Stockholders' Equity and Share-Based Compensation
|12 Months Ended|
Dec. 30, 2017
|Disclosure of Compensation Related Costs, Share-based Payments [Abstract]|
|Stockholders' Equity and Share-Based Compensation||
Stockholders’ Equity and Share-Based Compensation
The Company has 100,000 shares of common stock authorized. We have never paid cash dividends on our common stock. The following issuances of common stock were made during the fiscal year ended December 30, 2017:
In November of 2016, our Board of Directors approved a share repurchase program which authorized the Company to purchase up to $5,000 of its outstanding shares of common stock. That share repurchase program expired on March 4, 2017. In May of 2017 our Board of Directors approved another share repurchase program which authorized the Company to purchase up to $5,000 of its outstanding shares of common stock. That share repurchase program will expire on May 16, 2018, unless extended or shortened by the Board of Directors. Purchases under the Company’s repurchase programs may be made from time to time in the open market, in negotiated transactions off the market, or in such other manner as determined by the Company, including through plans complying with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended.
As of December 30, 2017, the Company repurchased 2,525 shares of common stock at an average price of $2.83, for an aggregate purchase price of approximately $7,146, net of costs.
Series A Convertible Preferred Stock
On March 25, 2013, the Company authorized the issuance of 4,150 shares of Series A Preferred and entered into a Securities Purchase Agreement pursuant to which the Company agreed to sell up to an aggregate of 4,150 shares of our Series A Preferred, $0.001 par value per share at a purchase price per share of $1.45 for aggregate proceeds to the Company of approximately $6,017. On March 25, 2013, we sold 4,000 shares of Series A Preferred for aggregate proceeds of $5,800. On April 5, 2013, we sold the remaining 150 shares of Series A Preferred for aggregate proceeds of $217. The Company incurred issuance costs of $847 and used the net proceeds from the sale of the Series A Preferred to reduce its revolving loan payable.
Each share of Series A Preferred is convertible into shares of our common stock at the initial conversion rate of one share of common stock for each share of Series A Preferred. The conversion will be adjusted for certain non-price based events, such as dividends and distributions on the common stock, stock splits, combinations, recapitalizations, reclassifications, mergers, or consolidations. If not previously converted by the holder, the Series A Preferred will automatically convert to common stock if the volume weighted average price for the common stock for any 30 consecutive trading days is equal to or exceeds $4.35 per share. The shares that would be issued if the contingently convertible Series A Preferred were converted are not excluded from the calculation of diluted earnings per share for the fiscal year ended December 30, 2017 (refer to “Note 8 – Net Loss Per Share” for anti-dilutive securities).
In the event of any liquidation event, which includes changes of control of the Company and sales or other dispositions by the Company of more than 50% of its assets, the Series A Preferred is entitled to receive, prior and in preference to any distribution to the common stock, an amount per share equal to $1.45 per share of Series A Preferred, plus all then accrued but unpaid dividends on such Series A Preferred. Following this distribution, if assets or surplus funds remain, the holders of the common stock shall share ratably in all remaining assets of the Company, based on the number of shares of common stock then outstanding. Notwithstanding the foregoing, if, in connection with any liquidation event, a holder of Series A Preferred would receive an amount greater than $1.45 per share of Series A Preferred by converting such shares held by such holder into shares of common stock, then such holder shall be treated as though such holder had converted such shares of Series A Preferred into shares of common stock immediately prior to such liquidation event, whether or not such holder had elected to so convert.
Dividends on the Series A Preferred are payable quarterly at a rate of $0.058 per share per annum in cash, in shares of common stock or in any combination of cash and common stock as determined by the Company’s Board of Directors. Certain conditions are required to be satisfied in order for the Company to pay dividends on the Series A Preferred in shares of common stock, including (i) the common stock being registered pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934, as amended, (ii) the common stock being issued having been approved for listing on a trading market and (iii) the common stock being issued either being covered by an effective registration statement or being freely tradable without restriction under Rule 144 (subject to certain exceptions). The Series A Preferred shall each be entitled to one vote per share for each share of common stock issuable upon conversion thereof (excluding from any such calculation any dividends accrued on such shares) and shall vote together with the holders of common stock as a single class on any matter on which the holders of common stock are entitled to vote. In addition, the Company must obtain the consent of holders of at least a majority of the then outstanding Series A Preferred in connection with (a) any amendment, alteration or repeal of any provision of the certificate of incorporation or bylaws of the Company as to adversely affect the preferences, rights or voting power of the Series A Preferred, or (b) the creation, authorization or issuance of any additional Series A Preferred or any other class or series of capital stock of the Company ranking senior to or on parity with the Series A Preferred or any security convertible into, or exchangeable or exercisable for Series A Preferred or any other class or series of capital stock of the Company ranking senior to or on parity with the Series A Preferred. Concurrent with the Company’s issuance of Series A Preferred, the Company, certain of its domestic subsidiaries and JPMorgan entered into a Second Amended Credit Agreement to allow the Company to pay cash dividends on the Series A Preferred in an aggregate amount of up to $400 per year and pay cash in lieu of issuing fractional shares upon conversion of or in payment of dividends on the Series A Preferred (refer to “Note 6 – Borrowings” of our Notes to Consolidated Financial Statements for additional details). For the fiscal year ended January 2, 2016, the Company recorded dividends of $241. The Company issued 103 shares of common stock in payment of the fiscal 2015 dividends. There were no accrued dividends outstanding as of January 2, 2016. For the fiscal year ended December 31, 2016, the Company recorded dividends of $241. The Company issued 37 shares of common stock in payment of a portion of the fiscal 2016 dividends. There were $61 dividends accrued as of December 31, 2016. For the fiscal year ended December 30, 2017, the Company recorded dividends of $189. The Company did not issue any shares of common stock in payment of the fiscal 2017 dividends. There were $41 dividends accrued as of December 30, 2017. As of December 30, 2017, 2,771 shares of Series A Preferred shares were outstanding.
Share-Based Compensation Plan Information
The Company adopted the 2016 Equity Incentive Plan ("2016 Equity Plan") on March 9, 2016, which became effective on May 31, 2016, following stockholder approval. Subject to adjustment for certain changes in the Company’s capitalization, the aggregate number of shares of the Company’s common stock that may be issued under the 2016 Equity Plan will not exceed the sum of (i) two million five hundred thousand (2,500) new shares, (ii) the number of unallocated shares remaining available for the grant of new awards under the Company’s prior equity plans described below (the “Prior Equity Plans”) as of the effective date of the 2016 Plan (which was equal to 3,894 shares as of May 31, 2016) and (iii) any shares subject to a stock award under the Prior Equity Plans that are not issued because such stock award expires or otherwise terminates without all of the shares covered by such stock award having been issued, that are not issued because such stock award is settled in cash, that are forfeited back to or repurchased by the Company because of the failure to meet a contingency or condition required for the vesting of such shares, or that are reacquired, withheld (or not issued) to satisfy a tax withholding obligation in connection with an award or to satisfy the purchase price or exercise price of a stock award. In addition, the share reserve will automatically increase on January 1st of each year, for a period of nine years, commencing on January 1, 2017 and ending on (and including) January 1, 2026, in an amount equal to one million five hundred thousand (1,500) shares per year; however the Board of Directors of the Company may act prior to January 1st of a given year to provide that there will be no January 1st increase in the share reserve for such year or that the increase in the share reserve for such year will be a lesser number of shares of common stock than would otherwise occur pursuant the automatic increase. Options granted under the 2016 Equity Plan generally expire no later than ten years from the date of grant and generally vest over a period of four years. The exercise price of all option grants must be equal to 100% of the fair market value on the date of grant. As of December 30, 2017, 7,065 shares were available for future grants under the 2016 Equity Plan.
The following tables summarizes the Company’s stock option activity for the fiscal years ended, and details regarding the options outstanding and exercisable at December 30, 2017, and December 31, 2016:
The weighted-average fair value of options granted during fiscal year 2017, 2016 and 2015 was $1.85, $1.65 and $1.19, respectively. The intrinsic value of stock options at the date of the exercise is the difference between the fair value of the stock at the date of exercise and the exercise price. During fiscal year 2017, 2016 and 2015, the total intrinsic value of the exercised options was $1,911, $599 and $346, respectively. The Company had $3,276 of unrecognized share-based compensation expense related to stock options outstanding as of December 30, 2017, which expense is expected to be recognized over a weighted-average period of 2.64 years.
The following tables summarize the Company’s stock option activity under the AutoMD 2014 Equity Incentive Plan (the "AMD Plan") for the fiscal years ended, and details regarding the options outstanding and exercisable at December 30, 2017 and December 31, 2016:
At December 30, 2017, 0 shares were available for future grants under the AMD Plan. The AMD Plan was terminated in connection with the dissolution of AutoMD.
The weighted-average fair value of options granted during fiscal year 2017, 2016 and 2015 was $0.55, $0.55 and $0.55, respectively. The intrinsic value of stock options at the date of the exercise is the difference between the fair value of the stock at the date of exercise and the exercise price.
Options exercised under all share-based compensation plans are granted net of the minimum statutory withholding
requirements that we pay in cash to the appropriate taxing authorities on behalf of our employees. For those employees who
elect not to receive shares net of the minimum statutory withholding requirements, the appropriate taxes are paid directly by the
employee. During fiscal 2017, we withheld 260 shares to satisfy $900 of employees' tax obligations related to the net settlement of the stock options. During fiscal 2016, we did not withheld any shares to satisfy employees' tax obligations related to the net settlement of the stock options.
Restricted Stock Units
During 2017 and 2016 the Company granted an aggregate of 1,671 and 954 RSUs, respectively, to certain employees of the Company. The restricted stock units ("RSUs") were granted under the 2016 Equity Incentive Plan and 2007 Omnibus Plan, and reduced the pool of equity instruments available under that plan.
During 2017 there were 1,144 RSUs granted that were time-based and 527 granted that were performance-based. During 2016 there were 382 RSUs granted that were time-based and 572 granted that were performance-based. As of December 30, 2017, 57.4% of the performance criteria established to trigger vesting of the performance based RSUs ("PSUs") was met subject to certification by the Compensation Committee. No PSUs will vest for the Company's named executive officers. 104 PSUs and 799 RSUs granted during 2017 were forfeited during the year. As of March 3, 2017, 525 of the PSUs granted in 2016 met the maximum performance criteria upon certification by the Compensation Committee and 47 PSUs were forfeited. The vesting of each RSU is subject to the employee’s continued employment through applicable vesting dates. Some RSUs granted to certain executives may vest on an accelerated basis in part or in full upon the occurrence of certain events. The RSUs are accounted for as equity awards and are measured at fair value based upon the grant date price of the Company's common stock. The closing price of the Company's common stock on January 19, 2017, January 25, 2017, March 30, 2017, May 11, 2017, August 9, 2017 and November 8, 2017, the date of each grant was $3.61, $3.40, $3.34, $3.93, $2.77, and $2.27, respectively. The closing price of the Company's common stock on January 21, 2016 and February 29, 2016, the date of each grant, was $2.64 and $2.75 per share, respectively. Compensation expense is recognized on a straight-line basis over the requisite service period of one-to-three years. Compensation expense for performance-based awards is measured based on the amount of shares ultimately expected to vest, estimated at each reporting date based on management’s expectations regarding the relevant performance criteria.
For the fiscal year ended December 30, 2017, we recorded compensation expense of $1,293 related to RSU's. As of December 30, 2017, there was unrecognized compensation expense of $962 related to unvested RSUs based on awards that are expected to vest. The unrecognized compensation expense is expected to be recognized over a weighted-average period of 0.95 years.
On May 5, 2009, the Company issued warrants to purchase up to 30 shares of common stock at an exercise price of $2.14 per share. On April 27, 2010, the Company issued additional warrants to purchase up to 20 shares of common stock at an exercise price of $8.32 per share. Both issuances of warrants terminated seven years after their grant date. The warrants were issued in connection with the financial advisory services provided by a consultant to the Company. On August 8, 2016 10 shares of common stock were issued in settlement of the May 5, 2009 warrants. The 20 shares of common stock from the April 27, 2010 expired on April 26, 2017. As of December 30, 2017, no warrants were outstanding and exercisable. No warrants share-based compensation expense was recognized during the fiscal years 2017, 2016 and 2015.
Share-Based Compensation Expense
The fair value of each option grant, excluding those options issued from the stock option exchange program as discussed above, was estimated on the date of grant using the Black-Scholes option pricing model with the following assumptions for each of the periods ended:
Share-based compensation from options and RSUs, is included in our consolidated statements of comprehensive operations, as follows:
The share-based compensation expense is net of amounts capitalized to internally-developed software of $56, $83 and $146 during the fiscal year 2017, 2016, and 2015, respectively. No tax benefit was recognized for fiscal years 2017, 2016, and 2015 due to the valuation allowance position.
Under ASC 718, forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures significantly differ from those estimates. The Company’s estimated forfeiture rates are calculated based on actual historical forfeitures experienced under our equity plans. The Company adopted ASU 2016-09 for fiscal 2017, and therefore did not utilize an estimated forfeiture rate for fiscal 2017. The Company's forfeiture rates were 10%-34% for fiscal years 2016, 2015, and 2014.
Non-controlling interests represent equity interests in consolidated subsidiaries that are not attributable, either directly or
indirectly, to the Company (i.e., minority interests). The Company's non-controlling interests consisted of the minority equity holders' proportionate share of the equity of AutoMD. However, during March 2017, AutoMD filed for dissolution, therefore the Company no longer has any non-controlling interests.
As of December 31, 2016 there were 1,405 stock options outstanding under the AutoMD 2014 Equity Incentive Plan (the "AMD Plan"). On March 6, 2017, the AMD Plan was terminated upon the dissolution of AutoMD, and all outstanding options were canceled.
The entire disclosure for accounts comprising shareholders' equity, comprised of portions attributable to the parent entity and noncontrolling interest, including other comprehensive income, and compensation-related costs for equity-based compensation. Includes, but is not limited to, disclosure of policies, compensation plan details, equity-based arrangements to obtain goods and services, deferred compensation arrangements, and employee stock purchase plan details.
Reference 1: http://www.xbrl.org/2003/role/presentationRef