Stock-Based Compensation

12 Months Ended

Dec. 30, 2017

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

Disclosure Of Compensation Related Costs Share Based Payments [Text Block]

16. Stock-Based Compensation

Stock Incentive Plan

On May 28, 2013, the Company’s shareholders approved the 2013 Stock Incentive Plan (the “2013 Plan”), which permits the grant of a variety of stock-based awards, including stock options, restricted stock units (“RSUs”) and performance share units (“PSUs”) to selected employees and directors of the Company. As at December 30, 2017, 3,674,298 securities remained available for issuance under the 2013 Plan.

For the years ended December 30, 2017, December 31, 2016 and January 2, 2016, total stock-based compensation expense amounted to $5.7 million, $4.1 million and $4.4 million, respectively.

Stock Options

Stock options granted to selected employees during the year ended December 30, 2017 and December 31, 2016, vest ratably on each of the first through third anniversaries of the grant date and expire on the tenth anniversary of the grant date. Stock options granted during the year ended January 2, 2016, vest ratably on each of the first through fifth anniversaries of the grant date and expire on the tenth anniversary of the grant date. Stock options granted by the Company contain an exercise price that is equal to the closing market price of the shares on the day prior to the grant date. Any consideration paid by employees or directors on exercise of stock options or purchase of stock is credited to capital stock.

The following table summarizes stock option activity for the year ended December 30, 2017:

				Weighted-
				average
		Weighted-		remaining
		average		contractual	Aggregate
	Options	exercise price		term (years)	intrinsic value
Outstanding, beginning of year	4,579,850	$	6.47
Granted	1,120,406		9.29
Exercised	(827,272)		5.34
Forfeited	(1,260,767)		6.74
Expired	(305,489)		7.56
Outstanding at end of year	3,306,728	$	7.51	6.92	$	4,145
Exercisable, end of year	1,157,507	$	7.16	5.12	$	1,615

The following table summarizes non-vested stock option activity during the year ended December 30, 2017:

		Weighted-
		average grant-
	Stock options	date fair value
Non-vested, beginning of year	2,843,676	$	3.06
Granted	1,120,406		4.12
Vested	(756,075)		3.19
Forfeited	(1,058,786)		3.05
Non-vested, end of year	2,149,221	$	3.57

The weighted-average grant-date fair values of all stock options granted in the years ended December 30, 2017, December 31, 2016 and January 2, 2016, were $4.12, $1.86 and $4.37, respectively. The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the stock options granted in those years were as follows:

	December 30, 2017	December 31, 2016	January 2, 2016
Grant-date stock price	$9.29	$4.25	$8.41
Dividend yield⁽¹⁾	0%	0%	0%
Expected volatility⁽²⁾	42.1%	41.7%	50.1%
Risk-free interest rate⁽³⁾	2.0%	1.6%	1.9%
Expected life of options (years)⁽⁴⁾	6.4	6.0	6.5

(1) Determined based on expected annual dividend yield at the time of grant.

(2) Determined based on historical volatility of the Company’s Common Shares over the expected life of the option.

(3) Determined based on the yield on U.S. Treasury zero-coupon issues with maturity dates equal to the expected life of the option.

(4) Determined using simplified method, as the Company changed the vesting period of its stock option grants from five years to three years in 2016, and, as a result, historical exercise data may not provide a reasonable basis upon which to estimate expected life.

The following table summarizes stock options outstanding and exercisable as at December 30, 2017:

					Weighted-
					average
					remaining	Weighted-			Weighted-
Exercise price range				Outstanding	contractual life	average exercise		Exercisable	average exercise
	Low		High	options	(years)	price		options	price
$	3.27	$	5.14	664,048	6.43	$	3.41	184,866	$	3.78
	5.15		7.28	636,177	6.47		6.01	383,844		5.74
	7.29		9.38	704,499	6.53		8.00	294,900		7.40
	9.39		9.60	706,052	9.40		9.50	-		-
	9.61		13.86	595,952	5.46		10.75	293,897		10.89
				3,306,728	6.92	$	7.51	1,157,507	$	7.16

Total compensation costs related to non-vested stock option awards not yet recognized as an expense was $5.3 million as at December 30, 2017, which will be amortized over a weighted-average remaining vesting period of 2.2 years.

Restricted Stock Units

For the year ended December 30, 2017, the Company granted 762,710 RSUs to selected employees and directors. 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 $9.18, based on the stock price of the Common Shares as of the dates of grant.

The following table summarizes non-vested RSU activity during the year ended December 30, 2017:

		Weighted-
		average grant-
	RSUs	date fair value
Non-vested, beginning of year	175,860	$	6.10
Granted	762,710		9.18
Vested	(95,724)		6.31
Forfeited	(67,490)		9.50
Non-vested, end of year	775,356	$	8.85

Total compensation costs related to non-vested RSU awards not yet recognized as an expense was $4.9 million as at December 30, 2017, which will be amortized over a weighted-average remaining vesting period of 2.2 years.

Performance Share Units

For the year ended December 30, 2017, the Company granted 1,560,535 PSUs to selected employees. 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 $5.64, based on the following inputs to the valuation model:

Grant-date stock price	$	9.33
Dividend yield		0%
Expected volatility⁽¹⁾		42.2%
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.

(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 following table summarizes non-vested PSU activity during the year ended December 30, 2017:

		Weighted-
		average grant-
	PSUs	date fair value
Non-vested, beginning of year	454,425	$	6.75
Granted	1,560,535		5.64
Forfeited or cancelled	(495,208)		6.70
Non-vested, end of year	1,519,752	$	5.68

Total compensation costs related to non-vested PSU awards not yet recognized as an expense was $6.4 million as at December 30, 2017, which will be amortized over a weighted-average remaining vesting period of 2.4 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 PSUs. In addition, Mr. Colo was granted 100,000 RSUs, of which 50,000 were contingent on Mr. Colo purchasing Common Shares with an aggregate value of $1.0 million in the open market.

The vesting of the Special Stock Options and PSUs 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 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 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 PSU 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 PSUs 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 Stock
		Options		PSUs
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 to the respective expected lives of the Special Stock Options and PSUs.

(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 PSUs.

The aggregate grant-date fair value of the Special Stock Options and PSUs 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.

Employee Share Purchase Plan

The Company maintains an employee share purchase plan whereby employees can purchase common shares through payroll deductions. In the year ended December 30, 2017, the Company’s employees purchased 61,796 common shares (December 31, 2016 – 82,841; January 2, 2016 – 55,024) for total proceeds of $0.4 million (December 31, 2016 – $0.4 million; January 2, 2016 – $0.4 million). As at December 30, 2017, 1,112,073 common shares are remaining to be granted under this plan.