STOCK-BASED COMPENSATION

Under the Company’s Amended and Restated Equity Incentive Plan (the "Plan"), the Compensation Committee of the Board of Directors may award incentive stock options, stock appreciation rights, restricted stock, unrestricted stock, stock deliverable on a deferred basis (including restricted stock units), and performance-based stock awards.

At the Company's May 13, 2011 shareholders' meeting, the shareholders approved an amendment to the Plan to (i) increase the maximum number of shares of stock available under the existing Plan by 3,725,000 shares from 12,053,392 shares to 15,778,392 shares and (ii) eliminate the Company's ability to grant cash awards and provide tax gross-ups under the Plan. The Plan was last approved for purposes of Section 162(m) of the Internal Revenue Code of 1986, as amended, at the Company's May 11, 2016 Shareholders' meeting. As of December 31, 2016, there were 1,625,371 shares available for grant under the Plan. The Plan makes provision for the treatment of awards upon termination of service or in the case of a merger or similar corporate transaction. Participation in the Plan is limited to members of the Company's board of directors, executive officers and other key employees.

The limit on shares available under the Plan, the individual limits, and other award terms are subject to adjustment to reflect stock splits or stock dividends, combinations, and certain other events. All stock options issued under the Plan expire no later than ten years from the date of grant. The Company believes that the current level of authorized shares is sufficient to satisfy future grants for the foreseeable future.

The Company recorded stock-based compensation cost as follows:



	For the fiscal years ended
(dollars in thousands)	December 31, 2016		January 2, 2016		January 3, 2015
Stock options	$	4,237	$	4,350	$	4,672
Restricted stock:
Time-based awards	7,451		6,855		7,018
Performance-based awards	3,974		4,728		4,827
Stock awards	1,185		1,096		1,081
Total	$	16,847	$	17,029	$	17,598

STOCK OPTIONS

Stock options vest in equal annual installments over a four-year period. The Company issues new shares to satisfy stock option exercises.

Changes in the Company's stock options for the fiscal year ended December 31, 2016 were as follows:



	Number of shares		Weighted- average exercise price	Weighted-average remaining contractual terms (years)	Aggregate intrinsic value (in thousands)

Outstanding, January 2, 2016	1,423,660		$46.56

Granted	221,740		$91.23
Exercised	(160,200	)	$44.73
Forfeited	(43,315	)	$77.31
Expired	(675	)	$72.10
Outstanding, December 31, 2016	1,441,210		$52.70	5.62	$	49,696

Vested and Expected to Vest, December 31, 2016	1,384,830		$51.34	5.50	$	49,504
Exercisable, December 31, 2016	953,780		$38.08	4.31	$	46,103

The intrinsic value of stock options exercised during the fiscal years ended December 31, 2016, January 2, 2016, and January 3, 2015 was approximately $9.0 million, $13.2 million, and $12.9 million, respectively. At December 31, 2016, there was approximately $6.4 million of unrecognized compensation cost (net of estimated forfeitures) related to stock options which is expected to be recognized over a weighted-average period of approximately 2.5 years.

The table below presents the assumptions used to calculate the fair value of options granted in each of the respective fiscal years:



	For the fiscal years ended
	December 31, 2016			January 2, 2016			January 3, 2015
Expected volatility	26.95		%	31.65		%	30.85		%
Risk-free interest rate	1.33		%	1.65		%	1.82		%
Expected term (years)	6.0			6.0			6.0
Dividend yield	1.45		%	1.06		%	1.11		%
Weighted average fair value of options granted	$	21.41		$	24.59		$	19.86

RESTRICTED STOCK AWARDS

Restricted stock awards issued under the Plan vest based upon continued service (time-based) or performance (performance-based) targets.

The following table summarizes activity related to all restricted stock awards during the fiscal year ended December 31, 2016:



	Restricted stock awards		Weighted-average grant-date fair value
Outstanding, January 2, 2016	460,727		$	68.14
Granted	190,092		$	91.66
Vested	(218,335	)	$	62.98
Forfeited	(26,785	)	$	77.91
Outstanding, December 31, 2016	405,699		$	81.29

During fiscal 2015, a total of 352,396 shares of restricted stock vested with a weighted-average fair value of $43.20 per share. During fiscal 2014, a total of 184,133 shares of restricted stock vested with a weighted-average fair value of $42.24 per share. At December 31, 2016, there was approximately $17.5 million of unrecognized compensation cost (net of estimated forfeitures) related to all restricted stock awards which is expected to be recognized over a weighted-average period of approximately 2.4 years.

Time-based Restricted Stock Awards

Time-based restricted stock awards vest in equal annual installments or cliff vest after a three- or four-year period. During fiscal years 2016, 2015, and 2014, a total of 124,135 shares, 148,396 shares, and 184,133 shares, respectively, of time-based restricted stock vested with a weighted-average fair value of $65.80 per share, $51.67 per share, and $42.24 per share, respectively. At December 31, 2016, there was approximately $12.8 million of unrecognized compensation cost (net of estimated forfeitures) related to time-based restricted stock which is expected to be recognized over a weighted-average period of approximately 2.6 years.

Performance-based Restricted Stock Awards



Fiscal year	Number of shares granted	Weighted-average fair value per share
2014	61,200	$	68.49
2015	50,600	$	82.40
2016	53,070	$	90.66

During the fiscal year ended December 31, 2016, a total of 94,200 performance shares vested with a weighted-average fair value of $59.27 per share. As of December 31, 2016, a total of 151,810 performance shares were unvested with a weighted-average fair value of $80.47 per share. Vesting of these 151,810 performance shares is based on the performance targets for the shares granted in fiscal 2016, 2015, and 2014. As of December 31, 2016, there was approximately $4.7 million of unrecognized compensation cost (net of estimated forfeitures) related to the unvested performance-based restricted stock awards which is expected to be recognized over a weighted-average period of approximately 1.7 years.

The Company estimates that all of the performance targets will be fully achieved and is recognizing compensation cost ratably over the applicable performance periods based on estimated achievement at the end of each reporting period.

Stock Awards

Included in restricted stock awards are grants to non-management members of the Company's Board of Directors. At issuance, these awards were fully vested and issued as shares of the Company's common stock. During fiscal years 2016, 2015, and 2014, such awards were as follows:



	Number of shares issued	Fair value per share	Aggregate value (in thousands)
2014	14,859	$72.72	$1,081
2015	10,933	$100.21	$1,096
2016	12,758	$101.10	$1,290

The Company received no proceeds from the issuance of these shares.