NOTE 16: STOCK-BASED COMPENSATION

On May 5, 2016, the 2016 Incentive Compensation Plan (the “Incentive Compensation Plan”) and the Stock Compensation Plan for Non-Employee Directors (the “Directors Plan” and, together with the Incentive Compensation Plan, “2016 Equity Plans”) were approved by the Company’s shareholders for the purpose of granting stock awards to officers, employees and Board members of the Company and its subsidiaries. There are 5,100,000 shares of Class A Common Stock authorized for issuance under the Incentive Compensation Plan and 200,000 shares of Class A Common Stock authorized for issuance under the Directors Plan, of which 3,032,672 shares and 168,529 shares, respectively, were available for grant as of December 31, 2017.

On March 1, 2013, the Compensation Committee of the Board adopted the 2013 Equity Incentive Plan (the “Equity Incentive Plan”) for the purpose of granting stock awards to directors, officers and employees of the Company and its subsidiaries. Stock awarded pursuant to the Equity Incentive Plan was limited to five percent of the outstanding Common Stock on a fully diluted basis as of the Effective Date. There were 5,263,000 shares of Common Stock authorized for issuance under the Equity Incentive Plan. Prior to the adoption of the 2016 Equity Plan, the Company had 616,332 shares of Class A Common Stock available for grant under the Equity Incentive Plan. Subsequent to the approval of the 2016 Equity Plans by the Company’s shareholders, no additional awards will be granted under the Equity Incentive Plan.

The Incentive Compensation Plan provides for the granting of non-qualified stock options (“NSOs”), incentive stock options (“ISOs”), stock appreciation (“SARs”), restricted stock units (“RSUs”), performance share units (“PSUs”), restricted stock awards and other stock-based awards (collectively “Equity Awards”). The Directors Plan provides for the granting of shares, stock options and other stock-based awards (collectively “Director Equity Awards”). Pursuant to ASC Topic 718, “Compensation-Stock Compensation,” the Company measures stock-based compensation costs on the grant date based on the estimated fair value of the award and recognizes compensation costs on a straight-line basis over the requisite service period for the entire award. The Company’s equity plans allow employees and directors to surrender to the Company shares of vested Common Stock upon vesting of their stock awards or at the time they exercise their NSOs in lieu of their payment of the required withholdings for employee taxes.

Holders of RSUs and PSUs also receive DEUs until the RSUs or PSUs vest. See Note 15 for further information. The number of DEUs granted for each RSU or PSU is calculated based on the value of the dividends per share paid on the Company’s Common Stock and the closing price of the Company’s Common Stock on the dividend payment date. The DEUs vest with the underlying RSU or PSU.

NSO and RSU awards generally vest 25% on each anniversary of the date of the grant. Under the 2016 Equity Plans, the exercise price of an NSO award cannot be less than the market price of the Class A Common Stock at the time the NSO award is granted and has a maximum contractual term of 10 years.

PSU awards generally cliff vest at the end of the three-year performance periods, depending on the period specified in each respective PSU agreement. The number of PSUs that ultimately vest depends on the Company’s performance relative to specified financial targets for fiscal years 2017, 2018 and 2019. In the second quarter of 2016, the Company granted 214,416 supplemental PSU awards (“Supplemental PSUs”) to certain executive officers. A portion of the Supplemental PSUs will be eligible to vest until March 1, 2018 if a closing stock price of the Company’s Class A Common Stock is maintained for 10 consecutive trading days that equals or exceeds $44 and each increment $2 thereafter, up to a maximum of $64, as adjusted for dividends declared (each such increment, a “Stock Price Hurdle”). No Stock Price Hurdle will be counted twice, and none of the Supplemental PSUs will vest unless the minimum $44 Stock Price Hurdle (as adjusted) is achieved by March 1, 2018. As of December 31, 2017, there were 136,448 Supplemental PSUs outstanding.

Unrestricted stock awards have been issued to certain members of the Board as compensation for retainer fees and long-term awards. The Company intends to facilitate settlement of all vested awards in Common Stock.

The Company estimates the fair value of NSO awards using the Black-Scholes option-pricing model, which incorporates various assumptions including the expected term of the awards, volatility of the stock price, risk-free rates of return and dividend yield. The risk-free rate was based on the U.S. Treasury yield curve in effect at the time of grant. Expected volatility was based on the actual historical volatility of a select peer group of entities operating in similar industry sectors as the Company. The expected dividend yield was based on the Company’s expectation of future dividend payments at the time of grant. Expected life was calculated using the simplified method as described under Staff Accounting Bulletin Topic 14, “Share-Based Payment,” as the Equity Incentive Plan was not in existence for a sufficient period of time for the use of the Company-specific historical experience in the calculation.

In connection with the special cash dividends and pursuant to the terms of the Company’s equity plans, the number of the Company’s employees’ outstanding equity awards, and the exercise price of the NSOs, were adjusted to preserve the fair value of the awards immediately before and after the special cash dividends. The Company’s Class A Common Stock began trading ex-dividend (the “Ex-dividend Date”) on January 11, 2017 and March 23, 2015 for the 2017 Special Cash Dividend and the 2015 Special Cash Dividend, respectively. The conversion ratio (the “Ratio”) used to adjust the awards was based on the ratio of (a) unaffected closing price of Class A Common Stock on the day before the Ex-dividend Date to (b) the opening price of Class A Common Stock on the Ex-dividend Date. As the above adjustments were made pursuant to existing anti-dilution provisions of the Company equity plans, the Company did not record any incremental compensation expense related to the conversion of the Equity Awards. The Equity Awards continue to vest over the original vesting period, as described above. The combined impact of this award activity is collectively referred to as the “Adjustments.” The Adjustments increased outstanding Equity Awards by 720,405 shares and 251,537 shares for the 2017 Special Cash Dividend and the 2015 Special Cash Dividend, respectively, which are separately included in the tables below. For NSOs granted prior to each respective Ex-dividend Date, the weighted-average exercise prices reflect the historical values without giving effect to the special cash dividends. For RSUs and PSUs granted prior to each respective Ex-dividend Date, the weighted-average fair values in the tables below reflect historical values without giving effect to the special cash dividends.

The awards held as of the Ex-dividend Date were modified as follows:


•	Non-Qualified Stock Options - The number of NSOs outstanding as of the Ex-dividend Date was increased via the calculated Ratio and the strike price of NSOs was decreased via the Ratio in order to preserve the fair value of NSOs;


•	Restricted Stock Units - The number of outstanding RSUs as of the Ex-dividend Date was increased utilizing the calculated Ratio in order to preserve the fair value of RSUs; and


•	Performance Share Units - The number of outstanding PSUs as of the Ex-dividend Date was increased utilizing the calculated Ratio in order to preserve the fair value of PSUs.

The following table provides the weighted-average assumptions used to determine the fair value of NSO awards granted during 2017, 2016 and 2015:



	2017		2016		2015
Risk-free interest rate	2.17	%	1.35	%	1.71	%
Expected dividend yield	3.12	%	3.36	%	0.17	%
Expected stock price volatility	33.12	%	36.54	%	44.47	%
Expected life (in years)	6.25		6.25		6.25

The Company determines the fair value of PSU, RSU and unrestricted and restricted stock awards by reference to the quoted market price of the Class A Common Stock on the date of the grant. The Company determined the fair value of Supplemental PSUs using a Monte Carlo simulation model.

Stock-based compensation expense for the years ended December 31, 2017, December 31, 2016 and December 31, 2015 totaled $33 million, $37 million, and $32 million respectively, including the expense attributable to discontinued operations of $2 million, $4 million and $2 million, respectively.

A summary of activity, weighted average exercise prices and weighted average fair values related to the NSOs is as follows (shares in thousands):



	Shares		Weighted Avg. Exercise Price		Weighted Avg. Fair Value		Weighted Avg. Remaining Contractual Term (in years)	Aggregate Intrinsic Value (In thousands)
Outstanding, December 28, 2014 (1)	975		$	70.90	$	37.15	9.0	$	1,164
Granted	449		57.91		25.81
Exercised	(3	)	49.40		23.86
Cancelled	(31	)	64.01		33.63
Forfeited	(160	)	60.20		29.88
Adjustment due to the 2015 Special Cash Dividend	145		*		*
Outstanding, December 31, 2015 (1)	1,375		$	60.62	$	30.47	8.3	$	—
Granted	1,363		30.43		7.46
Cancelled	(67	)	60.45		30.55
Forfeited	(275	)	39.89		15.04
Outstanding, December 31, 2016 (1)	2,396		$	45.82	$	19.15	8.2	$	6,163
Granted	932		32.12		7.97
Exercised	(400	)	28.31		8.54
Cancelled	(87	)	48.48		23.91
Forfeited	(447	)	29.24		8.31
Adjustment due to the 2017 Special Cash Dividend	453		*		*
Outstanding, December 31, 2017 (1)	2,847		39.00		15.49		6.6	21,897
Vested and exercisable, December 31, 2017 (1)	1,187		$	48.48	$	23.96	4.0	$	3,235


*	Not meaningful


(1)	The weighted average exercise price and weighted-average fair value of options outstanding as of the end of each reporting period reflect the adjustments to the awards as a result of the respective special cash dividend.

A summary of activity and weighted average fair values related to the RSUs is as follows (shares in thousands):



	Shares		Weighted Avg. Fair Value		Weighted Avg. Remaining Contractual Term (in years)
Outstanding and nonvested, December 28, 2014	633		$	68.76	2.7
Granted	457		57.18
Dividend equivalent units granted	16		41.71
Vested	(203	)	66.65
Forfeited	(151	)	58.80
Dividend equivalent units forfeited	(1	)	44.26
Adjustments due to the 2015 Special Cash Dividend	89		*
Outstanding and nonvested, December 31, 2015 (1)	840		$	58.39	2.3
Granted	824		29.97
Dividend equivalent units granted	34		37.20
Vested	(307	)	58.44
Dividend equivalent units vested	(6	)	41.32
Forfeited	(151	)	42.25
Dividend equivalent units forfeited	(3	)	39.01
Outstanding and nonvested, December 31, 2016 (1)(2)	1,231		$	40.92	1.3
Granted	625		32.77
Dividend equivalent units granted	31		39.21
Vested	(575	)	38.21
Dividend equivalent units vested	(20	)	32.45
Forfeited	(399	)	32.35
Dividend equivalent units forfeited	(12	)	33.14
Adjustment due to the 2017 Special Cash Dividend	224		*
Outstanding and nonvested, December 31, 2017 (1)	1,105		$	32.62	1.3


*	Not meaningful


(1)	The weighted average fair value of outstanding RSUs as of the end of each reporting period reflects the adjustment for the respective special cash dividend.


(2)	Included 22,309 RSUs which were granted to foreign employees and which the Company expected to settle in cash. The fair value of these RSUs was not material.

A summary of activity and weighted average fair values related to the restricted and unrestricted stock awards is as follows (shares in thousands):



	Shares		Weighted Avg. Fair Value		Weighted Avg. Remaining Contractual Term (in years)
Outstanding and nonvested, December 28, 2014	17		$	56.80	1.0
Granted	12		60.07
Vested	(27	)	58.24
Forfeited	(2	)	56.80
Outstanding and nonvested, December 31, 2015	—		$	—	0.0
Granted	17		33.73
Vested	(17	)	33.73
Outstanding and nonvested, December 31, 2016	—		$	—	0.0
Granted	52		36.48
Vested	(10	)	34.98
Outstanding and nonvested, December 31, 2017	42		$	36.84	3.0

A summary of activity and weighted average fair values related to the PSUs is as follows (shares in thousands):



	Shares		Weighted Avg. Fair Value		Weighted Avg. Remaining Contractual Term (in years)
Outstanding and nonvested, December 28, 2014	43		74.35		1.3
Granted	66		68.10
Dividend equivalent units granted	3		41.86
Forfeited	(17	)	64.89
Adjustment due to the 2015 Special Cash Dividend	12		*
Outstanding and nonvested, December 31, 2015 (1)(2)	107		$	65.50	0.6
Granted	295		21.26
Dividend equivalent units granted	10		37.50
Vested	(56	)	65.06
Dividend equivalent units vested	(1	)	41.64
Forfeited	(8	)	49.85
Outstanding and nonvested, December 31, 2016 (1)(2)	347		$	27.23	1.1
Granted	118		31.45
Dividend equivalent units granted	5		39.26
Vested	(184	)	31.22
Dividend equivalent units vested	(4	)	32.50
Forfeited	(47	)	33.73
Dividend equivalent units forfeited	(6	)	40.72
Adjustment due to the 2017 Special Cash Dividend	24		*
Outstanding and nonvested, December 31, 2017 (1)(2)	253		$	22.53	1.4

* Not meaningful

(1) Represents shares of PSUs for which performance targets have been established and which are deemed granted under U.S. GAAP.

(2) The weighted average fair value of outstanding PSUs reflect the adjustment for the respective special cash dividend.

As of December 31, 2017, the Company had not yet recognized compensation cost on nonvested awards as follows (in thousands):



	Unrecognized Compensation Cost		Weighted Average Remaining Recognition Period (in years)
Nonvested awards	$	34,262	2.3