Stock-Based Compensation

6 Months Ended

Jul. 01, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

9. Stock-Based Compensation

Stock Incentive Plan

For the two quarters ended July 1, 2017, the Company granted 823,236 stock options to selected employees that vest 100% on the third anniversary of the grant date and expire on the tenth anniversary of the grant date. The weighted-average grant-date fair value of the stock options was $4.24. The following table summarizes the weighted-average assumptions used in the Black-Scholes option-pricing model to determine the fair value of the stock options granted:

Grant-date stock price	$	9.46
Exercise price	$	9.46
Dividend yield		0%
Expected volatility⁽¹⁾		42.3%
Risk-free interest rate⁽²⁾		2.0%
Expected life of options (in years)⁽³⁾		6.5

(1) Determined based on the historical volatility of the Common Shares over the expected life of the stock options.

(2) Determined based on U.S. Treasury yields with a remaining term equal the expected life of the stock options.

(3) Determined based on the mid-point of vesting (three years) and expiration (ten years).

The aggregate grant-date fair value of stock options awarded to employees was $3.5 million, which will be recognized on a straight-line basis over the three-year vesting period.

For the two quarters ended July 1, 2017, the Company also granted 1,386,335 performance share units (“PSU”) to selected employees and 653,982 restricted stock units (“RSUs”) to selected employees and directors.

The vesting of the PSUs is subject to the satisfaction of certain stock price performance conditions during a three-year performance period ending May 24, 2020. One-third of the PSUs will vest upon achieving a stock price of $11.00, one-third will vest upon achieving a stock price of $14.00, and one-third will vest upon achieving a stock price of $18.00, in each case for 20 consecutive trading days and subject to the employee’s continued employment throughout the performance period. Each vested PSU will entitle the employee to receive one common share of the Company without payment of additional consideration.

The fair value of the PSUs was estimated using a Monte Carlo valuation model, which simulates the potential outcomes for the Company’s stock price performance and determines the payouts that would occur under each scenario. Fair value is based on the average of those results. The grant-date weighted-average fair value of the PSUs was determined to be $5.90, based on the following inputs to the valuation model:

Grant-date stock price	$	9.50
Dividend yield		0%
Expected volatility⁽¹⁾		42.3%
Risk-free interest rate⁽²⁾		1.5%
Expected life (in years)⁽³⁾		3.0

(1) Determined based on the historical volatility of the Common Shares over 6.5 years, which is consistent with the volatility assumption for stock options granted to employees on the same date as the PSUs.

(2) Determined based on U.S. Treasury yields with a remaining term equal to the expected life of the PSUs.

(3) Determined based on vesting for the PSUs.

The aggregate grant-date fair value of the PSUs was $8.2 million, which will be recognized on a straight-line basis over the requisite three-year performance period.

The RSUs granted to employees vest ratably on each of the first through third anniversaries of the grant date. RSUs granted to directors vest 100% on the first anniversary of the grant date. Each vested RSU will entitle the employee or director to receive one common share of the Company. The weighted-average grant-date fair value of the RSUs was estimated to be $9.31, based on the stock price of the Common Shares as of the dates of grant. The aggregate grant-date fair value of the RSUs awarded to employees and directors of $6.1 million will be recognized on a straight-line basis over the weighted-average vesting period of 2.7 years.

CEO Plan

On February 6, 2017, David Colo was appointed President and CEO of the Company. In connection with his appointment, the Company granted Mr. Colo 473,940 performance-based stock options (the “Special Stock Options”) and 277,780 performance stock units (the “Special Performance Units”). In addition, Mr. Colo was granted 100,000 RSUs, of which 50,000 of the RSUs granted were contingent on Mr. Colo purchasing an aggregate value of $1.0 million of Common Shares in the open market.

The vesting of the Special Stock Options and Special Performance Units is subject to: (i) Mr. Colo’s continued employment with the Company during a three-year performance period ending February 6, 2020; and (ii) the satisfaction of certain stock price performance conditions during the performance period. One-third of the Special Stock Options and Special Performance Units will vest upon achieving a stock price of $11.00, one-third will vest upon achieving a stock price of $14.00, and one-third will vest upon achieving a stock price of $18.00, in each case for 20 consecutive trading days and subject to Mr. Colo’s continued employment through the performance period. Each vested Special Stock Option will entitle Mr. Colo to purchase one common share of the Company at an exercise price of $7.00, which was equal to the closing price of the Common Shares as at February 6, 2017. Each vested Special Performance Unit will entitle Mr. Colo to receive one common share of the Company without payment of additional consideration.

The grant-date weighted-average fair values of the Special Stock Options and Special Performance Units were estimated using a Monte Carlo valuation model and determined to be $1.84 and $2.79, respectively, based on the following inputs to the valuation model:

				Special
		Special Stock		Performance
		Options		Units
Grant-date stock price	$	7.00	$	7.00
Exercise price	$	7.00		NA
Dividend yield		0%		0%
Expected volatility⁽¹⁾		42.0%		42.0%
Risk-free interest rate⁽²⁾		2.2%		1.5%
Expected life (in years)⁽³⁾		6.5		3.0

(1) Determined based on the historical volatility of the Common Shares over the expected life of the Special Stock Options.

(2) Determined based on U.S. Treasury yields with a remaining term equal the respective expected lives of the Special Stock Options and Special Performance Units.

(3) Determined using the simplified method for the Special Stock Options, based on the mid-point of vesting (three years) and expiration (ten years). Determined based on vesting for the Special Performance Units.

The aggregate grant-date fair value of the Special Stock Options and Special Performance Units awarded to Mr. Colo was $1.6 million, which will be recognized on a straight-line basis over the requisite three-year performance period.

The RSUs granted to Mr. Colo vest in three equal installments beginning on February 6, 2018. Each vested RSU will entitle Mr. Colo to receive one common share of the Company. The grant-date fair value of the RSUs was estimated to be $7.00 based on the stock price of the Common Shares as of the date of grant. The aggregate grant-date fair value of the RSUs awarded to Mr. Colo of $0.7 million will be recognized on a straight-line basis over the three-year vesting period.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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