|12 Months Ended|
Oct. 02, 2021
|Share-based Payment Arrangement [Abstract]|
Note 16—Equity-Based Compensation
2020 Omnibus Incentive Plan
In October 2020, we adopted the Leslie’s, Inc. 2020 Omnibus Incentive Plan (the “Plan”). The Plan provides for the grant of awards such as stock options to purchase Leslie’s common stock (each, a “Stock Option”) and restricted stock units (“RSUs”) which may settle in Leslie’s, Inc. common stock to our directors, executives and eligible employees of the Company. Stock Options granted under the Plan generally expire ten years from the date of grant and consist of Stock Options that vest upon the satisfaction of time-based requirements (“Service Stock Option”) and performance-based Stock Options that vest upon satisfaction of a performance-based requirement (“Performance Stock Options”). RSUs consist of grants that vest ratably upon the satisfaction of time-based requirements (“Service RSU”) and performance-based RSUs that vest upon satisfaction of performance-based requirements (“Performance RSU”). In each case, vesting of the Company’s outstanding and unvested Stock Options and RSUs is contingent upon the holder’s continued service through the date of each applicable vesting event. As of October 2, 2021, we had approximately 7.3 million shares of Common Stock available for future grants under the Plan.
As of October 2, 2021, the aggregate unamortized value of all outstanding equity-based compensation awards, excluding equity-based compensation expense associated with Performance Stock Options which have not yet been issued for accounting purposes, was approximately $34.8 million, which is expected to be recognized over a weighted average period of approximately 3.0 years.
The fair value of each non-qualified stock option (“Stock Option”) granted is estimated on the grant date using the Black-Scholes option pricing model. The expected life is based on the SEC simplified method and a mid-point assumption. Expected price volatility is determined based on the implied volatilities of comparable companies over a historical period that matches the expected life of the Stock Options. The risk-free interest rate is based on the expected United States Treasury rate over the expected life. The dividend yield is based on the expectation that no dividends will be paid.
The following table summarizes the weighted average assumptions used for Stock Options for the fiscal year ended:
The following tables summarizes our Stock Option activity under the Plan for the fiscal year ended (in thousands, except per share amounts):
There were no options that were exercisable as of October 2, 2021.
Restricted Stock Units
The following table summarizes our RSU activity under the Plan for the fiscal year ended (in thousands, except per share amounts):
Represents approximately 4.8 million Service and Performance Incentive Awards converted to RSUs in connection with the IPO and adoption of the Plan during fiscal 2021.
In connection with the IPO, we issued RSUs that vest only upon achievement of volume weighted average price (“VWAP”) targets established by the compensation committee of the board of directors (Performance RSUs). The VWAP target was measured over rolling 20-day trading periods commencing on the six-month anniversary of the consummation of the IPO. The VWAP targets were satisfied in May 2021 and are included in the vested RSUs in the table above.
Incentive Grant Agreements
Prior to the IPO, our then parent company granted profits interests to our employees (“Incentive Awards”) through incentive unit grant agreements (“Incentive Agreements”). The Incentive Awards had economic characteristics similar to stock options and had the right to share in the appreciation of the equity value of our then parent company. The sole asset of our then parent company was indirect ownership of Leslie’s, Inc. We concluded such Incentive Awards were classified as equity awards. The Incentive Awards were spread over two tiers, a service-based (time) award tier (“Service Incentive Awards”) and a performance-based award tier (“Performance Incentive Awards”). The Service Incentive Awards vested over a four-year period at a rate of 25% annually on each anniversary of the date of grant. The Performance Incentive Awards vested based on performance conditions as defined in the Incentive Agreements. In connection with the IPO and adoption of the Plan, all Incentive Awards granted under Incentive Agreements were converted to RSUs under the Plan with substantially similar service and performance conditions as defined in the Incentive Agreements.
The fair value of the Incentive Awards was estimated on the date of grant using the Black-Scholes option pricing model, which treated the Incentive Unit Grant Agreements as implicit call options with exercise prices determined based on their respective rights to participate in distributions. The Black-Scholes option pricing model required the use of a number of assumptions, including expected volatility, risk-free interest rate, expected dividends, and expected term.
The following table summarizes the assumptions and fair value used for Incentive Awards in each of the fiscal years ended:
The following tables summarizes our Incentive Awards activity (in thousands, except per share amounts):
In fiscal 2021, equity-based compensation expense totaled $25.6 million including the related Company payroll tax expense and is reported in SG&A in our consolidated statements of operations. This also included approximately $10.7 million associated with the acceleration of certain Incentive Awards in connection with the completion of our IPO. Equity-based compensation expense was $1.8 million and $2.1 million in fiscal 2020 and 2019, respectively.
The entire disclosure for share-based payment arrangement.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef