STOCK-BASED COMPENSATION

9 Months Ended

Jul. 02, 2021

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

NOTE 8—STOCK-BASED COMPENSATION

The 2019 Stock Incentive Plan (the “2019 Plan”) was approved by the Company’s stockholders at the March 2019 Annual Meeting. The 2019 Plan replaced the 2010 Omnibus Incentive Compensation Plan (“2010 Plan”) that was approved by the Company’s stockholders at the January 2011 Annual Meeting. The 2019 Plan, like the 2010 Plan, is administered by the Compensation Committee of the Board of Directors and provides for the following types of awards: incentive stock options, nonqualified options, stock appreciation rights, restricted shares, restricted stock units, performance compensation awards, cash incentive awards, director stock and other equity-based and equity-related awards. Awards are generally granted to certain members of management and employees, as well as directors. The Company also has an ESPP, adopted in 2011, that provides for the purchase of Company common stock at a discounted stock purchase price. Under the 2019 Plan, 840,360 shares of common stock, plus any shares that are subject to awards granted under the 2010 Plan that expire, are forfeited or canceled without the issuance of shares (other than shares used to pay the exercise price of a stock option under the 2010 Plan and shares used to cover the tax withholding of the award under the 2010 Plan) may be issued over a term of ten years. Under the ESPP, 150,000 shares of common stock may be issued over a term of ten years.

Stock-based compensation expense recorded under the 2010 Plan and the 2019 Plan, totaled $0.2 million and $0.7 million, respectively, for each of the three and nine months ended July 2, 2021. Stock-based compensation expense recorded under the 2010 Plan and the 2019 Plan, totaled $0.2 million and $0.5 million, respectively, for each of the three and nine months ended June 26, 2020.

At July 2, 2021, there were 490,329 shares of common stock available to be issued under the 2019 Plan and 64,294 shares of common stock available to be issued under the ESPP.

Expenses relating to stock options that comply with certain U.S. income tax rules are neither deductible by the Company nor taxable to the employee. Further information regarding awards granted under the 2019 Plan, the 2010 Plan and the ESPP is provided below.

Stock Options

When options are granted, IEC estimates fair value using the Black-Scholes option pricing model and recognizes the computed value as compensation cost over the vesting period, which is typically four years. The contractual term of options granted under the 2010 Plan and 2019 Plan is generally seven years. The volatility rate is based on the historical volatility of IEC’s common stock.

Assumptions used in the Black-Scholes model and the estimated value of options granted during the nine months ended July 2, 2021 and June 26, 2020 follows.

	Nine Months Ended
	July 2,			June 26,
Valuation of Options	2021			2020
Assumptions for Black-Scholes:
Risk-free interest rate		0.62	%		0.49	%
Expected term in years		5.5			5.5
Volatility		40	%		40	%
Expected annual dividends		none			none
Value of options granted:
Number of options granted		65,000			37,500
Weighted average fair value per share	$	3.92		$	2.65
Fair value of options granted (000s)	$	255		$	99

A summary of stock option activity, together with other related data, follows:

	Nine Months Ended
	July 2, 2021				June 26, 2020
			Wgtd. Avg.			Wgtd. Avg.
	Number		Exercise		Number	Exercise
Stock Options	of Options		Price		of Options	Price
Outstanding, beginning of period		670,145	$	4.67	743,145	$	4.54
Granted		65,000		10.00	37,500		5.26
Exercised		(18,375)		5.14	(30,500)		5.29
Forfeited		(17,000)		6.81	(15,000)		3.92
Expired		(3,000)		3.74	(5,000)		6.91
Outstanding, end of period		696,770	$	5.11	730,145	$	4.54
For options expected to vest
Number expected to vest		688,815	$	5.08	721,416	$	4.53
Weighted average remaining contractual term, in years		4.9			3.1
Intrinsic value (000s)			$	3,740		$	3,442
For exercisable options
Number exercisable		502,145	$	4.32	538,645	$	4.15
Weighted average remaining contractual term, in years		3.9			1.7
Intrinsic value (000s)			$	3,095		$	2,761
For non-exercisable options
Expense not yet recognized (000s)			$	442		$	345
Weighted average years to be recognized		2.9			2.9
For options exercised
Intrinsic value (000s)			$	106		$	93

Restricted (Non-vested) Stock

Certain holders of IEC restricted stock have voting and dividend rights as of the date of grant, and, until vested, the shares may be forfeited and cannot be sold or otherwise transferred. At the end of the vesting period, which is typically four or five years (three years in the case of directors), holders have all the rights and privileges of any other common stockholder of the Company. The fair value of a share of restricted stock is its market value on the date of grant, and that value is recognized as stock compensation expense over the vesting period.

A summary of restricted stock activity, together with related data, follows:

	Nine Months Ended
	July 2, 2021			June 26, 2020
		Wgtd. Avg.			Wgtd. Avg.
	Number of Non-	Grant Date		Number of Non-	Grant Date
Restricted (Non-vested) Stock	vested Shares	Fair Value		vested Shares	Fair Value
Outstanding, beginning of period	49,825	$	5.32	82,707	$	5.25
Granted	20,407		11.64	24,850		5.03
Vested	(25,380)		5.19	(44,482)		4.80
Forfeited	(1,000)		4.12	(13,250)		6.09
Outstanding, end of period	43,852	$	8.37	49,825	$	5.32
For non-vested shares
Expense not yet recognized (000s)		$	330		$	255
Weighted average remaining years for vesting	2.1			1.7
For shares vested
Aggregate fair value on vesting dates (000s)		$	333		$	317

Stock Issued to Board Members

In addition to annual grants of restricted stock, included in the table above, board members may elect to have their meeting fees paid in the form of shares of the Company’s common stock. The Company has not paid any meeting fees in stock since May 21, 2013.

Restricted Stock Units

Holders of IEC restricted stock units do not have voting and dividend rights as of the date of grant, and, until vested, the unit may be forfeited and cannot be sold or otherwise transferred. At the end of the vesting period, which is typically three years, holders will receive shares of the Company’s common stock and have all the rights and privileges of any other common stockholder of the Company. The fair value of a restricted stock unit is the market value of the underlying shares of the Company’s stock on the date of grant and that value is recognized as stock compensation expense over the vesting period.

A summary of restricted stock unit activity, together with related data, follows:

	Nine Months Ended
	July 2, 2021			June 26, 2020
		Wgtd. Avg.			Wgtd. Avg.
	Number of Non-	Grant Date		Number of Non-	Grant Date
Restricted Stock Units	vested Units	Fair Value		vested Units	Fair Value
Outstanding, beginning of period	186,727	$	6.56	153,186	$	5.36
Granted	67,597		7.65	50,556		9.19
Vested	(102,624)		4.28	(17,015)		3.58
Forfeited	—		—	—		—
Outstanding, end of period	151,700	$	8.58	186,727	$	6.56
For non-vested shares
Expense not yet recognized (000s)		$	722		$	818
Weighted average remaining years for vesting	1.7			2.0
For shares vested
Aggregate fair value on vesting dates (000s)		$	1,268		$	86