Share-Based Compensation:

Share-based compensation includes stock options, restricted stock units, performance-based restricted share units, and certain transactions under the Company’s ESPP. Share-based compensation expense is recognized based on the grant date fair value of all stock options, restricted stock units, and performance-based restricted share units plus a discount on shares purchased by employees as a part of the ESPP. The discount under the ESPP represents the difference between the purchase date market value and the employee’s purchase price.

There were no significant modifications to the Company’s share-based compensation plans during fiscal 2017 or 2016. In fiscal 2018, there were no significant modifications to the Company’s share-based compensation plans prior to May 10, 2018, when the Company’s shareholders approved the 2018 Omnibus Incentive Plan (the “2018 Plan”) replacing the 2009 Stock Incentive Plan. Following the adoption of the 2018 Plan, no further grants may be made under the 2009 Stock Incentive Plan. Subject to adjustment as provided by the terms of the 2018 Plan, the maximum number of shares of common stock with respect to which awards may be granted under the 2018 Plan is 12,562,318. The maximum number of shares with respect to which awards may be granted under the 2018 Plan shall be increased by the number of shares with respect to which options or other awards were granted under the 2009 Stock Incentive Plan or the 2006 Stock Incentive Plan but which terminate, expire unexercised, or are settled for cash, forfeited, or canceled without the delivery of shares after the effective date of the 2018 Plan.

Under our 2018 Plan, awards may be granted to officers, non-employee directors, other employees, and independent contractors. The per share exercise price of options granted shall not be less than the fair market value of the stock on the date of grant and such awards will expire no later than ten years from the date of grant. Vesting of awards commences at various anniversary dates following the dates of each grant and certain awards will vest only upon established performance conditions being met. At December 29, 2018, the Company had approximately 12.7 million shares available for future equity awards under the Company’s 2018 Plan.

Share-based compensation expense, including changes in expense for modifications, if any, of awards, was $28.9 million, $29.2 million, and $23.6 million for fiscal 2018, 2017, and 2016, respectively.

Stock Options

Under the Company’s share-based compensation plans, options may be granted to current or prospective officers or employees, non-employee directors, and independent contractors. The per share exercise price of options granted shall not be less than the fair market value of the stock on the date of grant and such options will expire no later than ten years from the date of grant. Vesting of options commences at various anniversary dates following the dates of grant.

The fair value is separately estimated for each option grant. The fair value of each option is recognized as compensation expense ratably over the vesting period. The Company has estimated the fair value of all stock option awards as of the date of the grant by applying a Black-Scholes pricing valuation model. The application of this valuation model involves assumptions that are judgmental and highly sensitive in the determination of compensation expense. The ranges of key assumptions used in determining the fair value of options granted during fiscal 2018, 2017, and 2016, as well as a summary of the methodology applied to develop each assumption, are as follows:



	Fiscal Year
	2018		2017		2016
Expected price volatility	26.4 - 27.0%		25.1 - 26.0%		25.5 - 27.9%
Risk-free interest rate	2.5 - 3.0%		1.7 - 1.9%		0.9 - 1.3%
Weighted average expected term (in years)	4.5		4.4		4.4
Forfeiture rate	7.3	%	7.2	%	7.1	%
Dividend yield	1.6	%	1.3	%	0.9	%

Expected Price Volatility — This is a measure of the amount by which a price has fluctuated or is expected to fluctuate. The Company applies a historical volatility rate. To calculate historical changes in market value, the Company uses daily market value changes from the date of grant over a past period generally representative of the expected life of the options to determine volatility. The Company believes the use of historical price volatility provides an appropriate indicator of future volatility. An increase in the expected volatility will increase compensation expense.

Risk-Free Interest Rate — This is the U.S. Treasury Constant Maturity rate over a term equal to the expected term of the option. An increase in the risk-free interest rate will increase compensation expense.

Weighted Average Expected Term — This is the period of time over which the options granted are expected to remain outstanding and is based on historical experience. Options granted generally have a maximum term of ten years. An increase in the expected term will increase compensation expense.

Forfeiture Rate — This is the estimated percentage of options granted that are expected to be forfeited or canceled before becoming fully vested. This estimate is based on historical experience. An increase in the forfeiture rate will decrease compensation expense.

Dividend Yield — This is the estimated dividend yield for the weighted average expected term of the option granted. An increase in the dividend yield will decrease compensation expense.

The Company issues shares for options when exercised. A summary of stock option activity is as follows:



Stock Option Activity	Options		Weighted Average Exercise Price		Weighted Average Fair Value		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (in thousands)
Outstanding at December 30, 2017	4,998,526		$	68.46			6.9	$	50,145
Granted	693,634		67.81		$	15.02
Exercised	(1,380,136	)	54.55
Canceled	(258,638	)	77.83
Outstanding at December 29, 2018	4,053,386		$	72.49			7.0	$	46,472

Exercisable at December 29, 2018	2,173,274		$	72.32			5.8	$	25,747

The aggregate intrinsic values in the table above represent the total difference between the Company’s closing stock price at each year-end and the option exercise price, multiplied by the number of in-the-money options at each year-end. As of December 29, 2018, total unrecognized compensation expense related to non-vested stock options was approximately $12.3 million with a weighted average expense recognition period of 1.6 years.

There were no material modifications to options in fiscal 2018, 2017, or 2016.

Other information relative to options activity during fiscal 2018, 2017, and 2016 is as follows (in thousands):



	Fiscal Year
	2018		2017		2016
Total fair value of stock options vested	$	18,247	$	15,996	$	15,184
Total intrinsic value of stock options exercised	$	43,476	$	9,237	$	39,696

Restricted Stock Units

The Company issues shares for restricted stock units once vesting occurs and related restrictions lapse. The fair value of the restricted stock units is the closing price of the Company’s common stock the day preceding the grant date, discounted for the expected dividend yield over the term of the award. The units vest over a one to three-year term; some plan participants have elected to defer receipt of shares of common stock upon vesting of restricted stock units, and as a result, those shares are not issued until a later date. A summary of restricted stock unit activity is presented below:



Restricted Stock Unit Activity	Restricted Stock Units		Weighted Average Grant Date Fair Value
Restricted at December 30, 2017	223,230		$	67.92
Granted	309,978		64.00
Exercised	(70,845	)	75.16
Forfeited	(24,293	)	65.84
Restricted at December 29, 2018	438,070		$	64.09

Other information relative to restricted stock unit activity during fiscal 2018, 2017, and 2016 is as follows (in thousands):



	Fiscal Year
	2018		2017		2016
Total grant date fair value of restricted stock units vested and issued	$	5,325	$	3,301	$	3,072
Total intrinsic value of restricted stock units vested and issued	$	5,364	$	3,465	$	5,104

For the majority of restricted stock units granted, the number of shares issued on the date the restricted stock units vest is net of shares withheld by the Company to satisfy the minimum statutory tax withholding requirements, which the Company pays on behalf of its employees. The Company issued 53,714, 39,314, and 48,267 shares as a result of vested restricted stock units during fiscal 2018, 2017, and 2016, respectively. Although shares withheld are not issued, they are treated similar to common stock repurchases as they reduce the number of shares that would have been issued upon vesting. The amounts are net of 17,131, 11,755, and 10,236 shares withheld to satisfy $1.4 million of employees’ tax obligations during fiscal 2018 and $0.8 million during both fiscal 2017 and 2016.

There were no material modifications to restricted stock units in fiscal 2018, 2017, or 2016.

As of December 29, 2018, total unrecognized compensation expense related to non-vested restricted stock units was approximately $13.5 million with a weighted average expense recognition period of 2.0 years.

Performance-Based Restricted Share Units

We issue performance-based restricted share units to senior executives that represent shares potentially issuable in the future, subject to the achievement of specified performance goals. The performance metrics for the units are growth in net sales and growth in earnings per diluted share over a one-year performance period. Issuance is based upon the level of achievement of the relative performance targets. If the performance targets are achieved, the units will vest on a pro-rata basis over a three-year period. The fair value of the performance-based restricted share units is the closing price of the Company’s common stock the day preceding the grant date, discounted for the expected dividend yield over the term of the awards. A summary of performance-based restricted share unit activity is presented below:



Performance-Based Restricted Share Unit Activity	Performance-Based Restricted Share Units	Weighted Average Grant Date Fair Value
Restricted at December 30, 2017	—	$	—
Granted ^(a)	41,310	63.90
Exercised	—	—
Forfeited	—	—
Restricted at December 29, 2018	41,310	$	63.90

^(a)Assumes 100% target level achievement of the relative performance targets. The actual number of shares that will be issued, which may be higher or lower than the target, will be determined by the level of achievement of the relative performance targets.

There were no vested or issued performance-based restricted share units as of fiscal 2018, 2017, or 2016, and as such, there was no associated fair value or intrinsic value for these awards.

There were no material modifications to performance-based restricted share units in fiscal 2018, 2017, or 2016.

As of December 29, 2018, total unrecognized compensation expense related to non-vested performance-based restricted share units was approximately $1.3 million with a weighted average expense recognition period of 2.2 years.

Employee Stock Purchase Plan

The ESPP provides Company employees the opportunity to purchase, through payroll deductions, shares of common stock at a 15% discount. Pursuant to the terms of the ESPP, the Company issued 77,458, 83,155, and 69,562 shares of common stock during fiscal 2018, 2017, and 2016, respectively. The total cost related to the ESPP, including the compensation expense calculations, was approximately $1.1 million, $1.0 million, and $1.1 million in fiscal 2018, 2017, and 2016, respectively. There is a maximum of 16.0 million shares of common stock that are reserved under the ESPP. At December 29, 2018, there were approximately 11.9 million remaining shares of common stock reserved for future issuance under the ESPP.