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Shareholders' Equity

12 Months Ended

Dec. 28, 2019

Stockholders' Equity Note [Abstract]

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. 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 that was approved in November 2013 and replaced it with an authorization to purchase up to $250.0 million of shares. At a meeting of the Board of Directors on October 25, 2019, the July 2018 repurchase authorization was extinguished and replaced with an authorization to purchase up to $250.0 million of shares. In fiscal 2019, the Company acquired and retired under the July 2018 repurchase authorization 2,013,782 shares of its common stock at an average cost of $74.52 per share for a total cost of $150.1 million. Also in fiscal 2019, the Company acquired and retired 180,763 shares of its common stock at an average cost of $83.01 per share for a total cost of $15.0 million under the October 25, 2019 repurchase authorization.

There is approximately $235.0 million in common stock available for repurchase under the October 25, 2019 repurchase authorization as of December 28, 2019.

Share-Based Compensation

The Company recognized approximately $13.0 million, $16.9 million and $13.6 million in share-based compensation expense in fiscal years 2019, 2018 and 2017, respectively. The total income tax benefit recognized in the Consolidated Statements of Income for share-based compensation expense was $3.1 million, $4.1 million and $5.2 million in fiscal years 2019, 2018 and 2017, 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 $23.0 million, $12.8 million and $11.9 million in fiscal years 2019, 2018 and 2017, 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 expensed the modified awards over the modified service term. The modification increased the amount of unrecognized compensation cost and reduced the weighted average period in which the Company recognized compensation cost. On December 27, 2019, the Company entered into a retirement agreement with the COO resulting in the modification of certain of the COO'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 $18.5 million, net of estimated forfeitures, which the Company expects to recognize over a weighted average period of approximately 1.9 years as of December 28, 2019.

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 3.6 million shares were available for future grant or payment under the 2018 Plans as of December 28, 2019.

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 28, 2019, December 29, 2018 and December 30, 2017, expired and canceled shares were immaterial.

The table below presents SARs share-based compensation activity for the fiscal years ended 2019, 2018 and 2017 (in millions):



	2019	2018	2017
Total Intrinsic Value of Share-Based Incentive Awards Exercised	$11.7	$5.2	$4.3
Cash Received from Stock Option Exercises	0.1	—	0.4
Total Fair Value of Share-Based Incentive Awards Vested	5.4	3.9	4.3

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



	2019	2018	2017
Per Share Weighted Average Fair Value of Grants	$20.84	$22.73	$23.31
Risk-Free Interest Rate	2.4%	2.9%	2.1%
Expected Life (Years)	7.0	7.0	7.0
Expected Volatility	25.0%	27.8%	28.6%
Expected Dividend Yield	1.5%	1.4%	1.3%

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 2019:



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 29, 2018	1,539,368	$	69.31
Granted	188,809	81.81
Exercised	(869,183)	67.88
Forfeited	(37,136)	76.94
Expired	(4,068)	74.37
Outstanding as of December 28, 2019	817,790	$	73.34	6.0	$	9.9
Exercisable as of December 28, 2019	415,570	$	69.57	3.8	$	6.6

Compensation expense recognized related to options and SARs was $2.7 million, $4.7 million and $4.1 million for fiscal years 2019, 2018 and 2017, respectively.

As of December 28, 2019, 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 3.4 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 2019:



	Shares	Weighted Average Fair Value at Grant Date		Weighted Average Remaining Contractual Term (years)
Unvested RSAs as of December 29, 2018	15,660	$	74.38	0.4
Granted	15,571	80.41
Vested	(15,660)	74.38
Unvested RSAs as of December 28, 2019	15,571	$	80.41	0.4

The weighted average grant date fair value of awards granted was $80.41, $74.68 and $80.70 in fiscal years 2019, 2018 and 2017, 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, $1.2 million and $1.1 million for fiscal 2019, 2018 and 2017, respectively.

As of December 28, 2019, there was $0.5 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 2019:



	Shares	Weighted Average Fair Value at Grant Date		Weighted Average Remaining Contractual Term (years)
Unvested RSUs as of December 29, 2018	234,824	$	69.78	1.6
Granted	93,428	78.98
Vested	(136,372)	64.47
Forfeited	(16,855)	76.34
Unvested RSUs as of December 28, 2019	175,025	$	78.19	1.9

The weighted average grant date fair value of awards granted was $78.98, $74.51 and $80.48 in fiscal years 2019, 2018 and 2017, 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 $6.2 million, $7.8 million and $6.2 million for fiscal 2019, 2018 and 2017, respectively.

As of December 28, 2019, there was $7.4 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 1.9 years.

Performance Share Units

Performance share unit awards ("PSUs") consist of shares or the rights to shares of the Company's stock which are awarded to associates 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, vest three years from the grant date and are issued at a performance target of 100%. 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 net present value 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 28, 2019	December 29, 2018	December 30, 2017
Risk-free interest rate	2.3%	2.7%	1.6%
Expected life (years)	3.0	3.0	3.0
Expected volatility	25.0%	25.0%	24.0%
Expected dividend yield	1.5%	1.4%	1.3%

Following is the summary of PSUs activity for fiscal 2019:



	Shares	Weighted Average Fair Value at Grant Date		Weighted Average Remaining Contractual Term (years)
Unvested PSUs as of December 29, 2018	167,840	$	71.71	1.8
Granted	48,091	85.54
Vested	(64,961)	65.85
Forfeited	(60,405)	67.90
Unvested PSUs as of December 28, 2019	90,565	$	86.35	1.9

The weighted average grant date fair value of awards granted was $85.54, $83.80 and $90.82 in fiscal years 2019, 2018 and 2017, 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 $2.9 million, $3.2 million and $2.2 million for fiscal 2019, 2018 and 2017, respectively. Total unrecognized compensation expense for all PSUs granted as of December 28, 2019 was $4.2 million and it is expected to be recognized as a charge to earnings over a weighted average period of 1.9 years.