Stock-Based Compensation

12 Months Ended

Jan. 02, 2021

Share-based Payment Arrangement [Abstract]

17. Stock-Based Compensation

All amounts disclosed below in this note include continuing and discontinued operations.

Stock Incentive Plan

On May 28, 2013, the Company's shareholders approved the 2013 Stock Incentive Plan, as amended (the "2013 Plan"), which permits the grant of a variety of stock-based awards, including stock options, restricted stock units ("RSUs") and performance share units ("PSUs") to selected employees and directors of the Company. As at January 2, 2021, 4,987,863 securities remained available for issuance under the 2013 Plan.

For the years ended January 2, 2021, December 28, 2019 and December 29, 2018, gross stock-based compensation expense amounted to $13.1 million, $11.6 million and $7.9 million, respectively. For the years ended January 2, 2021, and December 28, 2019, the Company reversed $0.9 million and $4.1 million, respectively, of previously recognized stock compensation related to forfeited awards previously granted to employees who were terminated in connection with the Value Creation Plan (see note 5).

Stock-based compensation was recorded in the consolidated statements of operations as follows:

	January 2, 2021		December 28, 2019		December 29, 2018
	$		$		$
Selling, general and administrative expenses	12,570		10,471		6,773
Other income	(894	)	(4,131	)	—
Earnings from discontinued operations	540		1,145		1,166
Total stock-based compensation expense	12,216		7,485		7,939

Short-Term and Long-Term Incentive Plans

As at January 2, 2021, 2,751,251 PSUs granted to certain employees under the Company's 2020 Short-Term Incentive Plan were outstanding. The vesting of these PSUs is subject to the Company achieving a predetermined measure of adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA") for fiscal 2020 and is subject to each employee's continued employment with the Company through April 22, 2021 (the requisite service period). The aggregate grant-date fair value of these PSUs was estimated to be $9.4 million.

During 2020, the Company issued 773,875 Common Shares, net of 368,938 Common Shares withheld for taxes, in connection with the vesting of outstanding PSUs previously granted to certain employees under the Company's 2019 Short-Term Incentive Plan.

In addition, as at January 2, 2021, 484,944 stock options, 253,424 PSUs and 129,017 RSUs granted to selected employees under the Company's 2020 Long-Term Incentive Plan were outstanding. The stock options vest ratably on each of the first through third anniversaries of the grant date and expire on the tenth anniversary of the grant date. The vesting of the PSUs is subject to the Company achieving predetermined measures of adjusted EBITDA for fiscal years ending 2020 through 2022. The RSUs vest ratably on each of the first through third anniversaries of the grant date. The aggregate grant-date fair value of all these equity awards was estimated to be $3.2 million.

Stock Option Activity

Stock options granted to selected employees during the three-year period ended January 2, 2021 vest ratably on each of the first through third anniversaries of the grant date and expire on the tenth anniversary of the grant date. Stock options granted by the Company contain an exercise price that is equal to the closing market price of the shares on the day prior to the grant date. Any consideration paid by employees or directors on exercise of stock options or purchase of stock is credited to capital stock.

The following table summarizes stock option activity for the year ended January 2, 2021:

					Weighted-
					average
			Weighted-		remaining
			average		contractual	Aggregate
	Stock options		exercise price		term (years)	intrinsic value
Outstanding, beginning of year	1,949,888		$	7.57
Granted	555,092			4.64
Exercised	(214,854	)		5.80
Forfeited	(119,346	)		8.31
Outstanding, end of year	2,170,780		$	6.95	5.89	$	10,270
Exercisable, end of year	1,615,793		$	7.72	4.66	$	6,410

The total intrinsic value of stock options exercised during the year ended January 2, 2021 was $0.3 million.

The following table summarizes non-vested stock option activity during the year ended January 2, 2021:

				Weighted-
				average grant-
	Stock options			date fair value
Non-vested, beginning of year	579,700		$	4.14
Granted	555,092			2.52
Vested	(505,330	)		4.17
Forfeited	(74,475	)		3.77
Non-vested, end of year	554,987		$	2.54

The weighted-average grant-date fair values of all stock options granted in the years ended January 2, 2021, December 28, 2019 and December 29, 2018, were $2.52, $1.70 and $3.31, respectively. The weighted-average assumptions used in the Black-Scholes option pricing model to determine the fair value of the stock options granted in those years were as follows:

		January 2, 2021		December 28, 2019		December 29, 2018
Grant-date stock price	$	4.64	$	3.57	$	7.56
Dividend yield⁽¹⁾		0%		0%		0%
Expected volatility⁽²⁾		60.0%		48.6%		41.1%
Risk-free interest rate⁽³⁾		0.4%		2.3%		2.9%
Expected life of options (years)⁽⁴⁾		6.0		5.8		6.0

(1)	Determined based on expected annual dividend yield at the time of grant.
(2)	Determined based on historical volatility of the Company’s Common Shares over the expected life of the option.
(3)	Determined based on the yield on U.S. Treasury zero-coupon issues with maturity dates equal to the expected life of the option.
(4)	Determined based on the mid-point of vesting (one through three years) and expiration (10 years).

The following table summarizes stock options outstanding and exercisable as at January 2, 2021:

					Weighted-
					average
					remaining		Weighted-			Weighted-
Exercise price range				Outstanding	contractual life		average exercise	Exercisable		average exercise
	Low		High	options	(years)		price	options		price
$	3.25	$	4.72	232,232	6.38	$	3.40	177,524	$	3.28
	4.73		4.94	484,944	9.52		4.73	—		—
	4.95		7.09	486,955	3.76		6.12	483,955		6.12
	7.10		9.48	317,967	4.22		7.98	305,632		7.99
	9.49		13.86	648,682	5.41		9.99	648,682		9.99
				2,170,780	5.89	$	6.95	1,615,793	$	7.72

Total compensation costs related to non-vested stock option awards not yet recognized as an expense was $1.1 million as at January 2, 2021, which will be amortized over a weighted-average remaining vesting period of 2.4 years.

Restricted Stock Unit Activity

RSUs granted to employees vest ratably on each of the first through third anniversaries of the grant date. RSUs granted to directors vest 100% on the first anniversary of the grant date. Each vested RSU entitles the employee or director to receive one common share of the Company. The weighted-average grant-date fair values of all RSUs granted in the years ended January 2, 2021, December 28, 2019 and December 29, 2018, were $3.20, $3.33 and $7.65, respectively, based on the closing price of the Common Shares on the grant dates.

The following table summarizes non-vested RSU activity during the year ended January 2, 2021:

				Weighted-
				average grant-
	RSUs			date fair value
Non-vested, beginning of year	413,013		$	5.64
Granted	647,565			3.20
Vested	(361,579	)		5.50
Forfeited	(51,700	)		4.28
Non-vested, end of year	647,299		$	3.39

The total intrinsic value of RSUs that vested during the year ended January 2, 2021 was $1.6 million. Total compensation costs related to non-vested RSU awards not yet recognized as an expense was $1.4 million as at January 2, 2021, which will be amortized over a weighted-average remaining vesting period of 1.9 years.

Performance Share Unit Activity

The vesting of PSUs granted to employees is subject to the Company achieving predetermined measures of adjusted EBITDA. Each vested PSU entitles the employee to receive one common share of the Company. The weighted-average grant-date fair values of all PSUs granted in the years ended January 2, 2021 and December 28, 2019, were $3.54 and $3.42, respectively, based on the closing price of the Common Shares on the grant dates. No PSUs were granted in the year ended December 29, 2018. Each reporting period, the number of PSUs that are expected to vest is redetermined and the aggregate grant-date fair value of the redetermined number of PSUs is amortized on a straight-line basis over the remaining requisite service period less amounts previously recognized.

The following table summarizes non-vested PSU activity during the year ended January 2, 2021:

			Weighted-
			average grant-
	PSUs		date fair value
Non-vested, beginning of year	2,936,115		$	4.08
Granted	3,084,107			3.54
Vested	(1,142,813	)		3.42
Forfeited or cancelled	(1,872,734	)		4.43
Non-vested, end of year	3,004,675		$	3.56

The total intrinsic value of PSUs that vested during the year ended January 2, 2021 was $2.1 million. Total compensation costs related to non-vested PSU awards not yet recognized as an expense was $4.4 million as at January 2, 2021, which will be amortized over a weighted-average remaining vesting period of 0.8 years.

Chief Executive Officer

On April 1, 2019, Joseph D. Ennen was appointed CEO of the Company. In connection with his appointment, the Company granted Mr. Ennen options to purchase 960,061 Common Shares, 512,619 RSUs (of which 215,000 were issued to equal the number of Common Shares purchased by Mr. Ennen on the open market within the 60-day period after his employment began) and 1,785,714 PSUs. The stock options vest on April 1, 2022, subject to Mr. Ennen's continued employment during the vesting period, and expire on April 1, 2029. Each vested stock option entitles Mr. Ennen to purchase one Common Share at an exercise price of $3.36, which was equal to the closing price of the Common Shares on April 1, 2019. The RSUs vest in three equal annual installments beginning on April 1, 2020, and each vested RSU entitles Mr. Ennen to receive one Common Share of the Company.

The vesting of 892,857 of the PSUs granted is subject to the Company achieving predetermined annual thresholds of adjusted EBITDA during fiscal years 2019 through 2022, and subject to Mr. Ennen’s continued employment with the Company through the end of the fiscal year during which the adjusted EBITDA performance condition is achieved. At the date of grant, those thresholds were determined as follows: 297,619 PSUs would vest upon the Company achieving annual adjusted EBITDA of $80 million, another 297,619 would vest upon the Company achieving annual adjusted EBITDA of $110 million, and the final 297,619 would vest upon the Company achieving annual adjusted EBITDA of $140 million. On February 8, 2021, the Company’s Board of Directors exercised its discretion to amend the annual adjusted EBITDA thresholds of Mr. Ennen’s PSUs to $43 million, $65 million, and $87 million, to solely reflect the impact of the divestiture of Tradin Organic on the measurement of adjusted EBITDA on a continuing basis. The vesting of the other 892,857 PSUs that were granted is subject to the Common Shares achieving certain volume-weighted average trading prices during a performance period commencing on April 1, 2019 and ending on December 31, 2022, as follows: 297,619 PSUs vest upon achieving a trading price of $5.00 per share, another 297,619 vest upon achieving a trading price of $9.00 per share, and the final 297,619 vest upon achieving a trading price of $14.00 per share, in each case for 20 consecutive trading days, and subject to Mr. Ennen's continued employment with the Company through the date the stock price performance condition is achieved. Each vested PSU entitles Mr. Ennen to receive one Common Share without payment of additional consideration.

The weighted-average grant-date fair values of the RSUs and PSUs subject to the adjusted EBITDA performance condition were estimated to be $3.46 and $3.36, respectively, based on the closing price of Common Shares on the dates of grant. A grant-date fair value of $1.68 was estimated for the stock options using the Black-Scholes option pricing model, and a weighted-average grant-date fair value of $1.77 was estimated for the PSUs subject to the stock price performance condition using a Monte Carlo valuation model. The following table summarizes the inputs to the Black-Scholes option-pricing and Monte Carlo valuation models:

	Stock Options		PSUs
Grant-date stock price	$	3.36	$	3.36
Exercise price	$	3.36		NA
Dividend yield		0%		0%
Expected volatility⁽¹⁾		47.9%		55.7%
Risk-free interest rate⁽²⁾		2.4%		2.3%
Expected life (in years)⁽³⁾		6.5		1.8

(1) Determined based on the historical volatility of the Common Shares over the expected life of the stock options and performance period of the PSUs.

(2) Determined based on U.S. Treasury yields with a remaining term equal to the expected life of the stock options and performance period of the PSUs.

(3) Determined based on the mid-point of vesting (three years) and expiration (ten years) for the stock options and the derived service period for the PSUs.

The aggregate grant-date fair value of the stock options, RSUs and PSUs awarded to Mr. Ennen was determined to be $8.0 million, which is being recognized on a straight-line basis over the vesting period for the stock options and RSUs and the derived service period for the PSUs. Each reporting period, the number of PSUs subject to the adjusted EBITDA performance condition that are expected to vest is redetermined and the aggregate grant-date fair value of the redetermined number of those PSUs is amortized over the remaining service period less amounts previously recognized. Total compensation costs related to Mr. Ennen's non-vested equity awards not yet recognized as an expense was $3.1 million as at January 2, 2021, which will be amortized over a weighted-average remaining vesting period of 1.6 years.

The following table summarizes activity related to Mr. Ennen's non-vested equity awards during the year ended January 2, 2021:

			Adjusted EBITDA	Stock price
	Stock		performance	performance
	options	RSUs	PSUs	PSUs
Non-vested, beginning of year	960,061	512,619	892,857	892,857
Vested	—	(170,873)	—	(595,238)
Non-vested, end of year	960,061	341,746	892,857	297,619

The total intrinsic value of Mr. Ennen's equity awards that vested during the year ended January 2, 2021 was $5.2 million. On February 11, 2021, the final tranche of Mr. Ennen's stock price performance PSUs vested with an intrinsic value of $4.9 million.

Chief Financial Officer

On September 3, 2019, Scott Huckins was appointed CFO of the Company. In connection with his appointment, the Company granted Mr. Huckins options to purchase 262,182 Common Shares, 327,819 RSUs (of which 154,500 were issued to equal the number of Common Shares purchased by Mr. Huckins on the open market prior to December 12, 2019) and 346,638 PSUs. The stock options vest on September 3, 2022, subject to Mr. Huckins' continued employment during the vesting period, and expire on September 3, 2029. Each vested stock option entitles Mr. Huckins to purchase one Common Share at an exercise price of $2.38, which was equal to the closing price of the Common Shares on September 3, 2019. The RSUs vest in three equal annual installments beginning on September 3, 2020, and each vested RSU entitles Mr. Huckins to receive one Common Share of the Company.

The vesting of 173,319 of the PSUs granted is subject to the Company achieving predetermined annual thresholds of adjusted EBITDA during fiscal years 2019 through 2022, and subject to Mr. Huckins’ continued employment with the Company through the end of the fiscal year during which the adjusted EBITDA performance condition is achieved. At the date of grant, those thresholds were determined as follows: 57,773 PSUs would vest upon the Company achieving annual adjusted EBITDA of $80 million, another 57,773 would vest upon the Company achieving annual adjusted EBITDA of $110 million, and the final 57,773 would vest upon the Company achieving annual adjusted EBITDA of $140 million. As above for Mr. Ennon’s PSUs, on February 8, 2021, the Company’s Board of Directors exercised its discretion to amend the annual adjusted EBITDA thresholds of Mr. Huckins’ PSUs to $43 million, $65 million, and $87 million, to solely reflect the impact of the divestiture of Tradin Organic on the measurement of adjusted EBITDA on a continuing basis. The vesting of the other 173,319 PSUs that were granted is subject to the Common Shares achieving certain volume-weighted average trading prices during a performance period commencing on September 3, 2019 and ending on December 31, 2022, as follows: 57,773 PSUs vest upon achieving a trading price of $5.00 per share, another 57,773 vest upon achieving a trading price of $9.00 per share, and the final 57,773 vest upon achieving a trading price of $14.00 per share, in each case for 20 consecutive trading days, and subject to Mr. Huckins' continued employment with the Company through the date the stock price performance condition is achieved. Each vested PSU entitles Mr. Huckins to receive one Common Share without payment of additional consideration.

The weighted-average grant-date fair values of the RSUs and PSUs subject to the adjusted EBITDA performance condition were estimated to be $2.45 and $2.38, respectively, based on the closing price of Common Shares on the dates of grant. A grant-date fair value of $1.18 was estimated for the stock options using the Black-Scholes option pricing model, and a weighted-average grant-date fair value of $0.79 was estimated for the PSUs subject to the stock price performance condition using a Monte Carlo valuation model. The following table summarizes the inputs to the Black-Scholes option-pricing and Monte Carlo valuation models:

	Stock Options		PSUs
Grant-date stock price	$	2.38	$	2.38
Exercise price	$	2.38		NA
Dividend yield		0%		0%
Expected volatility⁽¹⁾		49.7%		55.9%
Risk-free interest rate⁽²⁾		1.4%		1.4%
Expected life (in years)⁽³⁾		6.5		2.1

(1) Determined based on the historical volatility of the Common Shares over the expected life of the stock options and performance period of the PSUs.

(2) Determined based on U.S. Treasury yields with a remaining term equal to the expected life of the stock options and performance period of the PSUs.

(3) Determined based on the mid-point of vesting (three years) and expiration (ten years) for the stock options and the derived service period for the PSUs.

The aggregate grant-date fair value of the stock options, RSUs and PSUs awarded to Mr. Huckins was determined to be $1.7 million, which is being recognized on a straight-line basis over the vesting period for the stock options and RSUs and the derived service period for the PSUs. Each reporting period, the number of PSUs subject to the adjusted EBITDA performance condition that are expected to vest is redetermined and the aggregate grant-date fair value of the redetermined number of those PSUs is amortized over the remaining service period less amounts previously recognized. Total compensation costs related to Mr. Huckins' non-vested equity awards not yet recognized as an expense was $0.9 million as at January 2, 2021, which will be amortized over a weighted-average remaining vesting period of 1.8 years.

The following table summarizes activity related to Mr. Huckins' non-vested equity awards during the year ended January 2, 2021:

			Adjusted EBITDA	Stock price
	Stock		performance	performance
	options	RSUs	PSUs	PSUs
Non-vested, beginning of year	262,182	327,819	173,319	173,319
Vested	—	(109,273)	—	(115,546)
Non-vested, end of year	262,182	218,546	173,319	57,773

The total intrinsic value of Mr. Huckins' equity awards that vested during the year ended January 2, 2021 was $1.7 million. On February 11, 2021, the final tranche of Mr. Huckins' stock price performance PSUs vested with an intrinsic value of $1.0 million.

Employee Stock Purchase Plan

The Company maintains an Employee Stock Purchase Plan whereby employees can purchase common shares through payroll deductions. For the year ended January 2, 2021, the Company's employees purchased 113,581 Common Shares (December 28, 2019 - 185,415; December 29, 2018 - 112,158) for total proceeds of $0.5 million (December 28, 2019 - $0.5 million; December 29, 2018 - $0.6 million). As at January 2, 2021, 700,916 Common Shares are remaining to be granted under this plan.