Share Based Compensation Plans

9 Months Ended

Oct. 02, 2022

Share-based Payment Arrangement [Abstract]

Share based compensation expense was $5.6 million and $16.3 million for the three and nine months ended October 2, 2022, respectively, and $2.3 million and $11.5 million for the three and nine months ended October 3, 2021, respectively. As of October 2, 2022, the total remaining unrecognized compensation expense related to share based compensation amounted to $33.0 million, which will be amortized over the weighted average remaining requisite service period of 1.9 years.

Equity Incentive Plans

Our equity incentive plans under the 2021 Equity Plan and 2012 Plan are described in detail and defined in our Annual Report. The aggregate number of common shares that can be issued with respect to equity awards under the 2021 Equity Plan cannot exceed 880,000 shares; plus the number of shares reserved for the 2012 Plan that is in excess of the number of shares related to outstanding grants; plus the number of shares subject to existing grants under the 2012 Plan that may expire or be forfeited or cancelled. As of October 2, 2022, there were 941,633 shares of common stock available for future issuance under the 2021 Equity Plan.

Deferred Compensation Plan

We offer to certain of our employees and directors a Deferred Compensation Plan, which is further described in our Annual Report. As of October 2, 2022, the liability and asset relating to deferred compensation had a fair value of $6.7 million and $6.3 million, respectively. As of October 2, 2022, participation in the deferred compensation plan is limited and no restricted stock awards have been deferred into the deferred compensation plan. All plan investments are categorized as having Level 1 valuation inputs as established by the FASB’s Fair Value Framework.

Stock Appreciation Rights

We have granted Stock Appreciation Rights ("SARs") to certain employees under both the 2021 Equity Plan and the 2012 Plan, which entitle the recipient to the appreciation in value of a number of common shares over the exercise price over a period of time, each as specified in the applicable award agreement. The exercise price of any SAR granted may not be less than the fair market value of our common shares on the date of grant. The compensation expense for the SARs is measured based on the fair value of the SARs at the date of grant and is recognized over the requisite service period. The SARs vest over a maximum of three years, have a life of ten years and settle in common shares. It is assumed that all time-based SARs will vest. We recognize forfeitures of SARs in the period in which they occur.

The total fair value of SARs vested was $0.8 million during the nine months ended October 2, 2022.


Nine Months Ended October 2, 2022	Stock Appreciation Rights	Aggregate Intrinsic Value (in thousands)		Weighted Average Exercise Price		Average Remaining Contractual Life (Years)
Outstanding, beginning of period	158,725	$	7,324	$	71.81	7.5
Granted	33,803			88.43
Exercised	(4,580)	169		56.51
Cancelled and forfeited	(3,743)			96.15
Outstanding, end of period	184,205	$	1,246	$	74.75	7.3

Exercisable, end of period	124,842	$	1,220	$	66.14	6.5

The value of SARs granted is determined using the Black-Scholes-Merton valuation model, and the corresponding expense is expected to be recognized over the average requisite service period of 2.0 years. Expected volatility is based upon the historical volatility of our common shares amongst other considerations. The expected term is calculated based upon historical employee exercise behavior and the contractual term of the options amongst other considerations. The weighted average grant date assumptions used for the SARs granted were as follows for the periods indicated:


	2022 Grants
SAR value (model conclusion)	$	26.52
Risk-free rate	2.0		%
Expected dividend yield	0.0		%
Expected volatility	26.5		%
Expected term (years)	6.0

Restricted Stock Units

We have granted Restricted Stock Units ("RSUs") to directors and certain employees under the 2012 and 2021 Plans. The RSUs confer the right to receive shares of our common stock at a specified future date or when certain conditions are met. The compensation expense for the RSUs awarded is based on the fair value of the RSUs at the date of grant, which is equal to the stock price on the date of grant, and is recognized over the requisite service period. The RSUs vest over a maximum of three years and call for the underlying shares to be delivered no later than 30 days following the vesting date unless the participant is subject to a blackout period. In such case, the shares are to be

delivered once the blackout restriction has been lifted. It is assumed that all time-based RSUs will vest. We recognize forfeitures of RSUs in the period in which they occur.


Nine Months Ended October 2, 2022	Total Restricted Stock Units Outstanding	Weighted Average Grant Date Fair Value
Outstanding, beginning of period	442,106	$	87.24
Granted	420,781	88.57
Performance adjustment (1)	25,234	57.19
Delivered	(187,613)	77.98
Withheld to cover (2)	(34,755)
Forfeited	(41,095)	95.12
Outstanding, end of period	624,658	$	91.83

___________

(1) Performance-based RSUs are presented as outstanding, granted and forfeited in the table above assuming targets are met and the awards pay out at 100%. Certain awards are settled with payouts ranging from zero to 200% of the target award value depending on achievement. The performance adjustment represents the difference in shares ultimately awarded due to performance attainment above or below target.

(2) A portion of the vested RSUs delivered were net shares settled to cover statutory requirements for income and other employment taxes. We remit the equivalent cash to the appropriate taxing authorities. These net share settlements had the effect of share repurchases by us as we reduced and retired the number of shares that would have otherwise been issued as a result of the vesting.

Approximately half of the RSUs granted during the nine months ended October 2, 2022, vest at specified future dates with only service requirements, while the remaining portion of the RSUs vest based on both performance and service requirements. The value of RSUs granted in the nine months ended October 2, 2022, is being recognized over the weighted average requisite service period of 2.5 years. During the nine months ended October 2, 2022, 222,368 RSUs vested at a fair value of $16.0 million.