Shareholders' Equity and Share-Based Compensation

12 Months Ended

Dec. 29, 2022

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 29, 2022, 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 134,694, 61,654 and 37,567 shares pursuant

to these authorizations during fiscal 2022, fiscal 2021 and fiscal 2020, respectively. At December 29, 2022, there were 2,522,646 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 29, 2022, there were 418,565 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 29, 2022, there were 1,486,777 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 2022, fiscal 2021 and fiscal 2020:

Year Ended

December 29, 2022

December 30, 2021

December 31, 2020

Risk-free interest rate

1.73 – 3.90%

0.97 – 1.26%

0.40 – 1.26%

Dividend yield

1.50%

1.70 – 1.90%

Volatility

48 - 53%

28 – 53%

27 – 41%

Expected life

6 – 8 years

Total pre-tax share-based compensation expense was $8,170, $9,316 and $4,385 in fiscal 2022, fiscal 2021 and fiscal 2020, respectively. The recognized tax benefit on share-based compensation was $1,338, $1,997 and $771 in fiscal 2022, fiscal 2021 and fiscal 2020, respectively.

A summary of the Company’s stock option activity and related information follows (shares in thousands):


	Year Ended
	December 29, 2022				December 30, 2021				December 31, 2020
	Options		Weighted- Average Exercise Price		Options		Weighted- Average Exercise Price		Options		Weighted- Average Exercise Price
Outstanding at beginning of period	2,533		$	24.84	2,234		$	24.87	1,641		$	25.46
Granted	501		16.99		531		21.74		728		23.47
Exercised	(68)		13.15		(134)		11.42		(31)		12.21
Forfeited	(100)		24.89		(98)		26.60		(104)		28.06
Outstanding at end of period	2,866		23.76		2,533		24.84		2,234		24.87
Exercisable at end of period	1,613		$	25.70	1,119		$	24.76	1,001		$	20.38
Weighted-average fair value of options granted during the period	$	7.71			$	9.47			$	5.96

Exercise prices for options outstanding as of December 29, 2022 ranged from $12.71 to $41.90. The weighted-average remaining contractual life of those options is 6.3 years. The weighted-average remaining contractual life of options currently exercisable is 4.8 years. There were 2,821,000 options outstanding, vested and expected to vest as of December 29, 2022, with a weighted-average exercise price of $23.83 and an intrinsic value of $443. Additional information as of December 29, 2022 related to options outstanding segregated by exercise price range is as follows (shares in thousands):


	Exercise Price Range
	$12.71 to $20.25		$20.26 to $27.00		$27.01 to $41.90
Options outstanding	1,067		895		904
Weighted-average exercise price of options outstanding	$	16.15	$	23.06	$	33.41
Weighted-average remaining contractual life of options outstanding	6.5		6.3		6.2
Options exercisable	480		473		660
Weighted-average exercise price of options exercisable	$	15.93	$	24.15	$	33.90

The intrinsic value of options outstanding at December 29, 2022 was $446 and the intrinsic value of options exercisable at December 29, 2022 was $291. The intrinsic value of options exercised was $164, $1,164 and $107 during fiscal 2022, fiscal 2021 and fiscal 2020, respectively. As of December 29, 2022, total remaining unearned compensation cost related to stock options was $4,897, which will be amortized to expense over the remaining weighted-average life of 2.4 years.

A summary of the Company’s non-vested stock activity and related information follows (shares in thousands):


	Year Ended
	December 29, 2022			December 30, 2021			December 31, 2020
	Shares	Weighted- Average Fair Value		Shares	Weighted- Average Fair Value		Shares	Weighted- Average Fair Value
Outstanding at beginning of period	357	$	23.32	147	$	31.02	174	$	29.16
Granted	100	17.63		251	19.63		42	31.43
Vested	(242)	22.95		(32)	30.69		(69)	26.56
Forfeited	(3)	22.93		(9)	19.77		—	—
Outstanding at end of period	212	$	21.07	357	$	23.32	147	$	31.02

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 29, 2022, total remaining unearned compensation related to non-vested stock was $1,731, which will be amortized over the weighted-average remaining service period of 2.7 years