XML 33 R20.htm IDEA: XBRL DOCUMENT v3.22.0.1
Share-Based Compensation
 12 Months Ended
Jan. 01, 2022
Share-based Payment Arrangement [Abstract]  
Share-Based Compensation Share-Based CompensationOur shareowners approved our Amended and Restated Primo Water Corporation Equity Incentive Plan (the “Amended and Restated Equity Plan”) in its current form in May 2016, and approved the Primo Water Corporation 2018 Equity Incentive Plan (“2018 Equity Plan” and together with the Amended and Restated Equity Plan, the “Equity Plans”) in May 2018. Awards under the Equity Plans may be in the form of incentive stock options, non-qualified stock options, restricted shares, restricted share units, performance shares, performance units, stock appreciation rights, and stock payments to employees, directors and outside consultants. The Equity Plans are administered by the Human Resources and Compensation Committee (“HRCC”) of the Board of Directors or any other board committee as may be designated by the Board of Directors from time to time. Under the Amended and Restated Equity Plan, 20,000,000 shares are reserved for future issuance, and under the 2018 Equity Plan, 8,000,000 shares are reserved for future issuance, subject to adjustment upon a share split, share dividend, recapitalization, and other similar transactions and events. Shares that are issued under the Equity Plans are applied to reduce the maximum number of shares remaining available for issuance under the Equity Plans; provided that the total number of shares available for issuance under the Equity Plans are reduced two shares for each share issued pursuant to a “full-value” award (i.e., an award other than an option or stock appreciation right).
Shares to be issued pursuant to Time-based RSUs, Performance-based RSUs, or stock options that are forfeited, expired, or are canceled or settled without the issuance of shares return to the pool of shares available for issuance under the Equity Plans. As of January 1, 2022, there were approximately 139,000 shares available for future issuance under the Amended and Restated Equity Plan, and approximately 3,859,271 shares available for future issuance under the 2018 Equity Plan.
In the second quarter of 2020, the Human Resources and Compensation Committee of the Board of Directors (the “HRCC”) approved a bonus for a select group of associates that was settled in fully vested common shares based on the closing share price on the date the achievement of the performance target described below was certified by the HRCC. The aggregate target payout of $2.4 million was based on (1) attainment of a specified percentage target under the Company's annual cash performance bonus plan for the DSS business, and (2) attainment of a specified annualized 2020 synergy target. This bonus was accounted for as a liability-classified award with a performance condition. The final bonus payout was based upon the performance percentage, which was 122% of the target payout. For the year ended January 2, 2021, the Company recorded $2.9 million of share-based compensation expense, which is included in SG&A expenses on the Consolidated Statement of Operations. A related liability associated with these awards of $2.9 million was recorded in accounts payable and accrued liabilities on the Consolidated Balance Sheet as of January 2, 2021 and was subsequently paid in the first quarter of 2021.
The table below summarizes the share-based compensation expense for the years ended January 1, 2022, January 2, 2021, and December 28, 2019. Share-based compensation expense is recorded in SG&A expenses in the Consolidated Statements of Operations. As referenced below: (i) “Performance-based RSUs” represent restricted share units with performance-based vesting, (ii) “Time-based RSUs” represent restricted share units with time-based vesting, (iii) “Stock options” represent non-qualified stock options, (iv) “Director share awards” represent common shares issued in consideration of the annual board retainer fee to non-management members of our Board of Directors, and (v) the “ESPP” represents the Primo Water Corporation Employee Share Purchase Plan, under which common shares are issued to eligible employees at a discount through payroll deductions.

For the Year Ended
(in millions of U.S. dollars)January 1, 2022January 2, 2021December 28, 2019
Stock options$3.0 $5.5 $3.3 
Performance-based RSUs7.4 7.8 5.7 
Time-based RSUs5.5 4.9 2.1 
Director share awards1.3 1.3 1.1 
Liability-classified awards— 2.9 — 
Employee Share Purchase Plan0.3 0.3 0.2 
Total 1
$17.5 $22.7 $12.4 
______________________
1     Includes $0.6 million and $0.7 million of share-based compensation expense from our discontinued operations, which were included in net income from discontinued operations, net of income taxes on the Consolidated Statements of Operations for the years ended January 2, 2021 and December 28, 2019, respectively.

On August 4, 2020, we amended the Equity Plans to provide for defined criteria for a retirement along with continued vesting of equity awards upon a retirement. The total incremental compensation expense associated with the modification was $5.9 million and was included in SG&A expenses on the Consolidated Statement of Operations for the year ended January 2, 2021.
The tax benefit recognized related to share-based compensation expense for the fiscal year ended January 1, 2022 was $2.2 million (January 2, 2021 - $0.8 million; December 28, 2019 - $0.6 million).
As of January 1, 2022, the unrecognized share-based compensation expense and weighted average years over which we expect to recognize it as compensation expense were as follows:
(in millions of U.S. dollars, except years)Unrecognized share-based compensation expense as of January 1, 2022Weighted average years expected to recognize compensation
Stock options$1.2 1.5
Performance-based RSUs8.5 2.5
Time-based RSUs8.9 1.8
Total$18.6 

Stock Options
During 2021, 2020 and 2019 approximately 18,000, 1,053,600, and 1,138,000 options were granted to certain employees under the Amended and Restated Equity Plan at a weighted-average exercise price of $17.79, $15.48, and $13.68 per share, respectively. The weighted-average grant date fair value of the options was estimated to be $5.47, $4.63, and $3.42 per share in 2021, 2020 and 2019, respectively, using the Black-Scholes option pricing model. The contractual term of an option granted is fixed by the Amended and Restated Equity Plan and cannot exceed ten years from the grant date.
Following a review of peer group and survey data, and with input from its compensation consultant, the HRCC determined to change the mix of awards granted to participants in our Equity Plans commencing with the awards granted in 2021 by eliminating stock options from the mix and allocating awards 60% to performance-based restricted share units and 40% to time-based restricted share units.
The grant date fair value of each option granted during 2021, 2020 and 2019 was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions:

For the Year Ended
January 1, 2022January 2, 2021December 28, 2019
Risk-free interest rate1.2 %0.7 %1.8 %
Average expected life (years)6.06.06.0
Expected volatility35.9 %36.2 %29.0 %
Expected dividend yield1.4 %1.6 %1.8 %
The following table summarizes the activity for Company stock options:

Stock Options (in thousands)Weighted average exercise priceWeighted average contractual term (years)Aggregate intrinsic value (in thousands)
Outstanding at December 29, 20185,446 $12.30 7.3$11,993.0 
Granted1,138 13.68 
Exercised(91)10.47 389.1 
Forfeited or expired— — 
Outstanding at December 28, 20196,493 $12.57 6.9$11,045.4 
Granted1,054 15.48 
Exercised(252)10.27 1,185.9 
Forfeited or expired(25)11.98 
Outstanding at January 2, 20217,270 $13.07 6.5$20,659.3 
Granted18 17.79 
Exercised(2,382)10.32 17,439.4 
Forfeited or expired(51)13.62 
Outstanding at January 1, 20224,855 $14.42 6.0$15,588.1 
Exercisable at January 1, 20223,961 $14.30 5.4$13,192.7 
Vested or expected to vest at January 1, 20224,855 $14.42 6.0$15,588.1 

The aggregate intrinsic value amounts in the table above represent the difference between the closing price of our common shares on the New York Stock Exchange on December 31, 2021, which was $17.63 (December 31, 2020—$15.68; December 27, 2019—$13.45), and the exercise price, multiplied by the number of in-the-money stock options as of the same date.
Stock options granted during the year ended January 1, 2022 vest in three equal annual installments on the first, second and third anniversaries of the date of grant.
The total amount of cash received from the exercise of stock options was $23.8 million and $2.0 million during the fiscal year ended January 1, 2022 and January 2, 2021, respectively, with an associated tax benefit of $1.3 million and $0.1 million realized in each period. The total amount of cash received from the exercise of stock options was not material during the fiscal year ended December 28, 2019 with no associated tax benefit realized. The total fair value of options that vested during the year ended January 1, 2022 was $16.7 million (January 2, 2021 — $15.8 million; December 28, 2019 — $19.0 million).
Other Awards
In 2021, we granted 76,500 common shares to the non-management members of our Board of Directors under the Amended and Restated Equity Plan with a grant date fair value of approximately $1.3 million. The common shares were issued in consideration of the directors’ annual board retainer fee and were vested upon issuance.
Additionally, in 2021, we granted 484,000 Performance-based RSUs, which vest at the end of a three-year performance period beginning on the first day of our 2022 fiscal year, and ending on the last day of our 2024 fiscal year. The number of shares ultimately awarded will be based upon the performance payout rate, which can range from 0% to 200% of the awards granted. The Performance-based RSUs vest primarily on the Company’s achievement of average annual return on invested capital (“ROIC”) and aggregate revenues for the applicable performance period (the “Performance Objectives”). The number of Performance-based RSUs that may vest and the related unrecognized compensation cost is subject to change based on the Performance Objectives achieved during the vesting period. The Company also granted 665,000 Time-based RSUs, which vest over two to three years in equal annual installments on the first, second and third anniversaries of the date of grant and include a service condition.

Number of Performance-based RSUs (in thousands)Weighted Average Grant-Date Fair ValueNumber of Time-based RSUs (in thousands)Weighted Average Grant-Date Fair Value
Balance at December 29, 20181,665 $13.90 427 $14.23 
Awarded285 13.69 216 13.69 
Awarded in connection with modification190 11.22 — — 
Issued(441)11.30 (239)13.38 
Forfeited(100)12.33 (7)14.89 
Balance at December 28, 20191,599 $14.36 397 $14.43 
Awarded458 15.64 542 14.85 
Awarded in connection with modification344 17.50 — — 
Issued(842)16.80 (371)13.82 
Forfeited(374)16.03 (20)14.18 
Outstanding at January 2, 20211,185 $15.27 548 $14.75 
Awarded484 17.06 665 16.50 
Awarded in connection with modification119 17.46 — — 
Issued(467)17.46 (266)14.59 
Forfeited(75)15.02 (62)14.88 
Outstanding at January 1, 20221,246 $15.65 885 $16.10 
Vested or expected to vest at January 1, 20221,524 $15.34 885 $16.10 

The total fair value of Performance-based RSUs vested and issued during the years ended January 1, 2022, January 2, 2021 and December 28, 2019 were $8.1 million, $14.1 million and $5.0 million, respectively. The total fair value of Time-based RSUs vested and issued during the years ended January 1, 2022, January 2, 2021, and December 28, 2019 were $3.9 million, $5.1 million, and $3.2 million.
Employee Share Purchase Plan
The Company has maintained the Primo Water Corporation Employee Share Purchase Plan (the “ESPP”) since 2015. The ESPP qualifies as an “employee share purchase plan” under Section 423 of the Internal Revenue Code of 1986 (“IRC”), as amended. Substantially all employees are eligible to participate in the ESPP and may elect to participate at the beginning of any quarterly offering period. The ESPP authorizes the issuance, and the purchase by eligible employees, of up to 3,000,000 shares of Primo common shares through payroll deductions. Eligible employees who choose to participate may purchase Primo common shares at 90% of market value on the first or last day of the quarterly offering period, whichever is lower. The minimum contribution which an eligible employee may make under the ESPP is 1% of the employee’s eligible compensation, with the maximum contribution limited to 15% of the employee’s eligible compensation. At the end of each quarterly offering period for which the employee participates, the total amount of each employee’s payroll deduction for that offering period will be used to purchase Primo common shares. The Company recognized $0.3 million, $0.3 million and $0.2 million of share-based compensation expense in SG&A expenses in the Consolidated Statements of Operations for 2021, 2020 and 2019, respectively. At January 1, 2022, 2,342,096 shares remained available for issuance under the ESPP.