Share-Based Compensation

12 Months Ended

Oct. 02, 2021

Share-based Payment Arrangement [Abstract]

15. Share-Based Compensation

In fiscal 2015, we adopted the Omnibus Equity Incentive Plan ("Plan") and in fiscal 2020, amended and restated it. The Plan is administered by the Compensation Committee of our Board of Directors and the Committee may grant awards for the issuance of up to an aggregate of 5,200,000 shares of common stock in the form of non-qualified stock options, incentive stock options, stock appreciation rights (collectively, “SARs,” and each individually, a “SAR”), restricted stock, restricted stock units, performance shares, performance units, incentive bonus awards, other cash-based awards and other stock-based awards. The exercise price of a share subject to a stock option may not be less than 100% of the fair market value of a share of the Company's common stock with respect to the grant date of such stock option. No portion of the options vest and become exercisable after the date on which the optionee’s service with the Company and its subsidiaries terminates. The vesting of all unvested shares of common stock subject to an option will automatically be accelerated in connection with a “Change in Control,” as defined in the Plan.

New shares of the Company's common stock are issued upon stock option exercises, or at the time of vesting for restricted stock. We have granted performance awards as part of our overall compensation plans. The vesting of these awards is primarily based upon the attainment of certain performance metrics established under our annual Management Incentive Plan ("MIP"), with the Compensation Committee of the Board of Directors maintaining final discretion over vesting amounts. Stock-based payments to employees, including grants of stock options, restricted stock and restricted stock units ("RSU"), are recognized in the financial statements based on their fair value. The fair value of each stock option award on the grant date is estimated using the Black-Scholes option-pricing model with the following assumptions: expected dividend yield, expected stock price volatility, weighted-average risk-free interest rate and weighted average expected term of the options. For fiscal 2020 and fiscal 2019, the volatility assumption used in the Black-Scholes option-pricing model was based on peer group volatility because we did not have a sufficient trading history as a stand-alone public company. Because we do not have sufficient history with respect to stock option activity and post-vesting cancellations, the expected term assumption is based on the simplified method under U.S. GAAP, which is based on the vesting period and contractual term for each vesting tranche of awards. The mid-point between the vesting date and the expiration date is used as the expected term under this method. The risk-free interest rate used in the Black-Scholes model is based on the implied yield curve available on U.S. Treasury zero-coupon issues at the date of grant with a remaining term equal to the Company’s expected term assumption. The Company has never declared or paid a cash dividend on its common stock. Restricted stock and RSUs are valued based on the intrinsic value of the difference between the exercise price, if any, of the award and the fair market value of our common stock on the grant date. We expense any award with graded-vesting features using a straight-line attribution method and account for forfeitures in recording share-based compensation expense as they occur.

Restricted Stock Awards

The following table summarizes the Company's restricted stock and RSU activity for the fiscal year presented:


	2021
Restricted Stock Activity	Number of Shares	Weighted-Average Grant Date Fair Value
Balance, beginning of year	171,470	$	18.64
Granted	183,291	18.82
Vested	(68,191)	19.93
Forfeited	(37,725)	18.35
Balance, end of year	248,845	18.50

The weighted-average grant date fair value of restricted stock awards granted in fiscal 2020 and fiscal 2019 was $18.64 and $17.30, respectively.

Compensation expense for restricted stock awards, recognized in selling, general and administrative expenses on the Consolidated Statements of Operations, was $3.9 million, $2.7 million, and $2.6 million for fiscal 2021, fiscal 2020, and fiscal 2019, respectively, with associated tax benefits of $1.0 million, $0.7 million, and $0.7 million, respectively. At October 2, 2021, unrecognized compensation cost related to restricted stock awards totaled $1.3 million and is expected to be recognized over a weighted-average period of nine months.

Stock Option Awards

The following table summarizes the Company's stock option activity for the fiscal year presented:


	2021
	Number of Options	Weighted Average Exercise Price per Share ($)
Outstanding options, beginning of year	532,298	$	17.62
Granted	331,200	16.84
Exercised (1)	(120,461)	16.08
Expired	(64,308)	17.39
Forfeited	(52,562)	16.42
Outstanding options, end of year (2)	626,167	$	17.93
Fully vested and exercisable options, end of year (3)	267,779	$	17.85

(1) Stock options exercised during the fiscal year had an aggregate intrinsic value totaling $1.1 million.

(2) Stock options outstanding at the end of the fiscal year had $2.1 million intrinsic value.

(3) Fully vested and exercisable options at the end of the fiscal year had $0.9 million intrinsic value.

The total aggregate intrinsic value of stock options exercised during fiscal 2020 and fiscal 2019 was $4.3 million and $0.1 million, respectively.

Compensation expense for stock option awards, recognized in selling, general and administrative expenses on the Consolidated Statements of Operations, was $1.9 million, $1.4 million, and $1.5 million for fiscal 2021, fiscal 2020, and fiscal 2019, respectively, with associated tax benefits of $0.5 million, $0.4 million, and $0.4 million, respectively. At October 2, 2021, unrecognized compensation cost related to stock option awards totaled $0.8 million and is expected to be recognized over a weighted-average period of nine months.

The fair value of each option award at grant date was estimated using the Black-Scholes option-pricing model with the following assumptions made and resulting grant-date fair values during the fiscal years presented:


	2021			2020			2019
Expected volatility	41		%	32		%	31		%
Expected dividend yield	0		%	0		%	0		%
Risk-free interest rate	0.49		%	1.61		%	2.75		%
Expected term (in years)	2.7 - 6.0			4.5 - 6.0			4.5 - 5.5
Weighted-average grant-date fair value	$	6.58		$	6.91		$	5.58