Note 11. Share-Based Compensation

9 Months Ended

Sep. 30, 2012

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

11.  Share-Based Compensation

Share-based compensation expense, which includes stock options and restricted stock units, for the three and nine months ended September 30, 2012 and October 2, 2011, respectively, were as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30, 2012		October 2, 2011		September 30, 2012		October 2, 2011
Total cost of share-based payment plans	$	94	$	107	$	296	$	467

Stock Options  

The Company uses the Black Scholes option pricing model to estimate the fair value and compensation cost associated with employee incentive stock options which requires the consideration of historical employee exercise behavior data and the use of a number of assumptions including volatility of the Company’s stock price, the weighted average risk-free interest rate and the weighted average expected life of the options. There were no options granted during the three and nine months ended September 30, 2012.  Four thousand options were granted during the three and nine months ended October 2, 2011.

The following table summarizes Lakes’ stock option activity during the nine months ended September 30, 2012 and October 2, 2011:

	Number of Common Shares
	Options Outstanding			Exercisable		Available for Grant			Weighted-Average Exercise Price
2012
Balance at January 1, 2012		1,644,639			1,155,347		874,627		$	2.92
Forfeited/cancelled/expired		(116,600	)				1,000			2.88
Balance at September 30, 2012		1,528,039			1,121,818		875,627			2.92
2011
Balance at January 2, 2011		2,031,084			904,076		699,215		$	2.99
Restricted stock unit activity, net		—					1,667			3.25
Forfeited/cancelled/expired		(362,946	)				168,996			3.18
Granted		4,000					(4,000	)		2.29
Balance at October 2, 2011 (*)		1,672,138			991,670		865,878			2.95

(*) Options outstanding do not include 38,337 of outstanding restricted stock units.

As of September 30, 2012, the options outstanding had a weighted average remaining contractual life of 7.0 years, weighted average exercise price of $2.92 and aggregate intrinsic value of $0.1 million. The options exercisable have a weighted average exercise price of $3.22, a weighted average remaining contractual life of 6.7 years and aggregate intrinsic value of less than $0.1 million as of September 30, 2012.

There were no options exercised during the three and nine months ended September 30, 2012 and October 2, 2011. Lakes’ unrecognized share-based compensation expense related to stock options was approximately $0.4 million as of September 30, 2012, which is expected to be recognized over a weighted-average period of 1.3 years.

Lakes issues new shares of common stock upon the exercise of options.

Restricted Stock Units  

The following table summarizes Lakes’ restricted stock unit activity during the nine months ended September 30, 2012 and October 2, 2011:

Non-Vested Shares:	Restricted Stock Units			Weighted-Average Grant- Date Fair Value
2012
Balance at January 1, 2012		38,337		$	3.25
Vested		(38,337	)		3.25
Balance at September 30, 2012		—			—
2011
Balance at January 2, 2011		79,996		$	3.25
Vested		(39,992	)		3.25
Forfeited		(1,667	)		3.25
Balance at October 2, 2011		38,337			3.25

During the nine months ended September 30, 2012, 35,257 common shares were issued upon the vesting of restricted stock units, net of common shares redeemed at the election of the grantee for payroll tax payment.