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SHAREHOLDERS EQUITY

12 Months Ended

Dec. 30, 2022

SHAREHOLDERS' EQUITY

SHAREHOLDERS' EQUITY

10. SHAREHOLDERS’ EQUITY

Stock Incentive Plans

2006 Stock Incentive Plan

In June 2006, the Company’s board of directors adopted the 2006 Stock Incentive Plan (“2006 Plan”) and it received stockholder approval. The Company re-submitted the 2006 Plan to its stockholders for post-IPO approval at the 2007 annual meeting of the stockholders and it was approved. After the Company’s shareholders approved the 2008 Plan (as defined below) in June 2008, no additional awards were granted under the 2006 Plan. The 2006 Plan had 300,000 shares of common stock reserved for issuance to the Company’s directors, executives, officers, employees, consultants and advisors. Approximately 182,735 shares that were available for award grant purposes under the 2006 Plan became available for grant under the 2008 Plan following shareholder approval of the 2008 Plan. Options granted under the 2006 Plan could be “non-statutory stock options” which expired no more than 10 years from the date of grant or “incentive stock options” as defined in Section 422 of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). Upon exercise of non-statutory stock options, the Company is generally entitled to a tax deduction on the exercise of the option for an amount equal to the excess over the exercise price of the fair market value of the shares at the date of exercise. The Company is generally not entitled to any tax deduction on the exercise of an incentive stock option. The 2006 Plan terminated in June 2016 and, as of December 30, 2022, there were no outstanding stock options under the 2006 Plan.

Amended and Restated 2008 Performance Incentive Plan

In March 2008, the Company’s board of directors adopted the 2008 Performance Incentive Plan (“2008 Plan”), and it received stockholder approval at the 2008 annual meeting of the stockholders in June 2008. The 2008 Plan was originally set to terminate on April 17, 2027 but received a ten-year extension at the 2019 annual meeting of the stockholders and a three-year extension at the 2022 annual meeting of the stockholders. The 2008 Plan is currently scheduled to expire on April 18, 2032. The 2008 Plan initially had 450,000 shares of common stock reserved for issuance (not counting any shares originally available under the 2006 Plan that “poured over.”) At the 2010, 2012, 2016, 2017, 2019, and 2022 annual meetings of the stockholders, the stockholders approved 350,000, 500,000, 500,000, 875,000, 955,000, and 478,000 share increases, respectively, to the 2008 Plan. The maximum number of shares of the Company’s common stock that may be issued or transferred pursuant to awards under the 2008 Plan can also be increased by any shares subject to stock options granted under the 2006 Plan and outstanding as of June 9, 2008 which expire, or for any reason are cancelled or terminated, after June 9, 2008 without being exercised. The 2008 Plan currently has 392,000 shares of common stock reserved for issuance. Awards authorized by the 2008 Plan include stock options, stock appreciation rights, restricted stock, stock bonuses, stock units, performance stock, and other share-based awards. No participant may be granted an option to purchase more than 300,000 shares in any fiscal year. Options generally may not be granted with exercise prices less than fair market value at the date of grant, with vesting provisions and contractual terms determined by the compensation committee of the board of directors on a grant-by-grant basis, subject to the minimum vesting provisions contained in the 2008 Plan. Options granted under the 2008 Plan may be “nonqualified stock options” or “incentive stock options” as defined in Section 422 of the Internal Revenue Code. The maximum term of each option shall be 10 years. Upon exercise of nonqualified stock options, the Company is generally entitled to a tax deduction on the exercise of the option for an amount equal to the excess over the exercise price of the fair market value of the shares at the date of exercise. The Company is generally not entitled to any tax deduction on the exercise of an incentive stock option. For awards other than stock options, the Company is generally entitled to a tax deduction at the time the award holder recognizes income with respect to the award equal to the amount of compensation income recognized by the award holder. Options and other awards provide for accelerated vesting if there is a change in control (as defined in the 2008 Plan) and the outstanding awards are not substituted or assumed in connection with the transaction.

Through December 30, 2022, outstanding awards granted, net of forfeitures and exercises, under the 2008 Plan consisted of 40,000 shares of incentive stock options, 776,000 shares of nonqualified stock options, 135,000 shares of restricted stock awards and 66,000 shares of performance-based restricted stock units.

Employee Stock Purchase Plan

Amended and Restated 2006 Employee Stock Purchase Plan

The Company adopted its Amended and Restated 2006 Employee Stock Purchase Plan (“ESPP”) to allow eligible employees the right to purchase shares of common stock, at semi-annual intervals, with their accumulated payroll deductions. The ESPP received stockholder approval in June 2006. The Company re-submitted the ESPP to its stockholders for post-IPO approval at the 2007 annual stockholders’ meeting where approval was obtained. The ESPP initially had 300,000 shares of common stock reserved for issuance. At the 2017 annual meeting of the stockholders, the stockholders approved an 825,000 share increase to the ESPP. A total of 1,125,000 shares of the Company’s common stock have been reserved for issuance under the ESPP.

The ESPP has semi-annual periods beginning on each January 1 and ending on each June 30 and beginning on each July 1 and ending on each December 31. The first offering period commenced on February 10, 2007 and ended on June 30, 2007. Participants make contributions under the ESPP only by means of payroll deductions each payroll period. The rate of payroll contributions elected by a Participant may not be less than one percent (1%) nor more than ten percent (10%) of the Participant’s Earnings for each payroll period, and only whole percentages may be elected. The accumulated contributions are applied to the purchase of shares. Shares are purchased under the ESPP on or as soon as practicable after, the last day of the offering period. The purchase price per share equals 85% of the fair market value of a share on the lesser price of the share on the first day or last day of the offering period. The Company’s Amended and Restated 2006 Employee Stock Purchase Plan is a compensatory plan.

As of December 30, 2022, there were 364,000 shares available for issuance under the ESPP.

Stock-based Compensation Expense

The compensation expense that has been recognized for stock options, RSAs, performance-based restricted stock units (“PBRSU”), and ESPP issued under these plans was $8.4 million, $16.6 million, and $16.1 million for fiscal years 2022, 2021, and 2020, respectively.

The Company did not have any unrecognized compensation expense related to nonvested stock options for fiscal years 2022 and 2021. The total unrecognized compensation expense related to nonvested stock options was $0.4 million for fiscal year 2020.

The total unrecognized compensation expense related to RSAs was $1.7 million, $3.3 million, and $3.6 million, for fiscal years 2022, 2021, and 2020, respectively.

The total unrecognized compensation expense related to PBRSUs was $4.0 million, $2.2 million, and $13.2 million for the fiscal years 2022, 2021, and 2020, respectively. That expense is expected to be recognized over a weighted-average period of 1.9 years.

There were no options granted that were immediately vested during the fiscal years 2022, 2021, or 2020.

Summary of Stock Option Activity

A summary of option activity under the 2006 Plan and 2008 Plan as of December 30, 2022 and changes during the fiscal years ended December 30, 2022, December 31, 2021 and January 1, 2021 is presented below. The intrinsic value of the fully-vested options is $2.1 million based on the Company’s closing stock price of $17.85 and the average exercise price of outstanding options on December 30, 2022.


							Weighted-
				Weighted-			Average
				Average			Remaining
				Exercise			Contractual
		Options		Price			Term
		(in thousands)					(in years)
Outstanding at December 31, 2021		849		$	19.89		4.68
Granted		—			—		—
Exercised		(33)			8.12		—
Forfeited or expired		—			—		—
Outstanding at December 30, 2022		816		$	20.38		3.68
Vested and expected to vest at December 30, 2022		816		$	20.38		3.68
Exercisable at December 30, 2022		816		$	20.38		3.68


							Weighted-
				Weighted-			Average
				Average			Remaining
				Exercise			Contractual
		Options		Price			Term
		(in thousands)					(in years)
Outstanding at January 1, 2021		1,003		$	18.86		5.43
Granted		—			—		—
Exercised		(150)			12.86		—
Forfeited or expired		(4)			24.33		—
Outstanding at December 31, 2021		849		$	19.89		4.68
Vested and expected to vest at December 31, 2021		849		$	19.89		4.68
Exercisable at December 31, 2021		849		$	19.89		4.68


							Weighted-
				Weighted-			Average
				Average			Remaining
				Exercise			Contractual
		Options		Price			Term
		(in thousands)					(in years)
Outstanding at December 27, 2019		1,124		$	17.80		6.06
Granted		—			—		—
Exercised		(119)			9.12		—
Forfeited or expired		(2)			2.71		—
Outstanding at January 1, 2021		1,003		$	18.86		5.43
Vested and expected to vest at January 1, 2021		1,003		$	18.86		5.43
Exercisable at January 1, 2021		952		$	18.16		5.31

A summary of the status of the Company’s nonvested options and changes in nonvested options is presented below:


				Weighted-
				Average
				Grant-Date
		Options		Fair Value
		(in thousands)
Nonvested at December 31, 2021		—		$	—
Granted		—			—
Vested		—			—
Forfeited		—			—
Nonvested at December 30, 2022		—			—


				Weighted-
				Average
				Grant-Date
		Options		Fair Value
		(in thousands)
Nonvested at January 1, 2021		52		$	31.73
Granted		—			—
Vested		(52)			31.73
Forfeited		—			—
Nonvested at December 31, 2021		—			—


				Weighted-
				Average
				Grant-Date
		Options		Fair Value
		(in thousands)
Nonvested at December 27, 2019		166		$	12.15
Granted		—			—
Vested		(114)			30.97
Forfeited		—			—
Nonvested at January 1, 2021		52			31.73

Summary of Restricted Stock Activity

A summary of restricted stock activity under the 2008 Plan as of December 30, 2022 is presented below:


				Weighted-
				Average
		Restricted Stock		Grant Date Fair Value
		(in thousands)
Outstanding at December 31, 2021		110		$	38.30
Awarded		104			31.48
Vested		(74)			36.55
Forfeited		(5)			36.51
Outstanding at December 30, 2022		135		$	34.07

Outstanding at January 1, 2021		128		$	33.21
Awarded		63			41.02
Vested		(75)			32.09
Forfeited		(6)			36.69
Outstanding at December 31, 2021		110		$	38.30

Outstanding at December 27, 2019		58		$	33.33
Awarded		99			32.89
Vested		(29)			32.35
Forfeited		—			—
Outstanding at January 1, 2021		128		$	33.21

Summary of Performance-Based Restricted Stock Unit Activity

A summary of performance-based restricted stock unit activity under the 2008 Plan as of December 30, 2022 is presented below:


		Performance-Based		Weighted-Average
		Restricted Stock Unit		Grant Date Fair Value
		(in thousands)
Outstanding at December 31, 2021		224		$	31.31
Awarded		186			38.82
Released		(278)			40.99
Forfeited		(66)			26.61
Outstanding at December 30, 2022		66		$	27.93

Outstanding at January 1, 2021		379		$	20.68
Awarded		282			34.84
Released		(411)			29.08
Forfeited		(26)			29.93
Outstanding at December 31, 2021		224		$	31.31

Outstanding at December 27, 2019		431		$	20.68
Awarded		413			29.22
Released		(447)			28.26
Forfeited		(18)			28.62
Outstanding at January 1, 2021		379		$	20.68

Fair Value Valuation Assumptions

Stock Option Grants

The fair value of each option is calculated using the Black-Scholes option valuation model that uses the assumptions noted in the following table. Expected volatility is based upon historical volatility of “guideline companies” since the length of time the Company’s shares have been publicly traded is equal to the contractual term of the options. The expected term of the option, taking into account both the contractual term of the option and the effects of employees’ expected exercise and expected post-vesting termination behavior is estimated based upon the simplified method. Under this approach, the expected term is presumed to be the mid-point between the vesting date and the end of the contractual term. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant. No options were granted during fiscal years 2022, 2021 or 2020.

RSA and PBRSU Grants

The Company’s restricted stock awards are valued on the closing price of the Company’s common stock on the date of grant and typically vest over a two to three-year period.

The Company’s performance-based restricted stock unit awards are valued on the closing price of the Company’s common stock on the date of grant and vest over a performance period. Under the Company’s PBRSU design, awards vest based on two performance metrics. For the PBRSU awards granted in fiscal year 2022, 50% of each award will vest based upon the Company’s Adjusted EBITDA performance over a three-year performance period, and the remaining 50% of each award will vest based upon the Company’s adjusted diluted earnings per share performance over a three-year performance period, respectively. For the PBRSU awards granted in fiscal year 2021, 50% of the award will vest based upon the Company’s Adjusted EBITDA performance over a one-year performance period, and the remaining 50% of the award will vest based upon the Company’s Net Revenue performance over a one-year performance period. For the PBRSU awards granted in fiscal year 2020, 50% of each award will vest based upon the Company’s Adjusted EBITDA performance over a two-year performance period, and the remaining 50% of each award will vest based upon the Company’s adjusted diluted earnings per share performance over a two-year performance period, respectively.

ESPP

The fair value of ESPP purchase rights issued is calculated using the Black-Scholes valuation model that uses the assumptions noted in the following table. Purchase right under the ESPP are generally granted on either January 1 or July 1 of each year. The assumptions are as follows:


		2022				2021				2020
Weighted-average expected term (in years)			.5				.5				.5
Risk-Free interest Rate			1.4	%			0.1	%			0.9	%
Stock Price Volatility			30.0	%			31.9	%			30.3	%
Dividend yield			0	%			0	%			0	%
Fair Value		$	31.11			$	40.21			$	28.39