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Stock Plans | 12 Months Ended
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Dec. 31, 2016
Stock Plans |
11. | 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 Company’s Board of Directors’ Compensation and Benefit Committee’s discretion: non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock units (“RSUs”), restricted stock and other stock-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 December 31, 2016, January 2, 2016 and January 3, 2015, the Company granted to such members 36, 50 and 20 fully-vested shares, respectively, and recognized compensation expense of $451, $507 and $497, respectively. The Company’s long-term equity incentive compensation program has historically included non-qualified stock option and/or restricted stock unit (including performance-based stock unit with both time- and performance-vesting criteria) awards. These awards have generally had time-vesting criteria. 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. In fiscal 2015 and 2014, the Company also granted special performance-based stock option awards. Under the Winfrey Option Agreement, in fiscal 2015, the Company granted Ms. Winfrey a fully-vested non-qualified stock option to purchase 3,513 shares of its common stock as more fully described in Note 4. 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 $6,527, $24,771, and $10,533 for the fiscal years ended December 31, 2016, January 2, 2016 and January 3, 2015, 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 $1,849, $8,170 and $3,285 for the fiscal years ended December 31, 2016, January 2, 2016, and January 3, 2015, respectively. The tax benefits realized from options exercised and RSUs vested totaled $2,114, $274 and $301 for the fiscal years ended December 31, 2016, January 2, 2016 and January 3, 2015, respectively. No compensation costs were capitalized. As of December 31, 2016, there was $14,099 of total unrecognized compensation cost related to stock options, RSUs and PSUs granted under the Stock Plans. That cost is expected to be recognized over a weighted-average period of approximately 1.6 years. 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 December 31, 2016 and January 2, 2016 vest over a period of three to five years and the expiration term is ten years. Time-Vesting Options outstanding at December 31, 2016 and January 2, 2016 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 common 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 the Company’s historic average dividend yield. The Company did not grant any Time-Vesting Options in fiscal 2014.
|  | December 31, 2016 |  | January 2, 2016
Dividend yield |  | 0.0% |  | 0.0%
Volatility |  | 49.6% - 51.4% |  | 41.0%
Risk-free interest rate |  | 1.24% - 2.26% |  | 1.84% - 1.89%
Expected term (years) |  | 6.0 |  | 6.0
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 Options”). As of the end of fiscal 2016, there were no outstanding T&P Options. The options were exercisable based on the terms outlined in the agreements. During fiscal 2015 and fiscal 2014, the Company granted 37 and 1,601 T&P 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-vesting 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 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 common 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 represented the period from the grant date to the end of the five year performance period. Compensation expense on T&P Options was recognized ratably over the three year required service period as this period was longer than the derived service period calculated by the Monte Carlo simulation.
|  | January 2, 2016 |  | January 3, 2015
Dividend yield |  | 0.0% |  | 0.0%
Volatility |  | 40.5% |  | 37.8%
Risk-free interest rate |  | 1.6% |  | 1.4% -1.8%
Expected term (years) |  | 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 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 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 4 for additional disclosure regarding the Winfrey Option) for the fiscal year ended December 31, 2016 is presented below:
|  | Shares |  |  | Weighted- Average Exercise Price |  |  | Weighted- Average Remaining Contractual Life (Yrs.) |  |  | Aggregate Intrinsic Value |
Outstanding at January 2, 2016 |  |  | 5,330 |  |  | $ | 11.79 |  |  |  |  |  |  |  |  |
Granted |  |  | 118 |  |  | $ | 11.79 |  |  |  |  |  |  |  |  |
Exercised |  |  | (20 | ) |  | $ | 5.25 |  |  |  |  |  |  |  |  |
Cancelled |  |  | (315 | ) |  | $ | 12.71 |  |  |  |  |  |  |  |  |
Outstanding at December 31, 2016 |  |  | 5,113 |  |  | $ | 11.76 |  |  |  | 8.3 |  |  | $ | 20,293 |
Exercisable at December 31, 2016 |  |  | 4,490 |  |  | $ | 12.49 |  |  |  | 8.2 |  |  | $ | 17,135 |
The weighted-average grant-date fair value of all options granted (including the Winfrey Option as described in Note 4) was $5.79, $4.86 and $6.51, for the fiscal years ended December 31, 2016, January 2, 2016 and January 3, 2015, respectively. The total intrinsic value of Time-Vesting Options exercised was $117, $17 and $62 for the fiscal years ended December 31, 2016, January 2, 2016 and January 3, 2015, respectively. Cash received from Time-Vesting Options exercised during the fiscal years ended December 31, 2016, January 2, 2016 and January 3, 2015 was $139, $95 and $658, respectively. Restricted Stock Unit Awards with Time-Vesting Criteria 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 generally vest over a period of two 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 fiscal year ended December 31, 2016 is presented below:
|  | Shares |  |  | Weighted-Average Grant-Date Fair Value |
Outstanding at January 2, 2016 |  |  | 1,366 |  |  | $ | 14.66 |
Granted |  |  | 758 |  |  | $ | 12.68 |
Vested |  |  | (475 | ) |  | $ | 10.84 |
Forfeited |  |  | (511 | ) |  | $ | 16.41 |
Outstanding at December 31, 2016 |  |  | 1,138 |  |  | $ | 14.15 |
The weighted-average grant-date fair value of RSUs granted was $12.68, $5.55 and $24.37 for the fiscal years ended December 31, 2016, January 2, 2016 and January 3, 2015, respectively. The total fair value of RSUs vested during the fiscal years ended December 31, 2016, January 2, 2016 and January 3, 2015 was $5,145, $1,804 and $3,042, respectively. Performance-Based Stock Unit Awards with Time- and Performance-Vesting Criteria Pursuant to the restricted stock components of the 2014 Plan, in fiscal 2016, the Compensation and Benefits Committee of the Company’s Board of Directors determined to grant 290 performance-based stock unit awards having both time- and performance-vesting criteria (the “PSUs”). The time-vesting criteria will be satisfied on the third anniversary of the grant date (i.e., May 16, 2019). The performance-vesting criteria will be satisfied if the Company has achieved a Debt Ratio (as defined in the Company’s term sheet for PSU awards and based on a Debt to EBITDAS ratio (each, as defined therein)) at levels at or above a “threshold” level performance of 4.5x over the performance period from December 31, 2017 to December 29, 2018. The number of PSUs that become vested, if any, upon the satisfaction of both vesting criteria, shall be equal to (x) the target number of PSUs granted multiplied by (y) the applicable Debt Ratio achievement percentage, rounded down to avoid the issuance of fractional shares. If all of the awards fully meet the time-vesting criteria, depending on the Company’s Debt Ratio achievement, the number of shares of the Company’s common stock issuable under the PSUs range from 66 to 330. The Company is currently accruing compensation expense to what it believes is the probable outcome upon vesting. The fair value of PSUs is determined using the closing market price of the Company’s common stock on the date of grant. A summary of PSU activity under the 2014 Plan for the fiscal year ended December 31, 2016 is presented below:
|  | Shares |  |  | Weighted-Average Grant- Date Fair Value |
Outstanding at January 2, 2016 |  |  | 0 |  |  | $ | 0 |
Granted |  |  | 290 |  |  | $ | 13.19 |
Vested |  |  | (1 | ) |  | $ | 13.20 |
Forfeited |  |  | (91 | ) |  | $ | 13.20 |
Outstanding at December 31, 2016 |  |  | 198 |  |  | $ | 13.19 |
The weighted-average grant-date fair value of PSUs granted was $13.19 for the fiscal year ended December 31, 2016. The total fair value of PSUs vested during the fiscal year ended December 31, 2016 was $8.

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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=65895303&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=68057994&loc=d3e25284-112666 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB Topic 14) -URI http://asc.fasb.org/extlink&oid=27013229&loc=d3e301413-122809 Reference 4: 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 5: 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 6: 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 + Details
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