Shareholders' Equity

Common Stock

The Company acquired and retired 1,652,887 shares of its common stock in fiscal 2018, at an average cost of $77.31 per share for a total cost of $127.8 million. The Company acquired and retired 576,804 shares of its common stock in fiscal 2017 at an average cost of $78.12 per share for a total cost of $45.1 million. At a meeting of the Board of Directors in July 2018 the Company's Board of Directors approved the extinguishment of the existing 3.0 million share repurchase program approved in November 2013 and replaced it with an authorization to purchase up to $250.0 million in shares. There is approximately $196.9 million in common stock available for repurchase under this program as of December 29, 2018.

Share-Based Compensation

The Company recognized approximately $16.9 million, $13.6 million and $13.3 million in share-based compensation expense in fiscal years 2018, 2017 and 2016, respectively. The total income tax benefit recognized in the Consolidated Statements of Income for share-based compensation expense was $4.1 million, $5.2 million, and $5.1 million in fiscal years 2018, 2017 and 2016, respectively. The Company recognizes compensation expense on grants of share-based compensation awards on a straight-line basis over the vesting period of each award. The total fair value of shares and options vested was $12.8 million, $11.9 million, and $11.3 million in fiscal years 2018, 2017 and 2016, respectively. On October 10, 2018, the Company entered into a retirement agreement with the CEO resulting in the modification of the CEO's unvested awards. The Company expects to recognize the modified award values over the modified service term. The modification increased the amount of unrecognized compensation cost and reduced the weighted average period in which the Company expects to recognize the unrecognized compensation cost. Total unrecognized compensation cost related to share-based compensation awards was approximately $19.5 million, net of estimated forfeitures, which the Company expects to recognize over a weighted average period of approximately 1.8 years as of December 29, 2018.

During 2018, the Company's shareholders approved the 2018 Equity Incentive Plan ("2018 Plan"). The 2018 Plan authorizes the issuance of 2.1 million shares of common stock, plus the number of shares reserved under the prior 2013 Equity Incentive Plan that are not the subject of outstanding awards for equity-based awards and terminates any further grants under prior equity plans. Approximately 2.6 million shares were available for future grant or payment under the 2018 Plan as of December 29, 2018.

Options and Stock Appreciation Rights

The Company uses stock settled stock appreciation rights (“SARs”) as a form of share-based incentive awards. SARs are the right to receive stock in an amount equal to the appreciation in value of a share of stock over the base price per share that generally vest over 5 years and expire 10 years from the grant date. All grants are made at prices equal to the fair market value of the stock on the grant date. For fiscal years ended December 29, 2018, December 30, 2017, and December 31, 2016, expired and canceled shares were immaterial.

The table below presents share-based compensation activity for the fiscal years ended 2018, 2017 and 2016 (in millions):



	2018	2017	2016
Total Intrinsic Value of Share-Based Incentive Awards Exercised	$5.2	$4.3	$2.5
Cash Received from Stock Option Exercises	—	0.4	0.5
Total Fair Value of Share-Based Incentive Awards Vested	3.9	4.3	4.9

The weighted average assumptions used in the Company's Black-Scholes valuation related to grants for SARs were as follows:



	2018	2017	2016
Per Share Weighted Average Fair Value of Grants	$22.73	$23.31	$15.22
Risk-Free Interest Rate	2.9%	2.1%	1.4%
Expected Life (Years)	7.0	7.0	7.0
Expected Volatility	27.8%	28.6%	29.6%
Expected Dividend Yield	1.4%	1.3%	1.7%

The average risk-free interest rate is based on US Treasury security rates in effect as of the grant date. The expected dividend yield is based on the projected annual dividend as a percentage of the estimated market value of the Company's common stock as of the grant date. The Company estimated the expected volatility using a weighted average of daily historical volatility of the Company's stock price over the expected term of the award. The Company estimated the expected term using historical data.

Following is a summary of share-based incentive plan activity (options and SARs) for fiscal 2018:



Number of Shares Under Options and SARs	Shares	Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in millions)
Outstanding as of December 30, 2017	1,601,791	$	66.46
Granted	193,357	77.60
Exercised	(249,324)	57.54
Forfeited	(5,206)	70.30
Expired	(1,250)	54.28
Outstanding as of December 29, 2018	1,539,368	$	69.31	5.6	$	16.0
Exercisable as of December 29, 2018	928,987	$	66.61	3.9	$	12.0

Compensation expense recognized related to options and SARs was $4.7 million for fiscal December 29, 2018.

As of December 29, 2018, there was $6.4 million of unrecognized compensation cost related to non-vested options and SARs that is expected to be recognized as a charge to earnings over a weighted average period of 3.1 years.

The amount of options and SARs expected to vest is materially consistent with those outstanding and not yet exercisable.

Restricted Stock Awards and Restricted Stock Units

Restricted stock awards ("RSAs") and restricted stock units ("RSUs") consist of shares or the rights to shares of the Company's stock. The awards are restricted such that they are subject to substantial risk of forfeiture and to restrictions on their sale or other transfer. As defined in the individual grant agreements, acceleration of vesting may occur under a change in control, or death, disability or normal retirement of the grantee.

Following is the summary of RSAs activity for fiscal 2018:



	Shares	Weighted Average Fair Value at Grant Date		Weighted Average Remaining Contractual Term (years)
Unvested RSAs as of December 30, 2017	13,941	$	80.70	0.4
Granted	16,490	74.68
Vested	(13,941)	80.70
Forfeited	(830)	80.25
Unvested RSAs as of December 29, 2018	15,660	$	74.38	0.4

The weighted average grant date fair value of awards granted was $74.68, $80.70 and $57.43 in fiscal years 2018, 2017 and 2016, respectively.

RSAs vest on the one year anniversary of the grant date, provided the holder of the shares is continuously employed by or in the service of the Company until the vesting date. Compensation expense recognized related to the RSAs was $1.2 million for fiscal 2018.

As of December 29, 2018, there was $0.4 million of unrecognized compensation cost related to non-vested RSAs that is expected to be recognized as a charge to earnings over a weighted average period of 0.4 years.

Following is the summary of RSUs activity for fiscal 2018:



	Shares	Weighted Average Fair Value at Grant Date		Weighted Average Remaining Contractual Term (years)
Unvested RSUs as of December 30, 2017	260,533	$	70.81	1.7
Granted	78,140	74.51
Vested	(98,636)	76.25
Forfeited	(5,213)	69.71
Unvested RSUs as of December 29, 2018	234,824	$	69.78	1.6

The weighted average grant date fair value of awards granted was $74.51, $80.48 and $57.50 in fiscal years 2018, 2017 and 2016, respectively.

RSUs vest on the third anniversary of the grant date, provided the holder of the shares is continuously employed by the Company until the vesting date. Compensation expense recognized related to the RSUs was $7.8 million for fiscal 2018.

As of December 29, 2018, there was $6.8 million of unrecognized compensation cost related to non-vested RSUs that is expected to be recognized as a charge to earnings over a weighted average period of 1.6 years.

Performance Share Units

Performance share unit ("PSUs") awards consist of shares or the rights to shares of the Company's stock which are awarded to employees of the Company. These shares are payable upon the determination that the Company achieved certain established performance targets and can range from 0% to 200% of the targeted payout based on the actual results. PSUs have a performance period of 3 years, and vest three years from the grant date. The PSUs have performance criteria based on a return on invested capital metric or they have performance criteria using returns relative to the Company's peer group. As set forth in the individual grant agreements, acceleration of vesting may occur under a change in control, death or disability. There are no voting rights with these instruments until vesting occurs and a share of stock is issued. Some of the PSU awards are valued using a Monte Carlo simulation method as of the grant date while others are valued using the closing market price less NPV of dividends as of the grant date depending on the performance criteria for the award.

The assumptions used in the Company's Monte Carlo simulation related to grants for performance share units were as follows:



	December 29, 2018	December 30, 2017
Risk-free interest rate	2.7%	1.6%
Expected life (years)	3.0	3.0
Expected volatility	25.0%	24.0%
Expected dividend yield	1.4%	1.3%

Following is the summary of PSUs activity for fiscal 2018:



	Shares	Weighted Average Fair Value at Grant Date		Weighted Average Remaining Contractual Term (years)
Unvested PSUs as of December 30, 2017	155,116	$	70.43	2.0
Granted	50,659	83.80
Vested	(1,359)	57.43
Forfeited	(36,576)	83.55
Unvested PSUs as of December 29, 2018	167,840	$	71.71	1.8

The weighted average grant date fair value of awards granted was $83.80, $90.82 and $51.84 in fiscal years 2018, 2017 and 2016, respectively.

Compensation expense for awards granted are recognized based on the Monte Carlo simulation value or the expected payout ratio depending upon the performance criterion for the award, net of estimated forfeitures. Compensation expense recognized related to PSUs was $3.2 million for fiscal 2018. Total unrecognized compensation expense for all PSUs granted as of December 29, 2018 was $5.8 million and it is expected to be recognized as a charge to earnings over a weighted average period of 1.8 years.