13.20
Outstanding at December 30, 2017		330		$	19.42

The weighted-average grant-date fair value of PSUs granted was $27.22 and $13.19 during the fiscal years ended December 30, 2017 and December 31, 2016, respectively. The total fair value of PSUs vested during the fiscal years ended December 30, 2017 and December 31, 2016 was $0 and $8, respectively.