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Stock-Based Compensation | 12 Months Ended
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Dec. 28, 2019
Share-based Payment Arrangement [Abstract] |
Stock-Based Compensation | Stock-Based Compensation Under the Corporation’s 2017 Stock-Based Compensation Plan (the "Plan"), effective May 9, 2017, the Corporation may award options to purchase shares of the Corporation’s common stock and grant other stock awards to executives, managers, and key personnel. Upon shareholder approval of the Plan in May 2017, no future awards were granted under the Corporation’s 2007 Stock-Based Compensation Plan, but all outstanding awards previously granted under that plan shall remain outstanding in accordance with their terms. As of December 28, 2019, there were approximately 2.1 million shares available for future issuance under the Plan. The Plan is administered by the Human Resources and Compensation Committee of the Board. Restricted stock units awarded under the Plan are expensed ratably over the vesting period of the awards. Stock options awarded to members under the Plan must be at exercise prices equal to or exceeding the fair market value of the Corporation’s common stock on the date of grant. Stock options are generally subject to four-year cliff vesting and must be exercised within 10 years from the date of grant. The Corporation measures stock-based compensation expense at grant date, based on the fair value of the award, and recognizes expense over the employees' requisite service periods. Stock-based compensation expense is the cost of stock options and time-based restricted stock units issued under the shareholder approved stock-based compensation plans and shares issued under the shareholder approved member stock purchase plans. Compensation cost charged against operations for the Plan and the 2017 MSPP described in "Note 11. Accumulated Other Comprehensive Income (Loss) and Shareholders' Equity" in the Notes to Consolidated Financial Statements was as follows (in thousands):
| 2019 |  |  | 2018 |  |  | 2017 |
Compensation cost | $ | 6,830 |  |  | $ | 7,317 |  |  | $ | 7,750 |
The total income tax benefit recognized in the Consolidated Statements of Comprehensive Income for share-based compensation arrangements was as follows (in thousands):
| 2019 |  |  | 2018 |  |  | 2017 |
Income tax benefit | $ | 1,545 |  |  | $ | 1,582 |  |  | $ | 2,581 |
Stock-based compensation expense was estimated on the date of grant using the Black-Scholes option-pricing model with the following assumptions by grant year:
| 2019 |  |  | 2018 |  |  | 2017 |
Expected term | 5 years |  |  | 5 years |  |  | 6 years |
Expected volatility (weighted-average) | 33.86 | % |  | 34.12 | % |  | 38.07 | %
Expected dividend yield (weighted-average) | 2.98 | % |  | 2.97 | % |  | 2.36 | %
Risk-free interest rate (weighted-average) | 2.52 | % |  | 2.66 | % |  | 2.17 | %
Expected volatilities were based on historical volatility as the Corporation does not expect that future volatility over the expected term of the options is likely to differ from the past. The Corporation used a calculation method based on the historical daily frequency for a period of time equal to the expected term. The Corporation used the current dividend yield as there are no plans to substantially increase or decrease its dividends. The Corporation used historical exercise experience to determine the expected term. The risk-free interest rate was selected based on yields from treasury securities as published by the Federal Reserve equal to the expected term of the options. The amount of stock-based compensation expense recognized during a period is also based on the portion of the stock options that are ultimately expected to vest. The Corporation estimates pre-vesting forfeitures at the time of grant by analyzing historical data and revises those estimates in subsequent periods if actual forfeitures differ from those estimates. The following table summarizes the changes in outstanding stock options:
| Number of Shares |  | Weighted Average Exercise Price
Outstanding as of December 31, 2016 | 3,504,335 |  |  | $ | 31.68 |
Granted | 537,795 |  |  | 46.61 |
Exercised | (446,817 | ) |  | 25.55 |
Forfeited or Expired | (33,029 | ) |  | 40.81 |
Outstanding as of December 30, 2017 | 3,562,284 |  |  | $ | 34.63 |
Granted | 788,301 |  |  | 38.53 |
Exercised | (647,759 | ) |  | 26.28 |
Forfeited or Expired | (75,821 | ) |  | 38.36 |
Outstanding as of December 29, 2018 | 3,627,005 |  |  | $ | 36.89 |
Granted | 637,763 |  |  | 39.64 |
Exercised | (921,900 | ) |  | 30.29 |
Forfeited or Expired | (120,143 | ) |  | 39.29 |
Outstanding as of December 28, 2019 | 3,222,725 |  |  | $ | 39.24 |
A summary of the Corporation’s non-vested stock options and changes during the year are presented below:
| Number of Shares |  | Weighted Average Grant-Date Fair Value
Non-vested as of December 29, 2018 | 2,001,418 |  |  | $ | 11.46 |
Granted | 637,763 |  |  | 9.84 |
Vested | (920,133 | ) |  | 12.47 |
Forfeited | (116,475 | ) |  | 10.27 |
Non-vested as of December 28, 2019 | 1,602,573 |  |  | $ | 10.32 |
As of December 28, 2019, there was $3.1 million of unrecognized compensation cost net of estimated forfeitures related to non-vested stock option awards, which the Corporation expects to recognize over a weighted-average period of 1.1 years. Information about stock options expected to vest or currently exercisable is as follows:
| December 28, 2019
| Number of Shares |  | Weighted-Average Exercise Price |  | Weighted-Average Remaining Exercisable Period (years) |  | Aggregate Intrinsic Value ($000s)
Expected to vest | 1,484,810 |  |  | $ | 38.95 |  |  | 8.0 |  | $ | 1,597 |
Exercisable | 1,620,152 |  |  | $ | 39.46 |  |  | 5.1 |  | $ | 3,901 |
Other information for the last three years is as follows (in thousands):
| 2019 |  |  | 2018 |  |  | 2017 |
Total fair value of shares vested | $ | 11,470 |  |  | $ | 7,204 |  |  | $ | 8,057 |
Total intrinsic value of options exercised | $ | 5,981 |  |  | $ | 8,917 |  |  | $ | 7,270 |
Cash received from exercise of stock options | $ | 27,926 |  |  | $ | 17,021 |  |  | $ | 11,418 |
Tax benefit realized from exercise of stock options | $ | 1,353 |  |  | $ | 1,928 |  |  | $ | 2,423 |
Weighted-average grant-date fair value of options granted | $ | 9.84 |  |  | $ | 9.72 |  |  | $ | 14.41 |
The Corporation has occasionally issued restricted stock units ("RSUs") to executives, managers, and key personnel. The RSUs vest three years after the grant date. No dividends are accrued on the RSUs. The share-based compensation expense associated with the RSUs is based on the quoted market price of HNI Corporation shares on the date of grant less the discounted present value of dividends not received on the shares and is amortized using the straight-line method from the grant date through the vesting date. The following table summarizes the changes in outstanding RSUs:
| Number of Shares |  | Weighted-Average Grant Date Fair Value
Outstanding as of December 31, 2016 | 60,500 |  |  | $ | 38.54 |
Granted | — |  |  | — |
Vested | (18,500 | ) |  | 35.36 |
Forfeited | (5,000 | ) |  | 51.54 |
Outstanding as of December 30, 2017 | 37,000 |  |  | $ | 38.38 |
Granted | 23,224 |  |  | 40.44 |
Vested | (12,000 | ) |  | 51.54 |
Forfeited | (2,500 | ) |  | 28.90 |
Outstanding as of December 29, 2018 | 45,724 |  |  | $ | 36.49 |
Granted | 10,000 |  |  | 36.05 |
Vested | (24,823 | ) |  | 33.30 |
Forfeited | (9,289 | ) |  | 40.22 |
Outstanding as of December 28, 2019 | 21,612 |  |  | $ | 38.41 |
As of December 28, 2019, there was $0.4 million of unrecognized compensation cost related to RSUs, which the Corporation expects to recognize over a weighted-average period of 1.0 year. The total value of shares vested was as follows (in thousands):
| 2019 |  |  | 2018 |  |  | 2017 |
Value of shares vested | $ | 827 |  |  | $ | 618 |  |  | $ | 654 |
The following table details deferred compensation, which is a combination of cash and stock, and the affected line item in the Consolidated Balance Sheets where deferred compensation is presented (in thousands):
| December 28, 2019 |  | December 29, 2018
Current maturities of other long-term obligations | $ | 850 |  |  | $ | 2,356 |
Other long-term liabilities | 9,740 |  |  | 8,729 |
Total deferred compensation | $ | 10,590 |  |  | $ | 11,085 |
Total fair-market value of deferred compensation | $ | 7,503 |  |  | $ | 7,857 |

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