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Share-Based Compensation | 12 Months Ended
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Oct. 02, 2020
Share-based Payment Arrangement [Abstract] |
Share-Based Compensation | SHARE-BASED COMPENSATION: On November 12, 2013, the Board approved, and the stockholders of Aramark adopted by written consent, the Aramark 2013 Stock Incentive Plan (the "Old 2013 Stock Plan"), which became effective on December 1, 2013 and the amended and restated Old 2013 Stock Plan was approved by the Board on November 9, 2016 and approved by the stockholders of Aramark on February 1, 2017 (as amended, the "2013 Stock Plan"). The 2013 Stock Plan provides that the total number of shares of common stock that may be issued under the 2013 Stock Plan is 25,500,000. On January 29, 2020, the Company's stockholders approved the Second Amended and Restated 2013 Stock Incentive Plan, which amended and restated the 2013 Stock Plan. The Second Amended and Restated 2013 Stock Incentive Plan provides for up to 7.5 million of new shares authorized for issuance to participants, in addition to the shares that remained available for issuance under the 2013 Stock Plan as of January 29, 2020 that are not subject to outstanding awards under the 2013 Stock Plan. The following table summarizes the share-based compensation expense (reduction) and related information for Time-Based Options ("TBOs"), Retention Time-Based Options ("TBO-Rs"), Performance-Based Options ("PBOs"), Time-Based Restricted Stock Units ("RSUs"), Performance Stock Units ("PSUs") and Deferred Stock Units classified as "Selling and general corporate expenses" on the Consolidated Statements of (Loss) Income (in millions).
|  | Fiscal Year Ended
|  | October 2, 2020 |  | September 27, 2019 |  | September 28, 2018
TBOs |  | $ | 10.8 |  |  | $ | 14.7 |  |  | $ | 18.5 |
TBO-Rs |  | 0.3 |  |  | — |  |  | — |
RSUs |  | 35.1 |  |  | 28.9 |  |  | 24.1 |
PSUs (1) |  | (17.8) |  |  | 9.9 |  |  | 43.7 |
Deferred Stock Units |  | 1.9 |  |  | 1.8 |  |  | 2.0 |
|  | $ | 30.3 |  |  | $ | 55.3 |  |  | $ | 88.3 |
Taxes related to share-based compensation |  | $ | 7.2 |  |  | $ | 13.7 |  |  | $ | 24.1 |
Cash Received from Option Exercises |  | 90.0 |  |  | 39.1 |  |  | 21.5 |
Tax Benefit on Share Deliveries (2) |  | 46.2 |  |  | 4.8 |  |  | 7.4 |
(1) | Share-based compensation expense was reduced during fiscal 2020 based on lower than estimated target attainment on plan metrics on each of the fiscal 2018, fiscal 2019 and fiscal 2020 PSU grants, resulting in the reversal of previously recognized share-based compensation expense of $29.8 million. Share-based compensation expense was reduced during fiscal 2019 based on lower than estimated target attainment on plan metrics for the fiscal 2018 PSU grants, resulting in the reversal of previously recognized share-based compensation expense of $6.6 million. The Company also reversed previously recognized share-based compensation expense based on the actual target for the 2017 PSU grants achieved as of the end of fiscal 2019 of $5.2 million. During fiscal 2018, the Company increased the estimated target attainment on plan metrics for both the fiscal 2016 and fiscal 2017 PSU grants, resulting in an additional $18.9 million of share-based compensation expense.
(2) | The tax benefit on option exercises and restricted stock unit deliveries is included in "Prepayments and Other Current Assets" on the Consolidated Statement of Cash Flows.
On September 3, 2020, the Board determined a payout level for the fiscal 2018 PSU grants covering a performance period of September 30, 2017 to October 2, 2020 by adjusting the calculation of the performance to moderate the impact of COVID-19 by measuring performance for the first two and a half years of the three year performance period, removing both the results and the portion of the targets attributable to the period when the Company's business was hardest hit by COVID-19. As a result, the Company recognized $3.9 million of additional expense in fiscal 2020 associated with approximately 0.1 million shares due to this modification. No compensation expense was capitalized. Prior to the fourth quarter of fiscal 2018, the Company applied a forfeiture assumption of 8.7% per annum in the calculation of such expenses. The rate was reduced to approximately 6.4% per annum in the fourth quarter of fiscal 2018. During the fourth quarter of fiscal 2020, the Company increased its estimated forfeiture assumption to 9.0% per annum based on actual forfeiture activity. The below table summarizes the unrecognized compensation expense as of October 2, 2020 related to non-vested awards and the weighted-average period they are expected to be recognized:
|  | Unrecognized Compensation Expense (in millions) |  | Weighted-Average Period (Years)
TBOs |  | $ | 38.2 |  |  | 2.72
TBO-Rs |  | 22.2 |  |  | 4.49
RSUs |  | 114.9 |  |  | 2.61
PSUs |  | — |  |  | 1.90
Total |  | $ | 175.3 |  |  |
Stock Options Time-Based Options Fiscal 2020 and prior TBO grants vest solely based upon continued employment over a four year time period. The Company's annual TBO grants for fiscal 2021 were awarded early in September 2020 and will vest solely based upon continued employment over a three year time period. All TBOs remain exercisable for 10 years from the date of grant. The fair value of the TBOs granted was estimated using the Black-Scholes option pricing model. Prior to June of fiscal 2020, the expected volatility was based on a blended average of the historic volatility of the Company's and competitors' stocks over the expected term of the stock options. Beginning in June of fiscal 2020, the expected volatility is based on the historic volatility of the Company's stock over the expected term of the stock options. The expected life represents the period of time that options granted are expected to be outstanding and is calculated using the simplified method as permitted under Securities and Exchange Commission ("SEC") rules and regulations due to the method providing a reasonable estimate in comparison to actual experience. The simplified method uses the midpoint between an option's vesting date and contractual term. The risk-free rate is based on the United States Treasury security with terms equal to the expected life of the option as of the grant date. Compensation expense for TBOs is recognized on a straight-line basis over the vesting period during which employees perform related services. The table below presents the weighted average assumptions and related valuations for TBOs.
|  | Fiscal Year Ended
|  | October 2, 2020 |  | September 27, 2019 |  | September 28, 2018
Expected volatility |  | 30% |  | 20% |  | 20%
Expected dividend yield |  | 1.01% - 2.09% |  | 1.17% - 1.44% |  | 1.03% - 1.11%
Expected life (in years) |  | 6.22 |  | 6.25 |  | 6.25
Risk-free interest rate |  | 0.40% - 1.74% |  | 1.62% - 3.02% |  | 2.25% - 2.94%
Weighted-average grant-date fair value |  | $9.07 |  | $8.23 |  | $8.75
A summary of TBO activity is presented below:
Options |  | Shares (000s) |  | Weighted-Average Exercise Price |  | Aggregate Intrinsic Value ($000s) |  | Weighted-Average Remaining Term (Years)
Outstanding at September 27, 2019 |  | 12,356 |  |  | $ | 28.22 |  |  |  |  |
Granted |  | 4,327 |  |  | $ | 33.61 |  |  |  |  |
Exercised |  | (5,390) |  |  | $ | 21.72 |  |  |  |  |
Forfeited and expired |  | (2,574) |  |  | $ | 36.55 |  |  |  |  |
Outstanding at October 2, 2020 |  | 8,719 |  |  | $ | 32.45 |  |  | $ | 9,803 |  |  | 7.3
Exercisable at October 2, 2020 |  | 3,213 |  |  | $ | 29.49 |  |  | $ | 9,219 |  |  | 4.3
Expected to vest at October 2, 2020 |  | 4,839 |  |  | $ | 34.33 |  |  | $ | 481 |  |  | 8.9
|  | Fiscal Year Ended
|  | October 2, 2020 |  | September 27, 2019 |  | September 28, 2018
Total intrinsic value exercised (in millions) |  | $ | 114.6 |  |  | $ | 26.8 |  |  | $ | 16.6 |
Total fair value that vested (in millions) |  | 9.9 |  |  | 16.3 |  |  | 17.3 |
Retention Time-Based Options In September 2020, the Board granted special stock option awards for fiscal 2021 to its key business leaders. The option awards have exercise prices that are in all cases materially above the trading price of the Company's common stock as of the date of grant. The options are awarded in six tranches, with exercise prices that start at $35 and increase in $10 increments to an $85 exercise price. These awards will vest ratably on the third, fourth and fifth anniversaries of the grant date. The fair value of the TBO-Rs granted was estimated using the Black-Scholes option pricing model, following the same assumptions and methodology used to value the TBOs. The table below presents the weighted average assumptions and related valuations for TBO-Rs.
| Fiscal Year Ended
| October 2, 2020
Expected volatility | 37.82%
Expected dividend yield | 1.55%
Expected life (in years) | 7.00
Risk-free interest rate | 0.50%
Weighted-average grant-date fair value | $3.93
A summary of TBO-R activity is presented below:
Options |  | Shares (000s) |  | Weighted-Average Exercise Price |  | Aggregate Intrinsic Value ($000s) |  | Weighted-Average Remaining Term (Years)
Outstanding at September 27, 2019 |  | — |  |  | $ | — |  |  |  |  |
Granted |  | 5,732 |  |  | $ | 66.15 |  |  |  |  |
Exercised |  | — |  |  | $ | — |  |  |  |  |
Forfeited and expired |  | — |  |  | $ | — |  |  |  |  |
Outstanding at October 2, 2020 |  | 5,732 |  |  | $ | 66.15 |  |  | $ | — |  |  | 9.9
Expected to vest at October 2, 2020 |  | 4,275 |  |  | $ | 66.15 |  |  | $ | — |  |  | 9.9
Performance-Based Options The Company no longer grants PBOs under the 2013 Stock Plan. All PBOs remain exercisable for 10 years from the date of grant. A summary of PBO activity is presented below:
Options |  | Shares (000s) |  | Weighted-Average Exercise Price |  | Aggregate Intrinsic Value ($000s) |  | Weighted-Average Remaining Term (Years)
Outstanding at September 27, 2019 |  | 1,511 |  |  | $ | 12.77 |  |  |  |  |
Granted |  | — |  |  | $ | — |  |  |  |  |
Exercised |  | (1,205) |  |  | $ | 12.97 |  |  |  |  |
Forfeited and expired |  | — |  |  | $ | — |  |  |  |  |
Outstanding at October 2, 2020 |  | 306 |  |  | $ | 11.99 |  |  | $ | 4,765 |  |  | 0.9
Exercisable at October 2, 2020 |  | 306 |  |  | $ | 11.99 |  |  | $ | 4,765 |  |  | 0.9
The total intrinsic value of PBOs exercised during fiscal 2020, fiscal 2019 and fiscal 2018 was $34.9 million, $8.9 million and $7.4 million, respectively. Time-Based Restricted Stock Units The RSU agreement provides for grants of RSUs, 25% of which will vest and be settled in shares on each of the first four anniversaries of the date of grant for RSU grants prior to September 2020, subject to the participant's continued employment with the Company through each such anniversary. The Company's annual RSU grants for fiscal 2021 were awarded early in September 2020, 33% of which will vest and be settled in shares on each of the first three anniversaries of the date of grant, subject to the participant's continued employment with the Company through each such anniversary. The grant-date fair value of RSUs is based on the fair value of the Company's common stock. Participants holding RSUs will receive the benefit of any dividends paid on shares in the form of additional RSUs. The unvested units are subject to forfeiture if employment is terminated other than due to death, disability or retirement and the units are nontransferable while subject to forfeiture.
Restricted Stock Units |  | Units (000s) |  | Weighted Average Grant Date Fair Value
Outstanding at September 27, 2019 |  | 2,649 |  | $ | 36.89 |
Granted |  | 3,355 |  | $ | 32.80 |
Vested |  | (925) |  | $ | 35.79 |
Forfeited |  | (453) |  | $ | 38.67 |
Outstanding at October 2, 2020 |  | 4,626 |  |  | $ | 34.08 |
Performance Stock Units Under the 2013 Stock Plan, the Company is authorized to grant PSUs to its employees. A participant is eligible to become vested in a number of PSUs equal to a percentage, higher or lower, of the target number of PSUs granted based on the level of the Company's achievement of the performance condition. During both fiscal 2019 and 2018, the Company granted PSUs subject to the level of achievement of adjusted earnings per share and return on invested capital for the cumulative performance period of three years and the participant's continued employment with the Company. The fiscal 2018 grant vested at the end of fiscal 2020 based on approval by the Board (see above). During fiscal 2020, the Company granted PSUs subject to the level of achievement of adjusted revenue growth, adjusted operating income growth, return on invested capital and a total shareholder return multiplier for the cumulative performance period of three years and the participant's continued employment with the Company. The Company is accounting for the fiscal 2020 grant as a performance-based award, with a market condition, valued utilizing the Monte Carlo Simulation pricing model, which calculates multiple potential outcomes for an award and establishes fair value based on the most likely outcome. The grant-date fair value of the PSUs is based on the fair value of the Company's common stock.
Performance Stock Units |  | Units (000s) |  | Weighted Average Grant Date Fair Value
Outstanding at September 27, 2019 |  | 1,621 |  | $ | 36.20 |
Granted(1) |  | 642 |  | $ | 42.99 |
Vested |  | (590) |  | $ | 34.13 |
Forfeited |  | (358) |  | $ | 36.65 |
Outstanding at October 2, 2020 |  | 1,315 |  |  | $ | 37.61 |
(1) | Includes approximately 0.3 million shares resulting from the payout of the fiscal 2017 PSU grants due to exceeding the adjusted earnings per share target.
Deferred Stock Units Deferred Stock Units are issued only to non-employee members of the Board and represent the right to receive shares of the Company's common stock in the future. Each deferred stock unit will be converted to one share of the Company's common stock either on the first day of the seventh month after which such director ceases to serve as a member of the Board or at the director's election upon vesting. The grant-date fair value of deferred stock units is based on the fair value of the Company's common stock. The deferred stock units vest on the day prior to the next annual meeting of stockholders (which is generally one year after grant). The Company granted 49,733 deferred stock units during fiscal 2020. In addition, directors may elect to defer their cash retainer into Deferred Stock Units which are fully vested upon issuance.

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