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Share-Based Payment Arrangements | 12 Months Ended
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Dec. 28, 2019
Share-Based Payment Arrangements | (10) Share-Based Payment Arrangements As of December 28, 2019, the Company had two employee equity incentive plans, the 2002 employee stock option and stock incentive plan (the “ESOSIP”) and the 2011 equity incentive plan (the “2011 EIP”). No further grants can be made under the ESOSIP. The Company also has a stock compensation plan for members of its Board of Directors, the Amended and Restated 2013 Directors Stock Compensation Plan (as amended and restated as of May 17, 2016, the “2013 DSCP”). 6,000,000 shares of the Company’s Common Stock were authorized for issuance under the 2011 EIP and 115,000 shares of the Company’s Common Stock were authorized for issuance under the 2013 DSCP. The ESOSIP, 2011 EIP and 2013 DSCP are each referred to herein as a “Plan,” and, collectively, as the “Plans.” Amounts recognized in the financial statements with respect to these Plans are as follows (in thousands):
|  | Fiscal Years |
|  | 2019 |  |  | 2018 |  |  | 2017 |
Total cost of the Plans during the period |  | $ | 4,236 |  |  | $ | 18,256 |  |  | $ | 7,721 |
Amount of related income tax benefit recognized during the period |  |  | (4,130 | ) |  |  | (6,610 | ) |  |  | (3,285 | )
Net cost of the Plans during the period |  | $ | 106 |  |  | $ | 11,646 |  |  | $ | 4,436 |
Included in income tax benefits recognized in the fiscal years ended December 28, 2019, December 29, 2018 and December 30, 2017 were excess tax benefits from stock-based awards of $3,019,000, $2,060,000 and $1,299,000, respectively. Also included in income tax benefits recognized in the fiscal years ended December 28, 2019, December 29, 2018 and December 30, 2017 were income tax benefits of $74,000, $84,000 and $339,000, respectively, recognized on disqualifying dispositions of the Company’s Common Stock by employees who obtained shares of Common Stock through exercises of incentive stock options. As of December 28, 2019, there were 66,454 shares of the Company’s Common Stock reserved for issuance under the 2013 DSCP and 3,959,718 shares of the Company’s Common Stock reserved for issuance in the aggregate under the ESOSIP and 2011 EIP. Restricted Stock Units The following table summarizes information regarding the Company’s outstanding restricted stock unit (“RSU”) awards with either a performance condition or a market condition under the Plans:
|  | Number of RSUs |  |  | Weighted Average Grant Date Fair Value |
Outstanding at December 31, 2016 |  |  | 378,238 |  |  | $ | 50.46 |
Granted |  |  | 67,913 |  |  | $ | 76.81 |
Forfeited |  |  | (58,779 | ) |  | $ | 46.00 |
Outstanding at December 30, 2017 |  |  | 387,372 |  |  | $ | 55.75 |
Granted |  |  | 65,824 |  |  | $ | 95.94 |
Vested |  |  | (67,971 | ) |  | $ | 53.92 |
Forfeited |  |  | (92,880 | ) |  | $ | 52.36 |
Outstanding at December 29, 2018 |  |  | 292,345 |  |  | $ | 66.31 |
Granted |  |  | 68,820 |  |  | $ | 89.34 |
Shares earned in excess of target (1) |  |  | 71,172 |  |  | $ | 54.78 |
Vested shares, including shares earned in excess of target |  |  | (226,981 | ) |  | $ | 53.27 |
Forfeited |  |  | (6,481 | ) |  | $ | 86.60 |
Outstanding at December 28, 2019 |  |  | 198,875 |  |  | $ | 84.37 |
(1) | Represents shares earned in excess of target under the January 27, 2015 and January 29, 2016 RSU awards as actual results exceeded the target under both awards as a result of fiscal year 2018 results and under the May 1, 2015 RSU award as total shareholder return exceeded the target under the award.
During fiscal years 2017, 2018 and 2019 the Company granted RSUs with a performance condition. During fiscal years 2018 and 2019, the Company also issued RSUs with a market condition, as further described below. RSUs with a performance condition granted on February 1, 2019 may vest on January 31 of 2022, 2023 and 2024. RSUs with a performance condition granted on February 2, 2018 may vest on January 31 of 2021, 2022 and 2023. RSUs with a performance condition granted on February 2, 2017 may vest on January 31 of 2020, 2021 and 2022. RSUs with a performance condition granted on February 1, 2019 and February 2, 2018 vest based on growth in operating income and pre-tax income per diluted share from continuing operations attributable to Landstar System, Inc. and subsidiary as compared to a base year, being the year immediately preceding the year of grant. RSUs with a performance condition granted on February 2, 2017 vest based on growth in operating income and diluted earnings per share from continuing operations attributable to Landstar System, Inc. and subsidiary as compared to a base year, being the year immediately preceding the year of grant. At the time of grant, the target number of common shares available for issuance under the February 1, 2019, February 2, 2018 and February 2, 2017 grants equals 100% of the number of RSUs granted, and the maximum number of common shares available for issuance under the February 1, 2019, February 2, 2018 and February 2, 2017 grants equals 200% of the number of RSUs credited to the recipient. In the event actual results exceed the target, the number of shares that will be granted will exceed the number of RSUs granted. The fair value of an RSU with a performance condition was determined based on the market value of the Company’s Common Stock on the date of grant, discounted for lack of marketability for a minimum post-vesting holding requirement. The discount rate due to lack of marketability used for RSU award grants with a performance condition for all periods was 7%. With respect to RSU awards with a performance condition, the Company reports compensation expense over the life of the award based on an estimated number of units that will vest over the life of the award, multiplied by the fair value of an RSU at the time of grant. During fiscal year 2019, the Company granted 9,725 RSUs that vest based on a market condition. During fiscal year 2018, the Company granted 9,324 RSUs that vest based on a market condition. The RSUs granted in 2019 may vest on June 30 of 2023, 2024 and 2025, and the RSUs granted in 2018 may vest on June 30 of 2022, 2023 and 2024, in each case based on the Company’s total shareholder return (“TSR”) compound annual growth rate over the vesting periods, adjusted to reflect dividends (if any) paid during such periods and capital adjustments as may be necessary. The maximum number of common shares available for issuance under each grant equals 150% of the number of RSUs granted. The fair value of each RSU award was determined at the time of grant based on the expected achievement of the market condition at the end of each vesting period. With respect to these RSU awards, the Company reports compensation expense ratably over the life of the award based on an estimated number of units that will vest over the life of the award, multiplied by the fair value of the RSU. Previously recognized compensation cost would be reversed only if the employee terminated employment prior to completing the requisite service period. The Company recognized approximately $1,557,000, $15,985,000 and $5,849,000 of share-based compensation expense related to RSU awards in fiscal years 2019, 2018 and 2017, respectively. As of December 28, 2019, there was a maximum of $27.4 million of total unrecognized compensation cost related to RSU awards granted under the Plans with an expected average remaining life of approximately 3.0 years. With respect to RSU awards with a performance condition, the amount of future compensation expense to be recognized will be determined based on future operating results. Stock Options The Company did not grant any stock options during its 2017, 2018 or 2019 fiscal years. Options outstanding under the Plans generally become exercisable in either five equal annual installments commencing on the first anniversary of the date of grant or 100% on the fifth anniversary from the date of grant, subject to acceleration in certain circumstances. All options granted under the Plans expire on the tenth anniversary of the date of grant. Under the Plans, the exercise price of each option equals the fair market value of the Company’s Common Stock on the date of grant. The fair value of each option grant on its grant date was calculated using the Black-Scholes option pricing model. The Company utilized historical data, including exercise patterns and employee departure behavior, in estimating the term that options will be outstanding. Expected volatility was based on historical volatility and other factors, such as expected changes in volatility arising from planned changes to the Company’s business, if any. The risk-free interest rate was based on the yield of zero coupon U.S. Treasury bonds for terms that approximated the terms of the options granted. The following table summarizes information regarding the Company’s outstanding stock options under the Plans:
|  | Options Outstanding |  |  | Options Exercisable |
|  | Number of Options |  |  | Weighted Average Exercise Price per Share |  |  | Number of Options |  |  | Weighted Average Exercise Price per Share |
Options at December 31, 2016 |  |  | 372,561 |  |  | $ | 48.24 |  |  |  | 282,461 |  |  | $ | 46.39 |
Exercised |  |  | (180,321 | ) |  | $ | 47.01 |  |  |  |  |  |  |  |  |
Forfeited |  |  | (3,200 | ) |  | $ | 52.47 |  |  |  |  |  |  |  |  |
Options at December 30, 2017 |  |  | 189,040 |  |  | $ | 49.34 |  |  |  | 169,240 |  |  | $ | 48.50 |
Exercised |  |  | (99,926 | ) |  | $ | 48.36 |  |  |  |  |  |  |  |  |
Options at December 29, 2018 |  |  | 89,114 |  |  | $ | 50.44 |  |  |  | 88,114 |  |  | $ | 50.35 |
Exercised |  |  | (44,647 | ) |  | $ | 49.64 |  |  |  |  |  |  |  |  |
Options at December 28, 2019 |  |  | 44,467 |  |  | $ | 51.24 |  |  |  | 44,467 |  |  | $ | 51.24 |
The following tables summarize stock options outstanding and exercisable at December 28, 2019:
|  | Options Outstanding |
Range of Exercise Prices Per Share |  | Number Outstanding |  |  | Weighted Average Remaining Contractual Term (years) |  |  | Weighted Average Exercise Price per Share |
$ 37.07 - $ 40.00 |  |  | 2,900 |  |  |  | 0.1 |  |  | $ | 37.07 |
$ 40.01 - $ 45.00 |  |  | 7,500 |  |  |  | 1.1 |  |  | $ | 41.80 |
$ 45.01 - $ 56.40 |  |  | 34,067 |  |  |  | 2.7 |  |  | $ | 54.52 |
|  |  | 44,467 |  |  |  | 2.2 |  |  | $ | 51.24 |
|  | Options Exercisable |
Range of Exercise Prices Per Share |  | Number Exercisable |  |  | Weighted Average Remaining Contractual Term (years) |  |  | Weighted Average Exercise Price per Share |
$ 37.07 - $ 40.00 |  |  | 2,900 |  |  |  | 0.1 |  |  | $ | 37.07 |
$ 40.01 - $ 45.00 |  |  | 7,500 |  |  |  | 1.1 |  |  | $ | 41.80 |
$ 45.01 - $ 56.40 |  |  | 34,067 |  |  |  | 2.7 |  |  | $ | 54.52 |
|  |  | 44,467 |  |  |  | 2.2 |  |  | $ | 51.24 |
At December 28, 2019, the total intrinsic value of options outstanding and exercisable was $2,754,000. The total intrinsic value of stock options exercised during fiscal years 2019, 2018 and 2017 was $2,683,000, $6,715,000 and $7,599,000, respectively. As of December 28, 2019, there was no unrecognized compensation cost related to non-vested stock options granted under the Plans. Non-vested Restricted Stock and Deferred Stock Units The 2011 EIP provides the Compensation Committee of the Board of Directors with the authority to issue shares of Common Stock of the Company, subject to certain vesting and other restrictions on transfer (“restricted stock”). The following table summarizes information regarding the Company’s outstanding shares of non-vested restricted stock and Deferred Stock Units (defined below) under the Plans:
|  | Number of Shares and Deferred Stock Units |  |  | Weighted Average Grant Date Fair Value |
Non-vested at December 31, 2016 |  |  | 28,409 |  |  | $ | 58.91 |
Granted |  |  | 42,573 |  |  | $ | 84.47 |
Vested |  |  | (16,227 | ) |  | $ | 61.50 |
Non-vested at December 30, 2017 |  |  | 54,755 |  |  | $ | 78.02 |
Granted |  |  | 22,803 |  |  | $ | 113.35 |
Vested |  |  | (19,814 | ) |  | $ | 75.11 |
Forfeited |  |  | (1,757 | ) |  | $ | 71.12 |
Non-vested at December 29, 2018 |  |  | 55,987 |  |  | $ | 93.66 |
Granted |  |  | 30,338 |  |  | $ | 102.76 |
Vested |  |  | (21,517 | ) |  | $ | 92.70 |
Non-vested at December 28, 2019 |  |  | 64,808 |  |  | $ | 98.24 |
The fair value of each share of non-vested restricted stock issued and Deferred Stock Unit granted under the Plans is based on the fair value of a share of the Company’s Common Stock on the date of grant. Shares of non-vested restricted stock are generally subject to vesting in three equal annual installments either on the first, second and third anniversary of the date of grant or the third, fourth and fifth anniversary of the date of the grant, or 100% on the first or fifth anniversary of the date of the grant. For restricted stock awards granted under the 2013 DSCP plan, each recipient may elect to defer receipt of shares and instead receive restricted stock units (“Deferred Stock Units”), which represent contingent rights to receive shares of the Company’s Common Stock on the date of recipient separation from service from the Board of Directors, or, if earlier, upon a change in control event of the Company. Deferred Stock Units become vested 100% on the first anniversary of the date of the grant. Deferred Stock Units do not represent actual ownership in shares of the Company’s Common Stock and the recipient does not have voting rights or other incidents of ownership until the shares are issued. However, Deferred Stock Units do contain the right to receive dividend equivalent payments prior to settlement into shares. As of December 28, 2019, there was $3,623,000 of total unrecognized compensation cost related to non-vested shares of restricted stock and Deferred Stock Units granted under the Plans. The unrecognized compensation cost related to these non-vested shares of restricted stock and Deferred Stock Units is expected to be recognized over a weighted average period of 2.0 years. Directors’ Stock Compensation Plan Directors of the Company who are not employees of the Company (each an “Eligible Director”) are entitled under the 2013 DSCP to receive a grant of such number of restricted shares of the Company’s Common Stock or Deferred Stock Units equal to the quotient of $110,000 divided by the fair market value of a share of Common Stock on the date immediately following the date of each annual meeting of the stockholders of the Company (an “Annual Meeting”). In fiscal year 2019, 5,240 restricted shares and 1,048 Deferred Stock Units were granted to Eligible Directors. In fiscal year 2018, 4,950 restricted shares and 990 Deferred Stock Units were granted to Eligible Directors. In fiscal year 2017, 6,575 restricted shares and 1,315 Deferred Stock Units were granted to Eligible Directors. Restricted shares and Deferred Stock Units granted in 2017, 2018 and 2019 vest on the date of the next Annual Meeting. During fiscal years 2019, 2018 and 2017, $660,000, $660,000 and $651,000, respectively, of compensation cost was recorded for the grant of these restricted shares and Deferred Stock Units.

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- Definition The entire disclosure for share-based payment arrangement. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 + Details
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