Stock-based compensation

12 Months Ended

Dec. 29, 2018

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

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

15. 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 29, 2018, 4,028,729 securities remained available for issuance under the 2013 Plan.

For the years ended December 29, 2018, December 30, 2017 and December 31, 2016, total stock-based compensation expense amounted to $7.9 million, $5.7 million and $4.1 million, respectively.

Stock Options

Stock options granted to selected employees during the three-year period ended December 29, 2018 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 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 29, 2018:

				Weighted-
				average
		Weighted-		remaining
		average		contractual	Aggregate
	Stock options	exercise price		term (years)	intrinsic value
Outstanding, beginning of year	3,306,728	$	7.51
Granted	58,000		7.56
Exercised	(222,880)		4.11
Forfeited	(443,298)		7.76
Outstanding, end of year	2,698,550	$	7.76	6.67	$	210
Exercisable, end of year	1,264,902	$	7.18	5.04	$	127

The following table summarizes non-vested stock option activity during the year ended December 29, 2018:

		Weighted-
		average grant-
	Stock options	date fair value
Non-vested, beginning of year	2,149,221	$	3.57
Granted	58,000		3.31
Vested	(524,657)		3.19
Forfeited	(248,916)		3.22
Non-vested, end of year	1,433,648	$	3.74

The weighted-average grant-date fair values of all stock options granted in the years ended December 29, 2018, December 30, 2017 and December 31, 2016, were $3.31, $4.12 and $1.86, 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 29, 2018		December 30, 2017		December 31, 2016
Grant-date stock price	$	7.56	$	9.29	$	4.25
Dividend yield⁽¹⁾		0%		0%		0%
Expected volatility⁽²⁾		41.1%		42.1%		41.7%
Risk-free interest rate⁽³⁾		2.9%		2.0%		1.6%
Expected life of options (years)⁽⁴⁾		6.0		6.4		6.0

(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 29, 2018:

					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	$	5.50	468,550	6.85	$	3.68	297,447	$	3.75
	5.51		7.28	527,377	5.76		6.24	302,043		5.91
	7.29		9.35	578,999	6.48		8.03	333,502		7.67
	9.36		9.60	687,445	8.40		9.50	1,667		9.45
	9.61		13.86	436,179	5.14		10.85	330,243		10.92
				2,698,550	6.67	$	7.76	1,264,902	$	7.18

Total compensation costs related to non-vested stock option awards not yet recognized as an expense was $2.8 million as at December 29, 2018, which will be amortized over a weighted-average remaining vesting period of 1.4 years.

Restricted Stock Units

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 values of all RSUs granted in the years ended December 29, 2018, December 30, 2017 and December 31, 2016, were $7.65, $9.18 and $3.87, respectively.

The following table summarizes non-vested RSU activity during the year ended December 29, 2018:

		Weighted-
		average grant-
	RSUs	date fair value
Non-vested, beginning of year	775,356	$	8.85
Granted	154,711		7.65
Vested	(314,326)		8.96
Forfeited	(17,904)		9.50
Non-vested, end of year	597,837	$	8.46

Total compensation costs related to non-vested RSU awards not yet recognized as an expense was $3.1 million as at December 29, 2018, which will be amortized over a weighted-average remaining vesting period of 1.4 years.

Performance Share Units

For the year ended December 30, 2017, the Company granted 1,560,535 PSUs to selected employees. No additional PSUs were granted in the year ended December 29, 2018. 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.

For the year ended December 30, 2017, the fair value of the PSUs granted 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:

	December 30, 2017
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 29, 2018:

		Weighted-
		average grant-
	PSUs	date fair value
Non-vested, beginning of year	1,519,752	$	5.68
Forfeited or cancelled	(157,856)		6.41
Non-vested, end of year	1,361,896	$	5.60

Total compensation costs related to non-vested PSU awards not yet recognized as an expense was $3.6 million as at December 29, 2018, which will be amortized over a weighted-average remaining vesting period of 1.4 years.

CEO Plan

On February 6, 2017, David Colo was appointed President and CEO of the Company. In connection with his appointment, for the year ended December 30, 2017, 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.

For the year ended December 29, 2018, 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:

	December 30, 2017
		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.

Total compensation costs related to the non-vested Special Stock Options and PSUs awarded to Mr. Colo not yet recognized as an expense was $0.6 million as at December 29, 2018, which will be amortized over a weighted-average remaining vesting period of 1.1 years.

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. Total compensation costs related to the non-vested RSUs awarded to Mr. Colo not yet recognized as an expense was $0.3 million as at December 29, 2018, which will be amortized over a weighted-average remaining vesting period of 1.1 years.

On February 21, 2019, the Board of Directors terminated Mr. Colo as President and CEO of the Company.

Employee Stock Purchase Plan

The Company maintains an Employee Stock Purchase Plan whereby employees can purchase common shares through payroll deductions. For the year ended December 29, 2018, the Company’s employees purchased 112,158 common shares (December 30, 2017 – 61,796; December 31, 2016 – 82,841) for total proceeds of $0.6 million (December 30, 2017 – $0.4 million; December 31, 2016 – $0.4 million). As at December 29, 2018, 999,915 common shares are remaining to be granted under this plan.