Annual report pursuant to Section 13 and 15(d)

Stockholders' Equity

v3.22.0.1
Stockholders' Equity
 12 Months Ended
Dec. 30, 2021
Equity [Abstract]  
Stockholders' Equity Stockholders’ Equity
Common Stock
The Company has three classes of common stock: Class A, Class B, and Class C. The holders of Class A common stock, Class B common stock, and Class C common stock are entitled to share equally, on a per share basis, in dividends or other distributions. Class A common stockholders are entitled to one vote per share held. Class B and Class C common stockholders have no voting rights, except as otherwise provided by law. In the event of the voluntary liquidation or dissolution of the Company, each class of stock will share equally, on a per share basis, in all the assets of the Company that are available for distribution to stockholders.
Stock Incentive Plans
On January 13, 2011, the Company adopted the 2011 Stock Option Plan (as amended, restated, supplemented or otherwise modified from time to time, the “2011 Plan”) to provide for the grant of stock options to employees (including officers), consultants and non-employee directors of the Company and its subsidiaries. Pursuant to the terms of the 2011 Plan, the Company was authorized to grant options for the purchase of up to 12,520,407 shares as of December 29, 2016 and 10,780,970 shares as of December 31, 2015. As of December 29, 2016 and December 31, 2015, there were 179,575 and 104,269 shares available for grant pursuant to awards under the 2011 Plan, respectively. The Company ceased granting awards under the 2011 Plan upon the implementation of the 2017 Plan (as defined below).
On April 13, 2017, the board of directors approved the Floor & Decor Holdings, Inc. 2017 Stock Incentive Plan (the “2017 Plan”), which was subsequently approved by the Company’s stockholders. The 2017 Plan authorizes the Company to grant options and restricted stock awards to eligible employees (including officers), consultants, and non-employee directors up to an aggregate of 5,000,000 shares of Class A common stock. As of December 30, 2021 and December 31, 2020, there were 1,926,142 and 2,120,839 shares available for grant pursuant to awards under the 2017 Plan, respectively.
Secondary Offerings
On August 13, 2020, certain of the Company’s stockholders completed a secondary public offering (the “August Secondary Offering”) of an aggregate of 5,686,422 shares of common stock at a price to the public of $67.60 per share. The Company did not sell any shares in the August Secondary Offering and did not receive any proceeds from the sales of shares by the selling stockholders.
On May 22, 2020, certain of the Company’s stockholders completed a secondary public offering (the “May 2020 Secondary Offering”) of an aggregate of 4,972,900 shares of common stock at a price to the public of $44.55 per share. The Company did not sell any shares in the May 2020 Secondary Offering and did not receive any proceeds from the sales of shares by the selling stockholders.
On February 28, 2019, certain of the Company’s stockholders completed a secondary public offering (the “February Secondary Offering”) of an aggregate of 10,000,000 shares of common stock at a price to the public of $37.50 per share. The Company did not sell any shares in the February Secondary Offering and did not receive any proceeds from the sales of shares by the selling stockholders.
Stock-based Compensation
The Company accounts for stock-based compensation in accordance with ASC 718, Compensation- Stock Compensation, which requires measurement of compensation cost for all stock awards at fair value on the date of grant and recognition of compensation, net of forfeitures, over the requisite service period for awards expected to vest. Stock-based compensation expense for the fiscal years ended December 30, 2021, December 31, 2020, and December 26, 2019 was $20.5 million, $16.1 million, and $8.7 million, respectively, and was included in general and administrative expenses on the Company’s Consolidated Statements of Operations and Comprehensive Income.
Stock Options
Stock options are granted with an exercise price greater than or equal to the fair market value on the date of grant, as authorized by the Company’s board of directors or compensation committee. Options granted have contractual terms of ten years and vesting provisions ranging from one year to five years. Stock options granted to eligible employees during fiscal 2021 vest in four ratable annual installments on each of the first four anniversaries of the grant date, subject to the grantee’s continued service through the applicable vesting date. Stock option grants are generally subject to forfeiture if employment terminates prior to vesting.
Stock option award grant date fair values were estimated using the Black-Scholes-Merton option pricing model with the following weighted-average assumptions:
Fiscal Year Ended
December 30,
2021		 December 31,
2020		 December 26,
2019
Weighted average fair value per stock option $ 41.75 $ 22.27 $ 20.38
Risk-free interest rate 0.80% 1.17% 2.06%
Expected volatility 48% 39% 45%
Expected life (in years) 5.40 5.75 6.68
Dividend yield —% —% —%
The Company determines the grant date fair value of stock options with assistance from a third-party valuation specialist. Expected volatility is estimated based on the historical volatility of the Company’s Class A common stock since its initial public offering in 2017 as well as the historical volatility of the common stock of similar public entities. The Company considers various factors in determining the appropriateness of the public entities used in determining expected volatility, including the entity's life cycle stage, industry, growth profile, size, financial leverage, and products offered. To determine the expected life of the options granted, the Company relied upon a combination of the observed exercise behavior of prior grants with similar characteristics and the contractual terms and vesting schedules of the current grants. The risk-free interest rate is based on the term structure of interest rates at the time of the option grant.
The table below summarizes stock option activity for the fiscal year ended December 30, 2021:
Options Weighted
Average
Exercise
Price		 Weighted Average Remaining Contractual Life (Years) Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2021 3,740,604  $ 20.72 
Granted 66,505  95.68 
Exercised (1,252,566) 11.77 
Forfeited or expired (50,889) 39.11 
Outstanding at December 30, 2021 2,503,654  $ 26.81  5.7 $ 258,395 
Vested and exercisable at December 30, 2021 1,685,628  $ 19.58  5.2 $ 186,097 
The fair value of stock options vested during the fiscal years ended December 30, 2021, December 31, 2020, and December 26, 2019 was $8.8 million, $7.5 million, and $7.5 million, respectively. The aggregate intrinsic value of stock options exercised was $126.6 million, $135.5 million, and $146.6 million for the fiscal years ended December 30, 2021, December 31, 2020, and December 26, 2019, respectively.
The Company’s total unrecognized compensation cost related to stock options as of December 30, 2021 and December 31, 2020 was $9.7 million and $16.0 million, respectively. The unrecognized compensation cost remaining as of December 30, 2021 is expected to be recognized over a weighted average period of 1.9 years.
Restricted Stock Units
During the fiscal year ended December 30, 2021, the Company granted restricted stock units to certain employees that represent an unfunded, unsecured right to receive a share of the Company’s Class A common stock upon vesting. These awards vest in four ratable annual installments on each of the first four anniversaries of the grant date, subject to the grantee’s continued service through the applicable vesting date. The fair value of the restricted stock units was determined based on the closing price of the Company’s Class A common stock on the date of grant.
The following table summarizes restricted stock unit activity during the fiscal year ended December 30, 2021:
Restricted Stock Units Weighted Average Grant Date Fair Value
Unvested at January 1, 2021 128,220  $ 59.40 
Granted 129,290  99.78 
Vested (28,631) 58.01 
Forfeited (14,101) 76.14 
Unvested at December 30, 2021 214,778  $ 82.80 
The total unrecognized compensation cost related to restricted stock units as of December 30, 2021 and December 31, 2020 was $14.0 million and $6.2 million, respectively. The unrecognized compensation cost remaining as of December 30, 2021 is expected to be recognized over a weighted average period of 3.0 years.
Restricted Stock Awards
During the fiscal year ended December 30, 2021, the Company issued service-based restricted stock awards to certain executive officers and non-employee directors that are subject to the grantee’s continued service through the applicable vesting date. Service-based restricted stock awards granted during the period to executive officers vest in four ratable annual installments on each of the first four anniversaries of the grant date, while such awards granted to non-employee directors during the period cliff vest on the first anniversary from the grant date.
The following table summarizes restricted stock award activity during the fiscal year ended December 30, 2021:
Restricted Stock Awards
Service-based Performance-based TSR
Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value Shares Weighted Average Grant Date Fair Value
Unvested at January 1, 2021 131,844  $ 53.72  160,315  $ 57.70  104,456  $ 44.28 
Granted 29,153  96.86  —  —  —  — 
Vested (13,764) 49.70  —  —  —  — 
Forfeited (2,508) 46.37  —  —  —  — 
Unvested at December 30, 2021 144,725  $ 62.92  160,315  $ 57.70  104,456  $ 44.28 
The fair value of performance-based and service-based restricted stock awards is based on the closing market price of the Company's Class A common stock on the date of grant. The fair value of the TSR awards is estimated on grant date using the Monte Carlo valuation method. Compensation cost for restricted stock awards is recognized using the straight-line method over the requisite service period, which for each of the awards is the service vesting period. As of December 30, 2021 and December 31, 2020, total unrecognized compensation cost related to unvested restricted stock awards was $10.9 million and $15.2 million, respectively. The unrecognized compensation cost remaining as of December 30, 2021 is expected to be recognized over a weighted average period of 1.9 years.
The total fair value of restricted stock awards that vested during the fiscal years ended December 30, 2021, December 31, 2020, and December 26, 2019 was $1.4 million, $0.5 million, and $0.5 million, respectively.
Employee Stock Purchase Plan
The Employee Stock Purchase Plan (the “ESPP”) is a tax-qualified plan under Section 423 of the Internal Revenue Code and permits eligible employees to purchase shares of the Company’s common stock through payroll deductions, subject to certain limitations. The Company has designated a purchase price per share of common stock acquired under the ESPP at the lesser of 90% of the lower of the fair market value of its common stock on either the first or last trading day of each six-month offering period. There are 1,500,000 shares of the Company’s Class A common stock, par value $0.001 per share, approved for issuance under the ESPP, 46,273, 56,389, and 104,363 of which were issued during fiscal years 2021, 2020, and 2019, respectively. During fiscal years 2021, 2020, and 2019, the Company recognized stock-based compensation expense related to the ESPP totaling $1.0 million, $0.7 million, and $0.5 million, respectively.
Deferred Compensation Plan
In October 2019, the Company adopted the 2019 Director Nonqualified Excess Plan (the “Plan”) to provide for certain employees or independent contractors of the employer (including directors) to elect to defer compensation, including restricted stock grants, until they separate from service. The Plan is intended to be a nonqualified deferred compensation plan that complies with the provisions of Section 409A of the Internal Revenue Code and is effective for compensation starting in fiscal 2020. Deferrals and related compensation expense under the Plan were immaterial in fiscal years 2021 and 2020.