STOCK-BASED COMPENSATION

6 Months Ended

Mar. 30, 2012

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.

Stock-based awards granted through December 2011, were made under the 2001 Plan. Awards granted after December 2011, were made under the 2010 Plan and future awards will be made under the 2010 Plan.

Stock compensation expense recorded under the plans totaled $245 thousand and $204 thousand in the six months ended March 30, 2012 and April 1, 2011, 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 awards granted under the 2001 Plan, 2010 Plan and employee stock purchase plan are 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 six months ended March 30, 2012 and April 1, 2011.

	Six months ended
	March 30,			April 1,
Valuation of Options	2012			2011
Assumptions for Black-Scholes:
Risk-free interest rate		0.65	%		1.50	%
Expected term in years		4.0			4.9
Volatility		51	%		52	%
Expected annual dividends		none			none
Value of options granted:
Number of options granted		43,500			51,500
Weighted average fair value per share	$	1.93		$	2.51
Fair value of options granted (000's)	$	84		$	129

Changes in the number of options outstanding, together with other related data, are summarized in the next table.

	Six months ended
	March 30, 2012					April 1, 2011
				Wgtd. Avg.					Wgtd. Avg.
	Number			Exercise		Number			Exercise
Stock Options	of Options			Price		of Options			Price
Outstanding, beginning of period		371,339		$	3.32		764,595		$	1.66
Granted		43,500			4.84		51,500			5.49
Exercised		(11,000	)		1.24		(294,246	)		0.70
Forfeited		(59,900	)		4.50		(4,000	)		5.17
Expired		(5,000	)		0.55		-
Outstanding, end of period		338,939		$	3.46		517,849		$	2.56
For options expected to vest
Number expected to vest		321,992		$	3.46		491,957		$	2.56
Weighted average remaining term, in years					4.2					3.5
Intrinsic value (000s)				$	498				$	2,801
For exercisable options
Number exercisable		139,239		$	1.73		222,958		$	1.11
Weighted average remaining term, in years					2.5					1.1
Intrinsic value (000s)				$	456				$	1,591
For non-exercisable options
Expense not yet recognized (000s)				$	269				$	355
Weighted average years to become exercisable					1.7					1.6

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 is presented below.

	Six months ended
	March 30, 2012					April 1, 2011
	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, beginning of period		284,476		$	5.76		122,098		$	4.10
Granted		74,825			4.99		136,960			6.49
Becoming vested		(17,744	)		5.90		(7,080	)		4.03
Forfeited		(8,400	)		4.32		-
Outstanding, end of period		333,157		$	5.62		251,978		$	5.40
For non-vested shares
Expense not yet recognized (000s)				$	1,176				$	1,135
Weighted average remaining years for vesting					2.2					2.5
For shares becoming vested
Aggregate fair value on vesting dates (000s)				$	90				$	53

Employee Stock Purchase Plan

The Company began administering an employee stock purchase plan that provides for a discounted stock purchase price on October 1, 2011. Employee contributions and compensation expense recognized under the plan in the six months ended March 30, 2012 were $54 thousand and $6 thousand, respectively.

Stock Issued to Board Members

Board members are granted common stock for services provided. During the six months ended March 30, 2012 and April 1, 2011, board members were granted 4,304 and 3,236 shares of common stock, respectively. The Company recognized compensation expense of $22 thousand and $21 thousand at grant dates during the six months ended March 30, 2012 and April 1, 2011, respectively.