Stock-Based Compensation (Notes)

6 Months Ended

Jul. 02, 2023

Share-Based Payment Arrangement [Abstract]

Stock-based compensation expense for the three months ended July 2, 2023 and July 3, 2022 was $1.0 million and $0.9 million, respectively, and for the six months ended July 2, 2023 and July 3, 2022 was $2.1 million and $2.9 million, respectively. The first quarter of 2022 included additional stock-based compensation expense of $0.7 million related to the accelerated vesting of certain awards upon the retirement of our former CEO.

As of July 2, 2023, the total unrecognized stock-based compensation expense relating to time-vested restricted shares, performance-based restricted stock units and stock options was approximately $14.5 million and the Company expects to record an additional $3.5 million in stock-based compensation expense related to the vesting of these awards in the remainder of 2023. The remaining weighted average vesting period for stock options and non-vested shares was 2.1 years and restricted stock units was 2.7 years.

Time-based Non-vested Shares. During the six months ended July 2, 2023, the Company granted 1,007,915 non-vested shares of common stock to certain employees and officers of the Company and 384,807 non-vested shares of common stock to the outside directors of the Company. These shares generally vest in equal installments over their three-year service period, provided the participant has continuously remained an employee, officer or director of the Company.

In addition, on May 1, 2023, the Company granted 417,320 time-vested restricted shares to its new CEO. These shares generally vest in equal installments over a three-year service period, provided the participant has continuously remained employed by the Company.

A summary of all non-vested common share activity for the six months ended July 2, 2023 was as follows:


	Shares	Weighted Average Grant Date Price
Non-vested at January 1, 2023	1,767,811	$	3.79
Granted	1,810,042	$	2.50
Vested	(779,318)	$	4.22
Forfeited	(11,600)	$	2.48
Non-vested at July 2, 2023	2,786,935	$	2.84

The fair value of time-vested shares is based on the closing price on the date of grant.

Performance-based Restricted Shares. On April 1, 2022, 600,000 performance-based restricted shares were granted to the Company's former CEO of which 450,000 shares were forfeited on December 31, 2022. The remaining shares will fully vest on the third anniversary of the grant date based on the achievement of contractually defined EBITDA and share price growth targets. The fair value of the market-based restricted shares was determined using a Monte Carlo simulation valuation model and the shares were expensed over the applicable service period based on the probability of the Company's attainment of the contractually defined performance targets. This probability of performance attainment is assessed quarterly and if the Company estimates that it is not probable that the performance conditions will be satisfied, adjustments to prior and future expense will be recorded at that time.

Performance-based Restricted Stock Units. On July 1, 2023, the Company granted 797,915 performance-based restricted stock units to its executive officers. The number of performance-based restricted stock units that will ultimately vest and be received by the participants is based on achievement of contractually defined EBITDA growth targets to be measured over the period ending fiscal 2025. The Company estimates the fair-value of performance-based restricted stock units based on the closing stock price on the date of the grant which was $5.04. The Company assesses the probability of target attainment on a quarterly basis and records the expense over the vesting period. As of July 2, 2023, the Company has assessed the probability at maximum target attainment.

Stock Options. The Company has issued options to purchase shares of its common stock to certain employees and officers of the Company. These options become exercisable and are being expensed over their three-year vesting period. The options expire seven years from the date of the grant and were issued with an exercise price equal to the fair market value of the stock price on the date of grant, or $7.12 per share.

The following is a summary of all stock option activity for the six months ended July 2, 2023:


	Options	Weighted Average Exercise Price	Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value(1)
Options outstanding at January 1, 2023	975,500


Forfeited	—	$7.12
Options Outstanding at July 2, 2023	975,500	$7.12	4.1	$—
Vested or expected to vest at July 2, 2023	975,500	$7.12	4.1	$—
Options exercisable at July 2, 2023	868,250	$7.12	4.1	$—

(1)The aggregate intrinsic value is calculated using the difference between the market price of the Company's common stock at July 2, 2023 of $5.04 and the grant price for only those awards that have a grant price that is less than the market price of the Company's common stock at July 2, 2023. There were no awards having a grant price less than the market price of the Company's common stock at July 2, 2023.

Time-Based Restricted Stock Units. The Company has issued time-based restricted stock units ("RSUs") on shares of the Company's common shares to certain officers of the Company.

The following is a summary of all RSU activity for the six months ended July 2, 2023:


			Units
Non-vested at January 1, 2023			38,770

Vested			(19,381)

Non-vested at July 2, 2023			19,389