Share-Based Payment Arrangements

9 Months Ended

Sep. 28, 2024

Share-Based Payment Arrangements

(2) Share-based Payment Arrangements

As of September 28, 2024, the Company has an employee equity incentive plan, the 2011 equity incentive plan (the “2011 EIP”). The Company also has a stock compensation plan for members of its Board of Directors, the 2022 Directors Stock Compensation Plan (the “2022 DSCP”). 6,000,000 shares of the Company’s common stock were authorized for issuance under the 2011 EIP and 200,000 shares of the Company’s common stock were authorized for issuance under the 2022 DSCP. The 2011 EIP and 2022 DSCP are each referred to herein as a “Plan,” and, collectively, as the “Plans.” Amounts recognized in the financial statements with respect to these Plans are as follows (in thousands):

	Thirty-Nine Weeks Ended						Thirteen Weeks Ended
	September 28, 2024			September 30, 2023			September 28, 2024			September 30, 2023
Total cost of the Plans during the period	$	3,573		$	4,270		$	(43	)	$	1,144
Amount of related income tax benefit recognized during the period		(1,997	)		(3,878	)		(313	)		(286	)
Net cost of the Plans during the period	$	1,576		$	392		$	(356	)	$	858

Included in income tax benefits recognized in the thirty-nine-week periods ended September 28, 2024 and September 30, 2023 were excess tax benefits from stock-based awards of $1,122,000 and $2,830,000, respectively.

As of September 28, 2024, there were 181,450 shares of the Company’s common stock reserved for issuance under the 2022 DSCP and 2,800,060 shares of the Company’s common stock reserved for issuance under the 2011 EIP.

Restricted Stock Units

The following table summarizes information regarding the Company’s outstanding restricted stock unit (“RSU”) awards with either a performance condition or a market condition under the Plans:

	Number of			Weighted Average Grant Date
	RSUs			Fair Value
Outstanding at December 30, 2023		132,722		$	138.93
Granted		102,762		$	138.85
Shares earned in excess of target (1)		1,791		$	51.42
Vested shares		(45,057	)	$	115.69
Forfeited		(29,801	)	$	140.20
Outstanding at September 28, 2024		162,417		$	144.13

(1) Represents additional shares earned under the April 24, 2018 and July 1, 2019 RSU awards as total shareholder return during the applicable performance period exceeded target performance level under each of those awards.

During the thirty-nine-week period ended September 28, 2024, the Company granted RSUs with a performance condition and RSUs with a market condition, as further described below. Outstanding RSUs at both December 30, 2023 and September 28, 2024 include RSUs with a performance condition and RSUs with a market condition, as further described below and in the Company’s 2023 Annual Report on Form 10-K.

RSUs with a performance condition granted on February 2, 2024 may vest on January 31 of 2027, 2028 and 2029 based on growth in operating income and pre-tax income per diluted share from continuing operations as compared to the results from the 2023 fiscal year.

On February 2, 2024, the Company granted 58,268 RSUs that vest based on a market condition. These RSUs may vest based on the achievement of the target Company’s total shareholder return (“TSR”) compound annual growth rate, adjusted to reflect dividends (if any) paid during such periods and capital adjustments as may be necessary, and are eligible to vest annually starting after the sixth anniversary of the grant date and concluding after the tenth anniversary of the grant date. The fair value of this RSU award was determined at the time of grant based on the expected achievement of the market condition. With respect to these RSU awards, the Company reports compensation expense ratably over the service period of the award based on the number of units granted multiplied by the grant date fair value of the RSU. Previously recognized compensation cost would be reversed only if the employee did not complete the requisite service period due to termination of employment.

The Company recognized approximately $408,000 and $1,503,000 of share-based compensation expense related to RSU awards in the thirty-nine-week periods ended September 28, 2024 and September 30, 2023, respectively. As of September 28, 2024, there was a maximum of $40.7 million of total unrecognized compensation cost related to RSU awards granted under the Plans with an expected average remaining life of approximately 3.6 years. With respect to RSU awards with a performance condition, the amount of future compensation expense to be recognized will be determined based on future operating results.

Non-vested Restricted Stock and Deferred Stock Units

The following table summarizes information regarding the Company’s outstanding shares of non-vested restricted stock and Deferred Stock Units (defined below) under the Plans:

	Number of Shares and Deferred Stock Units			Weighted Average Grant Date Fair Value
Non-vested at December 30, 2023		46,348		$	158.38
Granted		31,525		$	187.08
Vested		(25,647	)	$	151.16
Forfeited		(4,707	)	$	169.92
Non-vested at September 28, 2024		47,519		$	180.17

The fair value of each share of non-vested restricted stock issued and Deferred Stock Unit granted under the Plans is based on the fair value of a share of the Company’s common stock on the date of grant. Shares of non-vested restricted stock are generally subject to vesting in three equal annual installments either on the first, second and third anniversary of the date of the grant or the third, fourth and fifth anniversary of the date of the grant, in two equal annual installments on the first and second anniversary of the date of the grant or 100% on the first, third or fifth anniversary of the date of the grant. For restricted stock awards granted under the 2022 DSCP, each recipient may elect to defer receipt of shares and instead receive restricted stock units (“Deferred Stock Units”), which represent contingent rights to receive shares of the Company’s common stock on the date of the recipient’s separation from service from the Board of Directors, or, if earlier, upon a change in control event of the Company. Deferred Stock Units become vested 100% on the first anniversary of the date of the grant. Deferred Stock Units do not represent actual ownership in shares of the Company’s common stock and the recipient does not have voting rights or other incidents of ownership until the shares are issued. However, Deferred Stock Units do contain the right to receive dividend equivalent payments prior to settlement into shares.

As of September 28, 2024, there was $5,754,000 of total unrecognized compensation cost related to non-vested shares of restricted stock and Deferred Stock Units granted under the Plans. The unrecognized compensation cost related to these non-vested shares of restricted stock and Deferred Stock Units is expected to be recognized over a weighted average period of 1.8 years.

Stock Options

The Company had no issued and outstanding vested or unvested stock options or unrecognized compensation costs related to non-vested stock options granted under the Plans as of December 30, 2023 or September 28, 2024. The total intrinsic value of stock options exercised during the thirty-nine-week period ended September 30, 2023 was $218,000.