Share-Based Compensation

12 Months Ended

Dec. 29, 2024

Share-Based Payment Arrangement [Abstract]

The Company has the ability to grant stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards and performance compensation awards to current or prospective employees, directors, officers, consultants or advisors. During 2020, the Company’s Board of Directors and its stockholders approved the adoption of the 2020 Omnibus Award Plan (the “2020 Plan”) for the issuance of equity instruments as described above. The Company’s previous 2010 Omnibus Award Plan (as amended, the “2010 Plan”) expired in accordance with its terms in 2020. All equity grants in 2024, 2023, and 2022 were issued from the 2020 Plan. The 2020 Plan is currently the only equity plan from which future equity awards may be granted, but outstanding awards granted under the 2010 Plan will continue to be governed by the terms of the 2010 Plan. As of December 29, 2024, there were approximately 11,388 shares of common stock available for future grants under the 2020 Plan. During the periods presented in the consolidated financial statements, the Company settled all exercises of stock options and vesting of restricted shares, including performance shares, with treasury shares.

Stock Options

The Company grants stock options that have maximum contractual terms of 10 years and vest ratably over three years. The exercise price of options granted is equal to the market price of the Company’s common stock on the date of grant. The fair value of stock options on the date of grant is calculated using the Black-Scholes Model. The aggregate intrinsic value of an option is the amount by which the fair value of the underlying stock exceeds its exercise price.

The following table summarizes stock option activity during 2024:


	Number of Options	Weighted Average Exercise Price		Weighted Average Remaining Contractual Life in Years	Aggregate Intrinsic Value
Outstanding at December 31, 2023	10,490	$	19.55
Granted	1,846	16.72
Exercised	(2,072)	16.47
Forfeited and/or expired	(1,131)	21.64
Outstanding at December 29, 2024	9,133	$	19.42	4.74	$	4,438
Vested or expected to vest at December 29, 2024	9,045	$	19.43	4.70	$	4,438
Exercisable at December 29, 2024	6,525	$	19.93	3.34	$	4,438

The total intrinsic value of options exercised during 2024, 2023 and 2022 was $5,796, $7,230 and $2,979, respectively. The weighted average grant date fair value of stock options granted during 2024, 2023 and 2022 was $3.43, $5.35 and $6.33, respectively.

The weighted average grant date fair value of stock options was determined using the following assumptions:


	2024		2023		2022
Risk-free interest rate	3.62	%	4.31	%	3.00	%
Expected option life in years	5.25		5.01		4.75
Expected volatility	36.25	%	36.79	%	37.82	%
Expected dividend yield	5.99	%	4.64	%	2.34	%

The risk-free interest rate represents the U.S. Treasury zero-coupon bond yield correlating to the expected life of the stock options granted. The expected option life represents the period of time that the stock options granted are expected to be outstanding based on historical exercise trends for similar grants. The expected volatility is based on the historical market price volatility of the Company over a period equivalent to the expected option life. The expected dividend yield represents the Company’s annualized average yield for regular quarterly dividends declared prior to the respective stock option grant dates.

The Black-Scholes Model has limitations on its effectiveness including that it was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable and that the model requires the use of highly subjective assumptions, such as expected stock price volatility. Employee stock option awards have characteristics significantly different from those of traded options and changes in the subjective input assumptions can materially affect the fair value estimates.

Restricted Shares

The Company grants RSUs, which primarily vest ratably over three years or cliff vest after three years. The Company also grants RSAs to non-employee directors, which primarily cliff vest after one year. For the purposes of our disclosures, the term “Restricted Shares” applies to RSUs and RSAs collectively unless otherwise noted. The fair value of Restricted Shares granted is determined using the fair market value of the Company’s common stock on the date of grant, as set forth in the applicable plan document.

The following table summarizes activity of Restricted Shares during 2024:


	Number of Restricted Shares	Weighted Average Grant Date Fair Value
Non-vested at December 31, 2023	1,372	$	20.42
Granted	1,174	17.49
Vested	(710)	19.32
Forfeited	(122)	21.55
Non-vested at December 29, 2024	1,714	$	18.81

The total fair value of Restricted Shares that vested in 2024, 2023 and 2022 was $12,685, $8,224 and $5,564, respectively.

Performance Shares

The Company grants performance-based awards to certain officers and key employees. The vesting of these awards is contingent upon meeting one or more defined operational or financial goals (a performance condition) or relative common stock share prices (a market condition). The quantity of shares awarded ranges from 0% to 200% of “Target,” as defined in the award agreement as the midpoint number of shares, based on the level of achievement of the performance and market conditions.

The fair values of the performance condition awards granted in 2024, 2023 and 2022 were determined using the fair market value of the Company’s common stock on the date of grant, as set forth in the applicable plan document. Share-based compensation expense recorded for performance condition awards is reevaluated at each reporting period based on the probability of the achievement of the goal.

The fair value of market condition awards granted in 2024, 2023 and 2022 were estimated using the Monte Carlo simulation model. The Monte Carlo simulation model utilizes multiple input variables to estimate the probability that the market conditions will be achieved and is applied to the trading price of our common stock on the date of grant.

The input variables are noted in the table below:


	2024		2023		2022
Risk-free interest rate	4.38	%	4.31	%	1.71	%
Expected life in years	3.00		3.00		3.00
Expected volatility	29.60	%	34.95	%	52.33	%
Expected dividend yield (a)	0.00	%	0.00	%	0.00	%

_______________

(a)The Monte Carlo method assumes a reinvestment of dividends.

Share-based compensation expense is recorded ratably for market condition awards during the requisite service period and is not reversed, except for forfeitures, at the vesting date regardless of whether the market condition is met.

The following table summarizes activity of performance shares at Target during 2024:


	Performance Condition Awards			Market Condition Awards
	Shares	Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value
Non-vested at December 31, 2023	608	$	21.66	494	$	26.68
Granted	277	18.00		402	19.85
Dividend equivalent units issued (a)	33	—		37	—
Vested (b)	(213)	20.21		—	—
Forfeited	(118)	21.97		(284)	24.35
Non-vested at December 29, 2024	587	$	20.32	649	$	23.27

_______________

(a)Dividend equivalent units are issued in lieu of cash dividends for non-vested performance shares. There is no weighted average fair value associated with dividend equivalent units.

(b)Performance condition awards exclude the vesting of an additional 45 shares, which resulted from the performance of the awards exceeding Target.

The total fair value of performance condition awards that vested in 2024, 2023 and 2022 was $4,683, $2,105 and $1,712, respectively. The total fair value of market condition awards that vested in 2023 and 2022 was $2,138 and $2,253, respectively. No market condition awards vested in 2024.

Share-Based Compensation

Total share-based compensation and the related income tax benefit recognized in the Company’s consolidated statements of operations were as follows:


	Year Ended
	2024		2023		2022
Stock options	$	4,829	$	7,687	$	9,072
Restricted shares	13,857		9,503		7,106
Performance shares:
Performance condition awards	480		2,524		4,431
Market condition awards	3,853		4,033		3,929
Share-based compensation	23,019		23,747		24,538
Less: Income tax benefit	(3,300)		(3,207)		(3,043)
Share-based compensation, net of income tax benefit	$	19,719	$	20,540	$	21,495

As of December 29, 2024, there was $26,868 of total unrecognized share-based compensation, which will be recognized over a weighted average amortization period of 1.62 years.