Share Based Compensation

12 Months Ended

Dec. 25, 2021

Share-based Payment Arrangement, Noncash Expense [Abstract]

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. Share based compensation expense is also recognized for the value of the 15% discount on shares purchased by employees as a part of the ESPP. The discount under the ESPP represents the difference between the market value on the first day of the purchase period or the market value on the purchase date, whichever is lower, and the employee’s purchase price.

There were no significant modifications to the Company's share-based compensation plans since the adoption of the 2018 Omnibus Incentive Plan (the “2018 Plan”) on May 10, 2018, which replaced the 2009 Stock Incentive Plan. Following the adoption of the 2018 Plan, no further grants may be made under the 2009 Stock Incentive Plan.

Under our share-based compensation plans, awards may be granted to officers, non-employee directors, and other employees. 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. Performance-based awards will vest if established performance conditions are met subject to continued employment. Certain performance-based awards are also subject to a market condition such that the actual number of shares vest are further modified based on the achievement of a relative stockholder return modifier. At December 25, 2021, the Company had approximately 9.9 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 $47.6 million, $37.3 million, and $31.1 million for fiscal 2021, 2020, and 2019, respectively.

Stock Options

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 2021, 2020, and 2019, as well as a summary of the methodology applied to develop each assumption, are as follows:


	Fiscal Year
	2021		2020		2019
Expected price volatility	29.8% - 30.3%		26.7% - 30.0%		26.4% - 27.6%
Risk-free interest rate	0.3% - 1.0%		0.2% - 1.3%		1.6% - 2.5%
Weighted average expected lives (in years)	4.3		4.3		4.5
Forfeiture rate	7.0	%	7.0	%	7.3	%
Dividend yield	1.5	%	1.5	%	1.4	%

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 26, 2020	1,932,410	80.44				5.8	$	128,411
Granted	248,808	145.87		$	30.78
Exercised	(974,878)	77.63
Canceled	(38,029)	106.98
Outstanding at December 25, 2021	1,168,311	$	95.85			6.9	$	154,706

Exercisable at December 25, 2021	598,807	$	77.15			5.4	$	90,489

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 25, 2021, total unrecognized compensation expense related to non-vested stock options was approximately $8.4 million with a weighted average expense recognition period of 1.8 years.

There were no material modifications to options in fiscal 2021, 2020, or 2019.

Other information relative to options activity during fiscal 2021, 2020, and 2019 is as follows (in thousands):


	Fiscal Year
	2021		2020		2019
Total fair value of stock options vested	$	8,478	$	12,546	$	16,060
Total intrinsic value of stock options exercised	$	90,532	$	64,395	$	45,101

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 generally 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 26, 2020	595,645	$	85.27
Granted	276,268	144.52
Vested	(305,704)	82.51
Forfeited	(42,790)	118.70
Restricted at December 25, 2021	523,419	$	115.59

As of December 25, 2021, total unrecognized compensation expense related to non-vested restricted stock units was approximately $36.4 million with a weighted average expense recognition period of 1.9 years.

There were no material modifications to restricted stock units in fiscal 2021, 2020, or 2019.

Other information relative to restricted stock unit activity during fiscal 2021, 2020, and 2019 is as follows (in thousands):


	Fiscal Year
	2021		2020		2019
Total grant date fair value of restricted stock units vested and issued	$	25,222	$	17,935	$	8,301
Total intrinsic value of restricted stock units vested and issued	$	47,136	$	23,011	$	10,623

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 specified performance period. The performance metrics for the performance-based restricted share units granted in fiscal 2021 also include a relative total shareholder return ("TSR") modifier such that the actual number of shares that vest at the end of the respective three-year period is determined based on the Company's TSR performance relative to the constituents of the S&P 500 as well as the level of achievement of the performance goals. If the performance targets are achieved, the performance-based restricted share units will be issued based on the achievement level, inclusive of the relative TSR modifier and the grant date fair value, and will cliff vest in full on the third anniversary of the date of the grant. The fair value of the performance-based restricted share units is estimated using a Monte Carlo simulation model on the grant date. Key assumptions used in the Monte Carlo simulation for the performance shares with a TSR modifier granted during fiscal 2021 include an expected volatility of 31.47%, a risk-free interest rate of 0.18% and a compounded dividend yield of 1.13%.

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 26, 2020	143,268	$	87.94
Granted (a)	60,317	148.05
Vested	(10,015)	64.70
Forfeited	(6,552)	104.65
Restricted at December 25, 2021	187,018	$	107.99

(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, inclusive of the TSR modifier.

As of December 25, 2021, total unrecognized compensation expense related to non-vested performance-based restricted share units was approximately $17.4 million with a weighted average expense recognition period of 1.9 years

There were no material modifications to performance-based restricted share units in fiscal 2021, 2020, or 2019.

Other information relative to performance-based restricted share unit activity during fiscal 2021 is as follows (in thousands):


	Fiscal Year
	2021		2020		2019
Total grant date fair value of performance-based restricted share units vested and issued	$	648	$	1,895	$	2,035
Total intrinsic value of performance-based restricted share units vested and issued	$	1,538	$	2,826	$	2,666

Shares Withheld to Satisfy Tax Withholding Requirements

For the majority of restricted stock units and performance-based restricted share units granted, the number of shares issued on the date the stock awards 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 219,723, 186,751, and 103,124 shares as a result of vested restricted stock units and performance-based restricted share units during fiscal 2021, 2020, and 2019, 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 95,996, 81,946, and 41,786 shares withheld to satisfy $14.9 million, $7.8 million, and $3.8 million of employees’ tax obligations during fiscal 2021, 2020, and 2019, respectively.

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 48,446, 63,704, and 61,678 shares of common stock during fiscal 2021, 2020, and 2019, respectively. The total cost related to the ESPP, including the compensation expense calculations, was approximately $1.4 million, $1.4 million, and $1.1 million in fiscal 2021, 2020, and 2019, respectively. There is a maximum of 16.0 million shares of common stock that are reserved under the ESPP. At December 25, 2021, there were approximately 11.8 million remaining shares of common stock reserved for future issuance under the ESPP.