Share-Based Payments

6 Months Ended

Jul. 02, 2022

(15)

Share-Based Payments

The following table details our stock option activity for the first two quarters of fiscal 2022 (dollars in thousands, except per share data):


		Weighted		Weighted Average
		Average		Contractual Life	Aggregate
	Options	Exercise Price		Remaining (Years)	Intrinsic Value
Outstanding at January 1, 2022	789,226	$	31.86	7.03	$	1,245
Granted	44,239	$	22.49
Exercised	(2,227)	$	26.80
Forfeited	—	$	—
Expired	(2,441)	$	26.80
Outstanding at July 2, 2022	828,797	$	31.38	6.71	$	134
Exercisable at July 2, 2022	555,676	$	30.99	5.53	$	61

The fair value of the options was estimated on the date of grant using the Black-Scholes option-pricing model utilizing the following assumptions. Expected volatility was based on both historical and implied volatilities of our common stock over the estimated expected term of the award. The expected term of the options granted represents the period of time that options were expected to be outstanding and is based on the “simplified method” in accordance with accounting guidance. We utilized the simplified method to determine the expected term of the options as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate expected term. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury implied yield at the date of grant. The assumptions used in the Black-Scholes option-pricing model during the first two quarters of 2022 and 2021 were as follows:


	2022		2021
Weighted average grant date fair value	$	3.73	$	6.48
Expected volatility		39.53%		37.3% - 38.8%
Expected term		5.5 years		5.5 - 6.5 years
Risk-free interest rate		3.0%		0.9% - 1.1%
Dividend yield		8.5%		5.6% - 6.3%

The following table details the activity in our performance share long-term incentive awards (LTIAs) for the first two quarters of 2022:


		Weighted Average
	Number of	Grant Date Fair Value
	Performance Shares⁽¹⁾	(per share)⁽²⁾
Outstanding at January 1, 2022	1,140,381	$	20.08
Granted	350,427	$	21.81
Vested	(337,284)	$	19.75
Forfeited	(47,092)	$	27.04
Outstanding at July 2, 2022	1,106,432	$	20.43

(1)	Solely for purposes of this table, the number of performance shares is based on the participants earning the maximum number of performance shares (i.e., 200% to 233% of the target number of performance shares).

(2)

The fair value of the awards was determined based upon the closing price of our common stock on the applicable measurement dates (i.e., the deemed grant dates for accounting purposes), reduced by the present value of expected dividends using the risk-free interest-rate, as the award holders are not entitled to dividends or dividend equivalents during the vesting period.

The following table details the activity in our restricted stock for the first two quarters of 2022:


		Weighted Average
	Number of Shares	Grant Date Fair Value
	of Restricted Stock	(per share)⁽¹⁾
Outstanding at January 1, 2022	74,461	$	24.78
Granted	49,444	$	27.30
Vested	(30,911)	$	23.14
Forfeited	(1,681)	$	25.54
Outstanding at July 2, 2022	91,313	$	26.69

(1)	The fair value of the awards was determined based upon the closing price of our common stock on the applicable measurement dates (i.e., the deemed grant dates for accounting purposes).

The following table details the net number of shares of common stock issued by our company during the second quarter and first two quarters of 2022 and 2021 upon the vesting of performance share LTIAs, the exercise of stock options, the issuance of restricted stock and other share-based compensation:


	Thirteen Weeks Ended				Twenty-six Weeks Ended
	July 2,		July 3,		July 2,		July 3,
	2022		2021		2022		2021
Number of performance shares vested		—		—		337,284		86,523
Shares withheld for tax withholding		—		—		(125,152)		(35,281)
Shares of common stock issued for performance share LTIAs		—		—		212,132		51,242
Shares of common stock issued upon the exercise of stock options		—		27,212		2,227		466,112
Shares of common stock issued to non-employee directors for annual equity grants		46,773		39,251		46,773		39,251
Shares of restricted common stock issued to employees		562		7,126		49,444		38,098
Shares of restricted stock withheld and cancelled for tax withholding upon vesting		(1,250)		(66)		(12,121)		(21,528)
Shares of restricted stock cancelled upon forfeiture		(1,108)		(956)		(1,681)		(956)
Net shares of common stock issued		44,977		72,567		296,774		572,219

The following table sets forth the compensation expense recognized for share-based payments (performance share LTIAs, restricted stock, stock options, non-employee director stock grants and other share-based payments) during the second quarter and first two quarters of 2022 and 2021 and where that expense is reflected in our consolidated statements of operations (in thousands):


	Thirteen Weeks Ended				Twenty-six Weeks Ended
	July 2,		July 3,		July 2,		July 3,
Consolidated Statements of Operations Location	2022		2021		2022		2021
Compensation expense included in cost of goods sold	$	232	$	322	$	439	$	458
Compensation expense included in selling, general and administrative expenses		926		1,080		1,809		1,667
Total compensation expense for share-based payments	$	1,158	$	1,402	$	2,248	$	2,125

As of July 2, 2022, there was $2.5 million of unrecognized compensation expense related to performance share LTIAs, which is expected to be recognized over the next 2.5 years, $2.0 million of unrecognized compensation expense related to restricted stock, which is expected to be recognized over the next 3.0 years, and $1.1 million of unrecognized compensation expense related to stock options, which is expected to be recognized over the next 1.8 years.