Shareholders' Equity and Share-Based Compensation

12 Months Ended

Dec. 30, 2021

Shareholders' Equity and Share-Based Compensation

Shareholders’ Equity and Share-Based Compensation

9. Shareholders’ Equity and Share-Based Compensation

Shareholders may convert their shares of Class B Common Stock into shares of Common Stock at any time. Class B Common Stock shareholders are substantially restricted in their ability to transfer their Class B Common Stock. Holders of Common Stock are entitled to cash dividends per share equal to 110% of all dividends declared and paid on each share of the Class B Common Stock. Holders of Class B Common Stock are entitled to ten votes per share while holders of Common Stock are entitled to one vote per share on any matters brought before the shareholders of the Company. Liquidation rights are the same for both classes of stock.

Through December 30, 2021, the Company’s Board of Directors has approved the repurchase of up to 11,687,500 shares of Common Stock to be held in treasury. The Company intends to reissue these shares upon the exercise of stock options and for savings and profit-sharing plan contributions. The Company repurchased 61,654, 37,567 and 30,139 shares pursuant to these authorizations during fiscal 2021, fiscal 2020 and fiscal 2019, respectively. At December 30, 2021, there were 2,657,340 shares available for repurchase under these authorizations.

The Company’s Board of Directors has authorized the issuance of up to 750,000 shares of Common Stock for The Marcus Corporation Dividend Reinvestment and Associate Stock Purchase Plan. At December 30, 2021, there were 421,870 shares available under this authorization.

Shareholders have approved the issuance of up to 7,437,500 shares of Common Stock under various equity incentive plans. Stock options granted under the plans to employees generally become exercisable either 40% after two years, 60% after three years, 80% after four years and 100% after five years of the date of grant, or 50% after two years, 75% after three years and 100% after four years of the date of grant, depending on the date of grant. The options generally expire ten years from the date of grant as long as the optionee is still employed with the Company.

Awarded shares of non-vested stock cumulatively vest either 25% after three years of the grant date, 50% after five years of the grant date, 75% after ten years of the grant date and 100% upon retirement, or 50% after three years of the grant date and 100% after five years of the grant date, or 50% after two years of the grant date and 100% after four years of the grant date, depending on the date of grant, or in the case of a special grant awarded in fiscal 2021, one year after the date of grant. The non-vested stock may not be sold, transferred, pledged or assigned, except as provided by the vesting schedule included in the Company’s equity incentive plan. During the period of restriction, the holder of the non-vested stock has voting rights and is entitled to receive all dividends and other distributions paid with respect to the stock. Non-vested stock awards and shares issued upon option exercises may be issued from previously acquired treasury shares. At December 30, 2021, there were 1,851,090 shares available for grants of additional stock options, non-vested stock and other types of equity awards under the current plan.

Share-based compensation, including stock options and non-vested stock awards, is expensed over the vesting period of the awards based on the grant date fair value.

The Company estimated the fair value of stock options using the Black-Scholes option pricing model with the following assumptions used for awards granted during fiscal 2021, fiscal 2020 and fiscal 2019:

	Year Ended
	December 30, 2021	December 31, 2020	December 26, 2019
Risk-free interest rate	0.97 – 1.26%	0.40 – 1.26%	2.50 – 2.60%
Dividend yield	1.50 – 1.50%	1.70 – 1.90%	1.70%
Volatility	28 - 53%	27 – 41%	27 – 32%
Expected life	6 – 8 years	6 – 8 years	6 – 8 years

Total pre-tax share-based compensation expense was $9,316, $4,385 and $3,523 in fiscal 2021, fiscal 2020 and fiscal 2019, respectively. The recognized tax benefit on share-based compensation was $1,997, $771 and $1,127 in fiscal 2021, fiscal 2020 and fiscal 2019, respectively. The increase in the recognized tax benefit during fiscal 2019 was primarily due to an increase in stock options exercised where the market price was significantly greater than the grant date fair value of the stock options.

A summary of the Company’s stock option activity and related information follows:

	Year Ended
	December 30, 2021				December 31, 2020				December 26, 2019
	Options		Weighted- Average Exercise Price		Options		Weighted- Average Exercise Price		Options		Weighted- Average Exercise Price
Outstanding at beginning of period	2,234		$	24.87	1,641		$	25.46	1,450		$	21.25
Granted	531		21.74		728		23.47		329		41.67
Exercised	(134)		11.42		(31)		12.21		(97)		15.60
Forfeited	(98)		26.60		(104)		28.06		(41)		30.58
Outstanding at end of period	2,533		24.84		2,234		24.87		1,641		25.46
Exercisable at end of period	1,119		$	24.76	1,001		$	20.38	802		$	18.22
Weighted-average fair value of options granted during the period	$	9.47			$	5.96			$	11.79

Exercise prices for options outstanding as of December 30, 2021 ranged from $12.71 to $41.90. The weighted-average remaining contractual life of those options is 6.6 years. The weighted-average remaining contractual life of options

currently exercisable is 4.4 years. There were 2,486,000 options outstanding, vested and expected to vest as of December 30, 2021, with a weighted-average exercise price of $24.87 and an intrinsic value of $1,965. Additional information as of December 30, 2021 related to options outstanding segregated by exercise price range is as follows:

	Exercise Price Range
	$12.71 to $20.26		$20.27 to $27.00		$27.01 to $41.90
Options outstanding	827		765		941
Weighted-average exercise price of options outstanding	$	16.18	$	23.66	$	33.42
Weighted-average remaining contractual life of options outstanding	4.5		8		7.2
Options exercisable	580		205		334
Weighted-average exercise price of options exercisable	$	17.55	$	26.96	$	35.89

The intrinsic value of options outstanding at December 30, 2021 was $1,996 and the intrinsic value of options exercisable at December 30, 2021 was $756. The intrinsic value of options exercised was $1,164, $0 and $2,135 during fiscal 2021, fiscal 2020 and fiscal 2019, respectively. As of December 30, 2021, total remaining unearned compensation cost related to stock options was $6,336, which will be amortized to expense over the remaining weighted-average life of 2.6 years.

A summary of the Company’s non-vested stock activity and related information follows:

	Year Ended
	December 30, 2021			December 31, 2020			December 26, 2019
	Shares	Weighted- Average Fair Value		Shares	Weighted- Average Fair Value		Shares	Weighted- Average Fair Value
Outstanding at beginning of period	147	$	31.02	174	$	29.16	158	$	18.98
Granted	251	19.63		42	31.43		39	38.24
Vested	(32)	30.69		(69)	26.56		(23)	18.60
Forfeited	(9)	19.77		—	—		—	—
Outstanding at end of period	357	$	23.32	147	$	31.02	174	$	29.16

The Company expenses awards of non-vested stock based on the fair value of the Company’s common stock at the date of grant. As of December 30, 2021, total remaining unearned compensation related to non-vested stock was $3,022, which will be amortized over the weighted-average remaining service period of 2.0 years