STOCK-BASED COMPENSATION

3 Months Ended

Dec. 30, 2011

STOCK-BASED COMPENSATION

NOTE 12. STOCK-BASED COMPENSATION

At the January 2011 Annual Meeting of Shareholders, the 2010 Omnibus Incentive Compensation Plan (“2010 Plan”) was approved by shareholders. This plan replaces IEC’s 2001 Stock Option and Incentive Plan (“2001 Plan”), which expired in December 2011. The 2010 Plan, which is administered by the Compensation Committee of the Board of Directors, provides for the following types of grants: 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. Under the 2010 Plan, up to 2,000,000 common shares may be issued over a term of ten years.

While all stock-based awards through December 30, 2011 were made under the 2001 Plan, future awards will be under the 2010 Plan.

Stock compensation expense recorded under the plans totaled $135 thousand and $76 thousand in the quarters ended December 30, 2011 and December 31, 2010, respectively. 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 stock options and restricted shares granted under the 2001 Plan 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 plan is generally seven years. A summary follows of assumptions used in the Black-Scholes model and the estimated value of options granted during the quarters ended December 30, 2011 and December 31, 2010.

	Three months ended
	December 30,			December 31,
Valuation of Options	2011			2010
Assumptions for Black-Scholes:
Risk-free interest rate		1.16	%		1.50	%
Expected term in years		4.9			4.9
Volatility		51	%		52	%
Expected annual dividends		none			none
Value of options granted:
Number of options granted		10,000			51,500
Weighted average fair value per share	$	2.12		$	2.51
Fair value of options granted (000s)	$	21		$	129

Changes in the number of options outstanding during the three month periods ended December 30, 2011 and December 31, 2010, together with other related data, are summarized in the next table.

	Three months ended
	December 30, 2011					December 31, 2010
				Wgtd. Avg.					Wgtd. Avg.
	Number			Exercise		Number			Exercise
Stock Options	of Options			Price		of Options			Price
Outstanding at beginning of period		371,339		$	3.32		764,595		$	1.66
Granted		10,000			5.30		51,500			5.49
Exercised							(53,750	)		0.56
Forfeited		(9,700	)		4.60		(4,000	)		5.17
Expired		(5,000	)		0.55
Outstanding at end of period		366,639		$	3.36		758,345		$	1.98
For options expected to vest
Number expected to vest		348,307		$	3.36		758,345		$	1.98
Weighted average remaining term, in years		4.2					4.4
Intrinsic value (000s)				$	486				$	4,277
For exercisable options
Number exercisable		125,239		$	1.59		422,993		$	0.84
Weighted average remaining term, in years		2.6					2.4
Intrinsic value (000s)				$	377				$	2,868
For non-exercisable options
Expense not yet recognized (000s)				$	297				$	328
Weighted average years to become exercisable					1.7					1.9

Restricted (Non-vested) Stock

Holders of IEC restricted stock have voting and dividend rights as of the date of grant, but 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 years, holders have all the rights and privileges of any other IEC common shareholder. 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, balances and related data for the three month periods ended December 30, 2011 and December 31, 2010 is presented below.

	Three months ended
	December 30, 2011					December 31, 2010
	Number of			Wgtd Avg.		Number of		Wgtd Avg.
	Non-vested			Grant Date		Non-vested		Grant Date
Restricted (Non-vested) Stock	Shares			Fair Value		Shares		Fair Value
Outstanding at beginning of period		284,476		$	5.76		122,098	$	4.10
Granted		-					100,250		5.70
Becoming vested		(6,900	)		3.49		-
Forfeited		(8,400	)		4.32		-
Outstanding at end of period		269,176		$	5.86		222,348	$	4.82
For non-vested shares
Expense not yet recognized (000s)				$	1,005			$	918
Weighted average remaining years for vesting					2.0				2.5
For shares becoming vested
Aggregate fair value on vesting dates (000s)				$	35