Stock-Based Compensation

6 Months Ended

Feb. 27, 2021

Note 4. Stock-Based Compensation

The Company accounts for all share-based payments in accordance with ASC Topic 718, “Compensation—Stock Compensation,” as subsequently amended. Stock-based compensation expense included in Operating expenses for the thirteen- and twenty-six-week periods ended February 27, 2021 and February 29, 2020 was as follows:


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	February 27,		February 29,		February 27,		February 29,
	2021		2020		2021		2020
Stock options	$	544	$	754	$	1,221	$	1,729
Restricted share awards		—		(21)		—		184
Restricted stock units		3,819		3,039		7,118		5,915
Performance share units		345		168		558		214
Associate Stock Purchase Plan		48		77		97		136
Total		4,756		4,017		8,994		8,178
Deferred income tax benefit		(1,174)		(1,008)		(2,204)		(2,048)
Stock-based compensation expense, net	$	3,582	$	3,009	$	6,790	$	6,130

Stock Options

The Company discontinued its grants of stock options in fiscal year 2020. The fair value of each option grant in previous fiscal years was estimated on the date of grant using the Black-Scholes option pricing model.

A summary of the Company’s stock option activity for the twenty-six-week period ended February 27, 2021 is as follows:


	Options	Weighted-Average Exercise Price per Share		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding on August 29, 2020	1,539	$	75.76
Granted	—		—
Exercised	(147)		73.57
Canceled/Forfeited	(8)		79.63
Outstanding on February 27, 2021	1,384	$	75.98	3.0	$	14,054
Exercisable on February 27, 2021	1,142	$	74.70	2.7	$	13,052

The unrecognized share-based compensation cost related to stock option expense at February 27, 2021 was $2,445 and will be recognized over a weighted-average period of 1.3 years. The total intrinsic value of options exercised, which represents the difference between the exercise price and the market value of the Company’s Class A Common Stock measured at each individual exercise date, during the twenty-six-week periods ended February 27, 2021 and February 29, 2020 was $1,494 and $2,574, respectively.

Performance Share Units

Beginning in fiscal year 2020, the Company began granting performance share units (“PSUs”) as part of its long-term stock-based compensation program. PSUs cliff vest after a three year performance period based on the achievement of specific performance goals as set forth in the applicable award agreement. Based on the extent to which the targets are achieved, vested shares may range from 0% to 200% of the target award amount.

The following table summarizes all transactions related to PSUs under the MSC Industrial Direct Co., Inc. 2015 Omnibus Incentive Plan (the “2015 Omnibus Incentive Plan”) (based on target award amounts) for the twenty-six-week period ended February 27, 2021:


	Shares	Weighted-Average Grant Date Fair Value
Non-vested PSUs at August 29, 2020	28	$	76.32
Granted	31		74.79
Vested	—		—
Canceled/Forfeited	—		—
Non-vested PSUs at February 27, 2021 ⁽¹⁾	59	$	75.52

⁽¹⁾Excludes seven shares of accrued incremental dividend equivalent rights on outstanding PSUs granted under the Company's 2015 Omnibus Incentive Plan.

The fair value of each PSU is the closing stock price on the New York Stock Exchange (the “NYSE”) of the Company’s Class A Common Stock on the date of grant. Upon vesting, subject to the achievement of specific performance goals, a portion of the PSU award may be withheld to satisfy the statutory income tax withholding obligation. The remaining PSUs will be settled in shares of the Company’s Class A Common Stock when vested, if at all. These awards accrue dividend equivalents on the underlying PSUs (in the form of additional stock units) based on dividends declared on the Company’s Class A Common Stock and these dividend equivalents are paid to the award recipient in the form of unrestricted Class A Common Stock on the vesting dates of the underlying PSUs, subject to the same performance vesting requirements. The unrecognized share-based compensation cost related to the PSUs at February 27, 2021 was $3,254 and is expected to be recognized over a weighted-average period of 2.2 years.

Restricted Stock Units

A summary of the Company’s non-vested restricted stock unit (“RSU”) award activity under the 2015 Omnibus Incentive Plan for the twenty-six-week period ended February 27, 2021 is as follows:


	Shares	Weighted-Average Grant Date Fair Value
Non-vested RSUs at August 29, 2020	482	$	76.73
Granted	235		75.15
Vested	(158)		74.46
Canceled/Forfeited	(11)		76.99
Non-vested RSUs at February 27, 2021 ⁽¹⁾	548	$	76.70

⁽¹⁾Excludes approximately 77 shares of accrued incremental dividend equivalent rights on outstanding RSUs granted under the Company's 2015 Omnibus Incentive Plan.

The fair value of each RSU is the closing stock price on the NYSE of the Company’s Class A Common Stock on the date of grant. Upon vesting, a portion of the RSU award may be withheld to satisfy the statutory income tax withholding obligation. The remaining RSUs will be settled in shares of the Company’s Class A Common Stock when vested, if at all. These awards accrue dividend equivalents on the underlying RSUs (in the form of additional stock units) based on dividends declared on the Company’s Class A Common Stock and these dividend equivalents are paid to the award recipient in the form of unrestricted Class A Common Stock on the vesting dates of the underlying RSUs. The unrecognized share-based compensation cost related to the RSUs at February 27, 2021 was $36,273 and is expected to be recognized over a weighted-average period of 3.1 years.