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Stockholders' Equity and Stock Compensation Plans
 12 Months Ended
Sep. 29, 2019
Stockholders' Equity Note [Abstract]  
Stockholders' Equity and Stock Compensation Plans Stockholders' Equity and Stock Compensation Plans
At September 29, 2019, we had the following stock-based compensation plans:
•
Employee Stock Purchase Plan ("ESPP").  Purchase rights to purchase common stock are granted to our eligible full and part-time employees, and shares of common stock are issued upon exercise of the purchase rights. An aggregate of 3,454,102 shares may be issued pursuant to such exercise. The maximum amount that an employee can contribute during a purchase right period is $5,000. The exercise price of a purchase right is the lesser of 100% of the fair market value of a share of common stock on the first day of the purchase right period or 85% of the fair market value on the last day of the purchase right period (December 15, or the business day preceding December 15 if December 15 is not a business day).
•
2005 Equity Incentive Plan ("2005 EIP").  Key employees and non-employee directors may be granted equity awards, including stock options, restricted stock and restricted stock units ("RSUs"). Options granted before March 6, 2006 vested at 25% on the first anniversary of the grant date, and the balance vests monthly thereafter, such that these options become fully vested no later than four years from the date of grant. These options expire no later than ten years from the date of grant. Options granted on and after March 6, 2006 vest at 25% on each anniversary of the grant date. These options expire no later than eight years from the grant date. RSUs granted to date vest at 25% on each anniversary of the grant date.
Our Compensation Committee has also awarded restricted stock to executive officers and non-employee directors under the 2005 EIP. Restricted stock grants generally vest over a minimum three-year period, and may be performance-based, determined by EPS growth, or service-based. No awards have made under the 2005 EIP since the adoption of the 2018 Equity Incentive Plan described below.
•
2015 Equity Incentive Plan ("2015 EIP").  Key employees and non-employee directors may be granted equity awards, including stock options, performance share units ("PSUs") and RSUs. Shares issued with respect to awards granted under the 2015 EIP other than stock options or stock appreciation rights, which are referred to as "full value awards", are counted against the 2015 EIP's aggregate share limit as three shares for every share or unit actually issued. No awards have made under the 2015 Equity Incentive Plan since the adoption of the 2018 Equity Incentive Plan on March 8, 2018 described below.
•
2018 Equity Incentive Plan ("2018 EIP"). Key employees and non-employee directors may be granted equity awards, including stock options, performance share units ("PSUs") and RSUs. Shares issued with respect to awards granted under the 2018 EIP other than stock options or stock appreciation rights, which are referred to as "full value awards", are counted against the 2018 EIP's aggregate share limit as one share for every share or unit issued. At September 29, 2019, there were 2.7 million shares available for future awards pursuant to the 2018 EIP.
The stock-based compensation and related income tax benefits were as follows:
 
Fiscal Year Ended
 
September 29,
2019
 
September 30,
2018
 
October 1,
2017
 
(in thousands)
Total stock-based compensation
$
17,618

 
$
19,582

 
$
13,450

Income tax benefit related to stock-based compensation
(4,016
)
 
(5,288
)
 
(4,715
)
Stock-based compensation, net of tax benefit
$
13,602

 
$
14,294

 
$
8,735


Stock Options
Stock option activity for the fiscal year ended September 29, 2019 was as follows:
 
Number of
Options
(in thousands)
 
Weighted-
Average
Exercise Price
per Share
 
Weighted-
Average
Remaining
Contractual
Term
(in years)
 
Aggregate
Intrinsic Value
(in thousands)
Outstanding on September 30, 2018
1,355

 
$
30.87

 
 
 
 

Exercised
(456
)
 
26.21

 
 
 
 

Forfeited
(5
)
 
23.48

 
 
 
 

Outstanding at September 29, 2019
894

 
33.28

 
5.08
 
$
46,176

 
 
 
 
 
 
 
 
Vested or expected to vest at September 29, 2019
894

 
33.28

 
5.08
 
46,176

Exercisable on September 29, 2019
671

 
30.75

 
4.33
 
36,346


The aggregate intrinsic value in the table above represents the total intrinsic value (the difference between our closing stock price on the last trading day of fiscal 2019 and the exercise price, times the number of shares) that would have been received by the in-the-money option holders if they had exercised their options on September 29, 2019. This amount will change based on the fair market value of our stock. At September 29, 2019, we expect to recognize $2.0 million of unrecognized compensation cost related to stock option grants over a weighted-average period of 1 year.

No stock options were granted in fiscal 2019. The weighted-average fair value of each stock option granted during fiscal 2018 and 2017 was $14.82 and $12.35, respectively. The aggregate intrinsic value of options exercised during fiscal 2019, 2018 and 2017 was $20.4 million, $14.4 million and $16.4 million, respectively.

The fair value of our stock options was estimated on the date of grant using the Black-Scholes option pricing model. There were no options granted in fiscal 2019. The following assumptions were used in the calculation for fiscal 2018 and 2017:
 
Fiscal Year Ended
 
September 30,
2018
 
October 1,
2017
Dividend yield
1.0%
 
1.0%
Expected stock price volatility
36.1% - 38.8%
 
36.1% - 38.8%
Risk-free rate of return, annual
1.7% - 2.9%
 
1.7% - 1.9%

For purposes of the Black-Scholes model, forfeitures were estimated based on historical experience. For the fiscal 2018 and 2017 year-ends, we based our expected stock price volatility on historical volatility behavior and current implied volatility behavior. Our risk-free rate of return was based on constant maturity rates provided by the U.S. Treasury. The expected life was based on historical experience.
Net cash proceeds from the exercise of stock options were $11.8 million, $13.5 million and $18.6 million for fiscal 2019, 2018 and 2017, respectively. Our policy is to issue shares from our authorized shares upon the exercise of stock options. The actual income tax benefit realized from exercises of nonqualified stock options and disqualifying dispositions of qualified options for fiscal 2019, 2018 and 2017 was $6.4 million, $5.1 million and $4.9 million, respectively.
RSU and PSU
RSU awards are granted to our key employee and non-employee directors. The fair value of the RSU was determined at the date of grant using the market price of the underlying common stock as of the date of grant. All of the RSUs have time-based vesting over a four-year period, except that RSUs awarded to directors vest after one year. The total compensation cost of the awards is then amortized over their applicable vesting period on a straight-line basis.

PSU awards are granted to our executive officers and non-employee directors. All of the PSUs are performance-based and vest, if at all, after the conclusion of the three-year performance period. The number of PSUs that ultimately vest is based on 50% on the growth in our EPS and 50% on our relative total shareholder return over the vesting period. For the performance-based awards, our expected performance is reviewed to estimate the percentage of shares that will vest. The total compensation cost of the awards is then amortized over their applicable vesting period on a straight-line basis.
A summary of the RSU and PSU activity under our stock plans is as follows:
 
RSU
 
PSU
 
Number of
Shares
(in thousands)
 
Weighted-
Average
Grant Date
Fair Value
per Share
 
Number of
Shares
(in thousands)
 
Weighted-
Average
Grant Date
Fair Value
per Share
 
 
 
 
 
 
 
 
Nonvested balance at October 2, 2016
499

 
$
27.16

 
277

 
$
31.65

Granted
226

 
41.00

 
99

 
48.36

Vested
(186
)
 
26.98

 
—

 
—

Forfeited
(28
)
 
30.15

 
—

 
—

Nonvested balance at October 1, 2017
511

 
33.19

 
376

 
36.05

Granted
199

 
48.16

 
99

 
57.40

Vested
(184
)
 
31.85

 
(270
)
 
31.66

Adjustment (1)
—

 
—

 
131

 
31.66

Forfeited
(38
)
 
36.39

 
(13
)
 
41.80

Nonvested balance at September 30, 2018
488

 
39.56

 
323

 
44.27

Granted
179

 
66.26

 
90

 
80.41

Vested
(180
)
 
36.95

 
(108
)
 
31.63

Adjustment (1)
—

 
—

 
79

 
31.63

Forfeited
(17
)
 
48.56

 
—

 
—

Nonvested balance at September 29, 2019
470

 
50.42

 
384

 
53.67

 
 
 
 
 
 
 
 

(1)
For fiscal 2018, includes a payout adjustment of 130,730 PSUs due to the actual performance level achieved for PSUs granted in fiscal 2015 that vested fiscal 2018. For fiscal 2019, includes a payout adjustment of 79,465 PSUs due to the actual performance level achieved for PSUs granted in fiscal 2016 that vested during fiscal 2019.

During fiscal 2019, 2018 and 2017, we awarded 179,478, 198,960 and 226,241 shares of RSUs, respectively, to our key employees and non-employee directors. The weighted-average grant-date fair value of RSUs granted during fiscal 2019, 2018 and 2017 was $66.26, $48.16 and $41.00, respectively. At September 29, 2019, there were 469,568 RSUs outstanding. RSU forfeitures result from employment terminations prior to vesting. Forfeited shares return to the pool of authorized shares available for award.

During fiscal 2019, 2018 and 2017, we awarded 89,816, 99,217 and 99,180 shares of PSUs, respectively, to our executive officers and non-employee directors. The weighted-average grant-date fair value of PSUs granted during fiscal 2019, 2018 and 2017 was $80.41, $57.40 and $48.36, respectively.

The stock-based compensation expense related to RSUs and PSUs for fiscal 2019, 2018 and 2017 was $15.4 million, $15.5 million and $10.6 million, respectively, and was included in total stock-based compensation expense. At September 29, 2019, there was $23.1 million of unrecognized stock-based compensation costs related to nonvested RSUs and PSUs that will be substantially recognized by the end of fiscal 2021.
ESPP
The following table summarizes shares purchased, weighted-average purchase price, cash received and the aggregate intrinsic value for shares purchased under the ESPP:
 
Fiscal Year Ended
 
September 29,
2019
 
September 30,
2018
 
October 1,
2017
 
(in thousands, except for purchase price)
Shares purchased
148

 
141

 
190

Weighted-average purchase price
$
46.38

 
$
40.38

 
$
26.02

Cash received from exercise of purchase rights
$
6,844

 
$
5,727

 
$
4,940

Aggregate intrinsic value
$
277

 
$
337

 
$
—


The grant date fair value of each award granted under the ESPP was estimated using the Black-Scholes option pricing model with the following assumptions:
 
Fiscal Year Ended
 
September 29,
2019
 
September 30,
2018
 
October 1,
2017
Dividend yield
1.0%
 
1.0%
 
1.0%
Expected stock price volatility
26.7%
 
24.0%
 
22.4%
Risk-free rate of return, annual
2.6%
 
1.8%
 
0.9%
Expected life (in years)
1
 
1
 
1

For fiscal 2019, 2018 and 2017, we based our expected stock price volatility on historical volatility behavior and current implied volatility behavior. The risk-free rate of return was based on constant maturity rates provided by the U.S. Treasury. The expected life was based on the ESPP terms and conditions.
Stock-based compensation expense for fiscal 2019, 2018 and 2017 included $0.9 million, $0.6 million and $0.5 million, respectively, related to the ESPP. The unrecognized stock-based compensation costs for awards granted under the ESPP at September 29, 2019 and September 30, 2018 were $0.2 million and $0.2 million, respectively. At September 29, 2019, ESPP participants had accumulated $4.3 million to purchase our common stock.