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Stock Plans | 12 Months Ended
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Jan. 02, 2016
Stock Plans |
10. | Stock Plans
Incentive Compensation Plans and Winfrey Option On May 6, 2008 and May 12, 2004, respectively, the Company’s shareholders approved the 2008 Stock Incentive Plan (the “2008 Plan”) and the 2004 Stock Incentive Plan (the “2004 Plan”). On May 6, 2014, the Company’s shareholders approved the 2014 Stock Incentive Plan (as amended, the “2014 Plan” and together with the 2004 Plan and the 2008 Plan, the “Stock Plans”), which replaced the 2008 Plan and 2004 Plan for all equity-based awards granted on or after May 6, 2014. The 2014 Plan is designed to promote the long-term financial interests and growth of the Company by attracting, motivating and retaining employees with the ability to contribute to the success of the business and to align compensation for the Company’s employees over a multi-year period directly with the interests of the shareholders of the Company. The Company’s Board of Directors or a committee thereof administers the 2014 Plan. Under the 2014 Plan, grants may take the following forms at the Compensation and Benefit Committee’s discretion: non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock units (“RSUs”), restricted stock and other share-based awards. As of its effective date, the maximum number of shares of common stock available for grant under the 2014 Plan was 3,500, subject to increase and adjustment as set forth in the 2014 Plan. Under the 2014 Plan, the Company also grants fully-vested shares of its common stock to certain members of its Board of Directors. While these shares are fully vested the directors are restricted from selling these shares while they are still serving on the Company’s Board of Directors. During the fiscal years ended January 2, 2016, January 3, 2015 and December 28, 2013, the Company granted 50, 20, and 14, fully-vested shares, respectively, and recognized compensation expense of $507, $497, and $524, respectively. From time to time, the Company has granted fully-vested shares of its common stock to individuals in connection with special circumstances. In fiscal 2015, the Company granted an aggregate of 105 fully-vested shares of its common stock to individuals under such special circumstances. Under the Winfrey Option Agreement, the Company granted Ms. Winfrey a fully vested non-qualified option to purchase 3,513 shares of its common stock as more fully described in Note 3. The Company issues common stock for share-based compensation awards from treasury stock. The total compensation cost that has been charged against income for these plans and the Winfrey Option, as applicable, was $24,771, $10,533, and $4,255 for the years ended January 2, 2016, January 3, 2015 and December 28, 2013, respectively. Such amounts have been included as a component of selling, general and administrative expenses. The total income tax benefit recognized in the income statement for all share-based compensation arrangements was $8,170, $3,285, and $1,174 for the years ended January 2, 2016, January 3, 2015 and December 28, 2013, respectively. The tax benefits realized from options exercised and RSUs vested totaled $274, $301, and $4,217 for the years ended January 2, 2016, January 3, 2015 and December 28, 2013, respectively. No compensation costs were capitalized. As of January 2, 2016, there was $19,600 of total unrecognized compensation cost related to stock options and RSUs granted under the Stock Plans. That cost is expected to be recognized over a weighted-average period of approximately 1.5 years. While the Stock Plans permit various types of awards, other than the aforementioned shares issued to directors and certain individuals in connection with special circumstances, grants under the plans have historically been either non-qualified stock options or RSUs. In fiscal 2015, 2014 and 2013, the Company also granted special performance-based stock option awards. The following describes some further details of these awards. Stock Option Awards Under Stock Plans Option Awards with Time Vesting Criteria Pursuant to the option components of the Stock Plans, the Company’s Board of Directors authorized the Company to enter into agreements under which certain employees received stock options with time vesting criteria (“Time Vesting Options”). The options are exercisable based on the terms outlined in the agreements. Time Vesting Options outstanding at January 2, 2016 and January 3, 2015 vest over a period of three to five years and the expiration term is ten years. Time Vesting Options outstanding at January 2, 2016 and January 3, 2015 have an exercise price between $3.97 and $63.59 per share. The fair value of each of these option awards is estimated on the date of grant using the Black-Scholes option pricing model with the weighted average assumptions noted in the following table. Expected volatility is based on the historical volatility of the Company’s stock. Since the Company’s option exercise history is limited, it has estimated the expected term of these option grants to be the midpoint between the vesting period and the contractual term of each award. The risk free interest rate is based on the U.S. Treasury yield curve in effect on the date of grant which most closely corresponds to the expected term of the Time Vesting Options. The dividend yield is based on our historic average dividend yield. The Company did not grant any Time Vesting Options in fiscal 2014.
|  | January 2, 2016 |  | January 3, 2015 |  | December 28, 2013
Dividend yield |  | 0.0% |  | 0.0% |  | 0.8%
Volatility |  | 41.0% |  | 0.0% |  | 36.5%
Risk-free interest rate |  | 1.84% - 1.89% |  | 0% - 0% |  | 1.3% - 2.2%
Expected term (years) |  | 6.0 |  | 0.0 |  | 6.5
Option Awards with Time and Performance Vesting Criteria Pursuant to the option components of the Stock Plans, the Company’s Board of Directors authorized the Company to enter into agreements under which certain employees received stock options with both time and performance vesting criteria (“T&P Vesting Options”). As of the end of fiscal 2015, there were no outstanding T&P Vesting Options. The options were exercisable based on the terms outlined in the agreements. During fiscal 2015, fiscal 2014 and fiscal 2013, the Company granted 37, 1,601 and 687 T&P Vesting Options, respectively, to certain employees that would have vested based on the achievement of both time and performance vesting criteria. The time-vesting criteria would have been 100% satisfied on the third anniversary of the date of the grant and the performance criteria was contingent upon meeting or exceeding certain stock price hurdles. With respect to the performance-vesting criteria, the stock options would have fully vested in 20% increments upon the first date that the average closing stock price for the 20 consecutive preceding trading days was equal to or greater than specified stock price hurdles. The fair value of the T&P Vesting Options was estimated on the date of grant and was based on the likelihood of the Company achieving the performance conditions. The Company estimated the fair value using a Monte Carlo simulation that used various assumptions that included expected volatility, a risk free rate and an expected term. Expected volatility was based on the historical volatility of the Company’s stock. The risk-free interest rate was based on the U.S. Treasury yield curve in effect on the date of grant which most closely corresponds to the performance measurement period. The expected term represents the period from the grant date to the end of the five year performance period. Compensation expense on T&P Vesting Options is recognized ratably over the three year required service period as this period is longer than the derived service period calculated by the Monte Carlo simulation.
|  | January 2, 2016 |  | January 3, 2015 |  | December 28, 2013
Dividend yield |  | 0.0% |  | 0.0% |  | 0.0%
Volatility |  | 40.5% |  | 37.8% |  | 36.5%
Risk-free interest rate |  | 1.6% |  | 1.4% - 1.8% |  | 2%
Expected term (years) |  | 5.0 |  | 5.0 |  | 5.0
On May 7, 2015, the Company’s shareholders approved an amendment to the 2014 Plan to permit a one-time stock option exchange program under which the Company would offer eligible employees the opportunity to exchange certain eligible T&P Vesting Options on a (a) two-for-one basis for new stock options for all eligible employees, other than the Company’s Chief Executive Officer (i.e., so that the new stock options would cover half as many shares as the corresponding surrendered options) and (b) 3.5-for-one basis for new stock options for the Company’s Chief Executive Officer (i.e., so that the new stock options would cover a number of shares equal to the quotient of the number of shares covered by the corresponding surrendered options divided by 3.5). The option exchange program was designed to create better incentives for employees to remain with the Company and contribute to the attainment of its business and financial objectives. On May 22, 2015, the Company launched a tender offer in connection with the option exchange program which expired on June 22, 2015. Pursuant to the offer, employees tendered options to purchase 1,700 shares of common stock (representing 99.6% of the total shares of common stock underlying the options eligible for exchange) with a weighted-average exercise price of $24.68 per share. The Company cancelled and replaced those options on June 22, 2015 with options to purchase 734 shares of common stock with an exercise price of $5.25 per share, which was the closing price per share of the Company’s common stock on the New York Stock Exchange on June 22, 2015. The replacement options vest over three years, with 25% vesting on each of the first and second anniversaries of the date of grant and 50% vesting on the third anniversary of the date of grant. The option exchange resulted in an incremental stock option expense of $1,599, which was determined by comparing the fair value of the T&P Vesting Option as calculated based on a Monte Carlo simulation, to the fair value of the replacement options, as calculated using the Black-Scholes option pricing model, for the eligible options at the time of exchange. This incremental expense, along with the unamortized expense associated with the cancelled options, is being recognized ratably over the new vesting period of the replacement options, which is three years. Option Activity A summary of all option activity under the Stock Plans and the Winfrey Option (see Note 3 for additional disclosure regarding the Winfrey Option) for the year ended January 2, 2016 is presented below:
|  | Shares |  |  | Weighted- Average Exercise Price |  |  | Weighted- Average Remaining Contractual Life (Yrs.) |  |  | Aggregate Intrinsic Value |
Outstanding at January 3, 2015 |  |  | 3,250 |  |  | $ | 30.72 |  |  |  |  |  |  |  |  |
Granted |  |  | 4,572 |  |  |  | 6.61 |  |  |  |  |  |  |  |  |
Exercised |  |  | (4 | ) |  |  | 22.67 |  |  |  |  |  |  |  |  |
Exchanged |  |  | (1,700 | ) |  |  | 24.68 |  |  |  |  |  |  |  |  |
Cancelled |  |  | (788 | ) |  |  | 31.94 |  |  |  |  |  |  |  |  |
Outstanding at January 2, 2016 |  |  | 5,330 |  |  | $ | 11.79 |  |  |  | 9.2 |  |  | $ | 73,260 |
Exercisable at January 2, 2016 |  |  | 3,916 |  |  | $ | 10.62 |  |  |  | 9.3 |  |  | $ | 55,772 |
The weighted-average grant-date fair value of all options granted (including the Winfrey Option as described in Note 3) was $4.86, $6.51, and $11.37 for the years ended January 2, 2016, January 3, 2015 and December 28, 2013, respectively. The total intrinsic value of Time Vesting Options exercised was $17, $62, and $9,858 for the years ended January 2, 2016, January 3, 2015 and December 28, 2013, respectively. Cash received from Time Vesting Options exercised during the years ended January 2, 2016, January 3, 2015 and December 28, 2013 was $95, $658, and $16,187, respectively. Restricted Stock Units Under Stock Plans Pursuant to the restricted stock components of the Stock Plans, the Company’s Board of Directors authorized the Company to enter into agreements under which certain employees received RSUs. The RSUs are exercisable based on the terms outlined in the agreements. The RSUs vest over a period of three to five years. The fair value of RSUs is determined using the closing market price of the Company’s common stock on the date of grant. A summary of RSU activity under the Stock Plans for the year ended January 2, 2016 is presented below:
|  | Shares |  |  | Weighted-Average Grant-Date Fair Value |
Outstanding at January 3, 2015 |  |  | 838 |  |  | $ | 27.71 |
Granted |  |  | 780 |  |  | $ | 5.55 |
Vested |  |  | (35 | ) |  | $ | 51.18 |
Forfeited |  |  | (217 | ) |  | $ | 26.25 |
Outstanding at January 2, 2016 |  |  | 1,366 |  |  | $ | 27.71 |
The weighted-average grant-date fair value of RSUs granted was $5.55, $24.37, and $38.40 for the years ended January 2, 2016, January 3, 2015 and December 28, 2013, respectively. The total fair value of RSUs vested during the years ended January 2, 2016, January 3, 2015 and December 28, 2013 was $1,804, $3,042, and $1,705, respectively.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=51659978&loc=d3e25284-112666 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 + Details
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