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Stock-Based Compensation
 12 Months Ended
Dec. 28, 2019
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation
STOCK-BASED COMPENSATION
The Company accounts for stock-based compensation in accordance with the fair value recognition provisions of ASC Topic 718, Compensation – Stock Compensation. The Company recognized compensation expense of $24.5 million, $31.2 million and $25.4 million and related income tax benefits of $4.8 million, $6.4 million and $8.6 million for grants under its stock-based compensation plans in the statements of operations for fiscal years 2019, 2018 and 2017, respectively. The Company generally grants restricted stock or units (“Restricted Awards”), performance-based restricted stock or units (“Performance Awards”) and stock options under its stock-based compensation plans.
As of December 28, 2019, the Company had 5,669,643 stock incentive units (stock options, stock appreciation rights, restricted stock, restricted stock units and common stock) available for issuance under the Stock Incentive Plan of 2016, as amended and restated ("Stock Plan"). Each stock option or stock appreciation right granted counts as 1.0 stock incentive unit. Stock options granted under the Stock Plan have an exercise price equal to the fair market value of the underlying stock on the grant date, expire no later than ten years from the grant date and generally vest over three years. All other awards granted, including Restricted Awards and Performance Awards, count as 2.6 stock incentive units for each share, restricted share or restricted stock unit granted. Restricted Awards issued under the Stock Plan are subject to certain restrictions, including a prohibition against any sale, transfer or other disposition by the officer or employee during the vesting period (except for certain transfers for estate planning purposes for certain officers), and a requirement to forfeit all or a certain portion of the award upon certain terminations of employment.
These restrictions typically lapse over a three- to four-year period from the date of the award. The Company has elected to recognize expense for these stock-based incentive plans ratably over the vesting term on a straight-line basis. Certain option and restricted awards provide for accelerated vesting under various scenarios, including retirement, death and disability, and upon a change in control of the Company. Awards issued to employees that meet the specified retirement age and service requirements are vested upon the employee's retirement in accordance with plan provisions and the applicable award agreements issued under the Stock Plan. The Company issues shares to plan participants upon exercise or vesting of stock-based incentive awards from either authorized, but unissued shares or treasury shares.
The Board of Directors awards an annual grant of Performance Awards to certain plan participants. The number of Performance Awards that will be earned (and eligible to vest) during the performance period will depend on the Company’s level of success in achieving two specifically identified performance targets. Any portion of the Performance Awards that are not earned by the end of the three-year measurement period will be forfeited. The final determination of the number of Performance Awards to be issued in respect to an award is determined by the Compensation Committee of the Company’s Board of Directors.
Restricted Awards and Performance Awards
A summary of the unvested Restricted Awards and Performance Awards is as follows:
 
Restricted
Awards
 
Weighted-
Average
Grant Date
Fair Value
 
Performance
Awards
 
Weighted-
Average
Grant Date
Fair Value
Unvested at December 31, 2016
1,947,378

 
$
21.24

 
1,730,886

 
$
21.86

Granted
762,078

 
23.06

 
511,722

 
25.14

Vested
(445,939
)
 
22.03

 
(173,894
)
 
27.01

Forfeited
(238,445
)
 
21.66

 
(378,046
)
 
25.04

Unvested at December 30, 2017
2,025,072

 
$
21.70

 
1,690,668

 
$
21.54

Granted
609,276

 
31.81

 
384,657

 
35.10

Vested
(560,263
)
 
22.93

 
(229,023
)
 
26.64

Forfeited
(153,712
)
 
23.81

 
(215,284
)
 
26.18

Unvested at December 29, 2018
1,920,373

 
$
24.38

 
1,631,018

 
$
23.42

Granted
554,092

 
34.73

 
370,830

 
37.10

Vested
(681,938
)
 
24.63

 
(654,021
)
 
17.46

Forfeited
(173,611
)
 
28.47

 
(220,725
)
 
19.74

Unvested at December 28, 2019
1,618,916

 
$
27.36

 
1,127,102

 
$
31.94


As of December 28, 2019, there was $19.9 million of unrecognized compensation expense related to unvested Restricted Awards, which is expected to be recognized over a weighted-average period of 1.5 years. The total fair value of Restricted Awards vested during the year ended December 28, 2019 was $23.7 million. As of December 29, 2018, there was $20.2 million of unrecognized compensation expense related to unvested Restricted Awards, which was expected to be recognized over a weighted-average period of 1.6 years. The total fair value of Restricted Awards vested during the year ended December 29, 2018 was $17.4 million. As of December 30, 2017, there was $18.3 million of unrecognized compensation expense related to unvested Restricted Awards, which was expected to be recognized over a weighted-average period of 1.8 years. The total fair value of Restricted Awards vested during the year ended December 30, 2017 was $10.6 million.
As of December 28, 2019, there was $4.5 million of unrecognized compensation expense related to unvested Performance Awards, which is expected to be recognized over a weighted-average period of 1.1 years. The total fair value of Performance Awards vested during the year ended December 28, 2019 was $22.8 million. As of December 29, 2018, there was $19.0 million of unrecognized compensation expense related to unvested Performance Awards, which was expected to be recognized over a weighted-average period of 1.7 years. The total fair value of Performance Awards vested during the year ended December 29, 2018 was $7.3 million. As of December 30, 2017, there was $16.9 million of unrecognized compensation expense related to unvested Performance Awards, which was expected to be recognized over a weighted-average period of 1.9 years. The total fair value of Performance Awards vested during the year ended December 30, 2017 was $4.0 million.
Stock Options
The Company estimated the fair value of employee stock options on the date of grant using the Black-Scholes-Merton formula. The estimated weighted-average fair value for each option granted was $9.07, $8.20 and $5.50 per share for fiscal years 2019, 2018 and 2017, respectively, with the following weighted-average assumptions.
 
Fiscal Year
 
2019
 
2018
 
2017
Expected market price volatility (1)
29.6
%
 
29.6
%
 
29.3
%
Risk-free interest rate (2)
2.5
%
 
2.5
%
 
1.7
%
Dividend yield (3)
1.0
%
 
0.8
%
 
1.0
%
Expected term (4)
4 years

 
4 years

 
4 years

(1) 
Based on historical volatility of the Company’s common stock. The expected volatility is based on the daily percentage change in the price of the stock over the four years prior to the grant.
(2) 
Represents the U.S. Treasury yield curve in effect for the expected term of the option at the time of grant.
(3) 
Represents the Company’s estimated cash dividend yield for the expected term.
(4) 
Represents the period of time that options granted are expected to be outstanding. As part of the determination of the expected term, the Company concluded that all employee groups exhibit similar exercise and post-vesting termination behavior.
A summary of the stock option transactions is as follows:
 
Shares Under Option
 
Weighted-Average Exercise Price
 
Average Remaining Contractual Term (Years)
 
Aggregate Intrinsic Value
(In millions)
Outstanding at December 31, 2016
7,493,662

 
$
19.55

 
6.4
 
$
28.7

Granted
93,274

 
23.85

 
 
 
 
Exercised
(1,267,269
)
 
17.15

 
 
 
 
Canceled
(230,003
)
 
21.37

 
 
 
 
Outstanding at December 30, 2017
6,089,664

 
$
20.05

 
5.8
 
$
72.1

Granted
28,171

 
31.85

 
 
 
 
Exercised
(1,359,387
)
 
17.69

 
 
 
 
Canceled
(56,446
)
 
17.12

 
 
 
 
Outstanding at December 29, 2018
4,702,002

 
$
20.83

 
5.2
 
$
54.5

Granted
25,471

 
34.81

 
 
 
 
Exercised
(681,389
)
 
17.87

 
 
 
 
Canceled
(12,977
)
 
23.97

 
 
 
 
Outstanding at December 28, 2019
4,033,107

 
$
21.41

 
4.4
 
$
49.8

Unvested at December 28, 2019
(44,250
)
 
 
 
 
 
 
Exercisable at December 28, 2019
3,988,857

 
$
21.27

 
4.4
 
$
49.7


The total pretax intrinsic value of stock options exercised during fiscal years 2019, 2018 and 2017 was $10.7 million, $21.2 million and $12.5 million, respectively. As of December 28, 2019, there was $0.2 million of unrecognized compensation expense related to stock option grants expected to be recognized over a weighted-average period of 1.4 years. As of December 29, 2018 and December 30, 2017, there was $0.4 million and $1.8 million, respectively, of unrecognized compensation expense related to stock option awards expected to be recognized over a weighted-average period of 0.8 years and 1.0 years, respectively.
The aggregate intrinsic value in the preceding table represents the total pretax intrinsic value, based on the Company’s closing stock price as of each fiscal year end, which would have been received by the option holders had all option holders exercised options, where the market price of the Company's stock was above the strike price ("in-the-money"), as of that date. The total number of in-the-money options exercisable as of December 28, 2019, based on the Company’s closing stock price of $33.74 per share, was 3,974,757 and the weighted-average exercise price was $21.29 per share. As of December 29, 2018, 4,048,842 outstanding options were exercisable and in-the-money, with a weighted-average exercise price of $21.09 per share.