Equity Compensation |
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| Equity Compensation | Equity Compensation 2021 Omnibus Incentive Plan
The Company maintains its 2021 Omnibus Incentive Plan (the “Plan”) under which it grants stock-based awards to eligible directors, officers and employees in order to attract, retain and reward such individuals and strengthen the mutuality of interest between such individuals and the Company’s stockholders. The Plan allows the Company to issue and grant 15,125,000 shares.
The Company measures compensation expense for stock-based awards in accordance with ASC Topic 718, Compensation – Stock Compensation (“ASC 718”). During the three months ended April 1, 2023, the Company granted stock-based awards including restricted stock units (“RSUs”), performance-based restricted stock units (“PSUs”), and stock options under the Plan. The grant date fair value of RSUs are equal to the closing price of the Company’s common stock on either: (i) the date of grant; or (ii) the previous trading day, depending on the level of administration required. Forfeitures are recognized as they occur, any unvested RSUs or stock options are forfeited upon a “Termination of Service”, as defined in the Plan, or as otherwise provided in the applicable award agreement or determined by the Company’s Compensation Committee of the Board of Directors.
Restricted Stock Unit Grants
RSUs are subject to a vesting period between and four years. RSU activity for the three months ended April 1, 2023 is as follows:
(dollar amounts in thousands, except share and per share data)
Stock-based compensation expense for RSUs is recognized straight line over the respective service period, reduced for actual forfeitures, and included in general and administrative expense in the accompanying Unaudited Condensed Consolidated Statement of Operations and Comprehensive Income. Total compensation expense related to the above awards was approximately $637 and $600 for the three months ended April 1, 2023 and April 2, 2022, respectively. As of April 1, 2023, there was an aggregate of $8,538 of unrecognized expense related to the RSUs granted, which the Company expects to amortize over a weighted-average period of 3.01 years.
Performance-based Restricted Stock Unit Grants
PSU awards are based on the satisfaction of the Company’s performance metrics. The number of PSUs that become earned can range between 0% and 200% of the original target number of PSUs awarded for the 2022 awards. PSUs are subject to a three-year performance cliff-vesting period.
As of April 1, 2023, PSUs activity for the three months ended April 1, 2023 is as follows:
(dollar amounts in thousands, except share and per share data)
Stock-based compensation expense for PSUs is recognized straight line over the requisite service period, reduced for actual forfeitures, and included in general and administrative in the accompanying Condensed Consolidated Statement of Operations and Comprehensive Income. Total compensation expense related to the PSUs was approximately $994 for the three months ended April 1, 2023. As of April 1, 2023, there
was an aggregate of $4,802 of unrecognized expense related to the PSUs granted, which the Company expects to amortize over a weighted-average period of 2.21 years.
The above table represents PSUs assuming 100% of target payout at the time of the grant. Actual payouts can range between 0% and 200%, depending on performance results for the three-year performance period. As of April 1, 2023, the Company deemed the estimate of the PSUs granted in fiscal year ended December 31, 2022 to be issued at 200% of target, and have reflected such estimates within the share-based compensation expense. The Company estimates the PSU’s granted during the period ending April 1, 2023 to be issued at 100% of target.
The Actual payout of the 2022 grants will be in a range of 0% to 200%, depending on performance results for the three-year performance period from January 2, 2022, through December 28, 2024. The Actual payout of the 2023 grants will be in a range of 0% to 200%, depending on performance results for the three-year performance period from January 1, 2023, through December 27, 2025.
Stock Options
Stock options are granted by applying a valuation method to determine the grant date fair value for each stock option award. Stock options are subject to a vesting period of either or four years. Stock option awards typically vest in 33% or 25% annual installments on each annual anniversary of the vesting commencement date for the duration of the vesting period, and expire ten years from the grant date. The fair value of each option is estimated using a Black-Scholes option valuation model using the independent valuations of the Company’s stock.
The principal assumptions utilized in valuing stock options include, the expected option life, the risk-free interest rate (an estimate based on the yield of United States Treasury zero coupon with a maturity equal to the expected life of the option), the expected stock price volatility using the historical and implied price volatility, and the expected dividend yield.
A summary of the assumptions used in determining the fair value of stock options is as follows:
(dollar amounts in thousands, except share and per share data)
Stock option activity for the three months ended April 1, 2023 is as follows:
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