The Company maintains a 2014 Incentive Compensation Plan (the Plan), which, with subsequent amendments, allows for issuance of up to 15,788 shares through its expiration date of February 2024.

The Plan provides for the grant of performance-based restricted stock units (PRUs), restricted stock units (RSUs), and stock appreciation rights. The exercise price for awards is determined by the compensation committee of the board of directors. Each award shall vest and expire as determined by the compensation committee of the board of directors, with PRUs and RSUs generally vesting over three years for employees and one year for non-employee directors. PRUs and RSUs do not have voting rights. All grants provide for accelerated vesting if there is a change in control, as defined in the Plan.

As of January 3, 2022, 507 PRUs, 3,127 RSUs and 60 stock options were outstanding under the Plan. Included in the 507 PRUs outstanding as of January 3, 2022 are 181 vested but not yet released. Included in the 3,127 RSUs outstanding as of January 3, 2022 are 530 vested but not yet released RSUs associated with non-employee directors. These RSUs vest over one year with release of the underlying shares of common stock deferred until retirement from the board of directors, (or until one year after retirement in the case of certain prior grants).

The Company maintains a long-term incentive program for executives that provides for the issuance of PRUs, representing hypothetical shares of the Company’s common stock that may be issued. Under the PRU program, a target number of PRUs is awarded at the beginning of each three-year performance period. The number of shares of common stock released at the end of the performance period may range from zero to 2.4 times the target number depending on performance during the period. The performance metrics of the PRU program are based on (a) annual financial targets, which are based on revenue and EBITDA (earnings before interest, tax, depreciation, and amortization expense), each equally weighted, and (b) an overall modifier based on the Company’s total stockholder return (TSR) relative to a group of peer companies selected by the Company’s compensation committee, over the three-year performance period.

Under the PRU program, financial goals are set at the beginning of each fiscal year and performance is reviewed at the end of that year. The percentage to be applied to each participant’s target award ranges from zero to 160% based upon the extent to which the annual financial performance goals are achieved. If specific performance threshold levels for the annual financial goals are met, the amount earned for that element will be applied to one-third of the participants’ PRU award to determine the number of units earned.

At the end of the three-year performance period, the total units earned, if any, are adjusted by applying a modifier, ranging from zero to 150% based on the Company’s TSR based on stock price changes relative to a group of peer companies selected by the Company’s compensation committee for the same three-year period.

The TSR modifier is intended to ensure that there are limited or no payouts under the PRU program if the Company’s stock performance is significantly below the median TSR of a group of peer companies selected by the Company’s compensation committee over the three-year performance period. Where the annual financial goals have been met and where there has been strong relative TSR performance over the three-year performance period, the PRU program may provide substantial rewards to participants with a maximum payout of 2.4 times the initial PRU award. However, even if all of the annual financial metric goals are achieved in each of the three years, there will be no payouts if the Company’s stock performance is below that of the 10th percentile for PRUs granted in 2021, 2020 and 2019 of the group of peer companies selected by the Company’s compensation committee, as appropriate.

Recipients of PRU awards generally must remain employed by the Company on a continuous basis through the end of the three-year performance period in order to receive any amount of the PRUs covered by that award. In events such as death, disability or retirement, the recipient may be entitled to pro-rata amounts of PRUs as defined in the Plan. Target shares subject to PRU awards do not have voting rights of common stock until earned and issued following the end of the three-year performance period.

The Company records stock-based compensation expense for PRU awards granted based on management’s periodic assessment of the annual financial performance goals to be achieved. As of January 3, 2022, management determined that vesting of the PRU awards was probable. PRU activity for the year ended January 3, 2022 was as follows:

	Shares			Weighted Average Fair Value
	(In thousands)
Outstanding shares as of December 28, 2020		289		$	10.27
Granted		325			14.23
Vested		(181	)		9.20
Forfeited / cancelled		(10	)		9.20
Change in units due to annual performance achievement		(97	)		8.38
Outstanding shares as of January 3, 2022		326		$	15.41

The fair value of PRUs granted is calculated using a Monte Carlo simulation model, as the TSR modifier contains a market condition. For the years ended January 3, 2022, December 28, 2020 and December 30, 2019, the following assumptions were used in determining the fair value:

	For the Year Ended
	January 3, 2022 ⁽¹⁾			December 28, 2020 ⁽²⁾			December 30, 2019 ⁽³⁾
Weighted-average fair value	$	14.23		$	10.57		$	10.17
Risk-free interest rate		0.18	%		0.18	%		2.18	%
Dividend yield		—			—			—
Expected volatility		47	%		49	%		38	%

The risk-free interest rate for the expected term of PRUs is based on the U.S. Treasury yield curve in effect at the time of grant. Expected volatility is calculated using the Company’s historical stock price.

	Shares			Weighted Average Grant-Date Fair Value
	(In thousands)
Non-vested RSUs outstanding as of December 28, 2020		2,566		$	11.20
Granted		1,395			14.40
Vested		(1,174	)		14.65
Forfeited		(190	)		11.63
Non-vested RSUs outstanding as of January 3, 2022		2,597		$	12.70
Vested and expected to vest through 2024 as of January 3, 2022		3,127		$	12.41

The fair value of the Company’s RSUs is determined based upon the closing common stock price on the grant date. The weighted average fair value per unit of RSUs granted was $14.40, $11.20 and $10.09 for the years ended January 3, 2022, December 28, 2020 and December 30, 2019, respectively. The total fair value of RSUs vested for the years ended January 3, 2022, December 28, 2020 and December 30, 2019 was $17,185, $13,093 and $13,954, respectively.

As of January 3, 2022, stock options outstanding was 60. This is not material to the consolidated financial statements of the Company.

For the years ended January 3, 2022, December 28, 2020 and December 30, 2019, the amounts recognized in the consolidated statements of operations with respect to the stock-based compensation plan are as follows:

	For the Year Ended
	January 3,		December 28,		December 30,
	2022		2020		2019
	(In thousands)
Cost of goods sold	$	4,714	$	3,889	$	3,148
Selling and marketing		2,540		1,919		1,887
General and administrative		9,718		10,083		11,568
Research and development		739		182		213
Stock-based compensation expense recognized	$	17,711	$	16,073	$	16,816

The following is a summary of total unrecognized compensation costs as of January 3, 2022:

	Unrecognized Stock-Based Compensation Cost		Remaining Weighted Average Recognition Period
	(In thousands)		(In years)
RSU awards	$	24,406		1.4
PRU awards		1,457		1.0
Stock options		46		0.6
	$	25,909