STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2012

STOCK-BASED COMPENSATION

NOTE 6 – STOCK-BASED COMPENSATION

Stock Option Awards

In accordance with accounting standards, the Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. That cost will be recognized over the period in which the employee is required to provide the services – the requisite service period (usually the vesting period) – in exchange for the award. The grant date fair value for options and similar instruments will be estimated using option pricing models. Under accounting standards, the Company is required to select a valuation technique or option pricing model that meets the criteria stated in the standard. The Company uses the Black-Scholes model. Accounting standards require that the Company estimate forfeitures for stock options and reduce compensation expense accordingly. The Company has reduced its stock compensation expense by the assumed forfeiture rate and will evaluate experience against this forfeiture rate going forward.

During the first nine months of 2012 and 2011, the Company recognized stock option compensation costs of $0.5 million and $0.7 million, respectively. In the third quarters of 2012 and 2011, the Company recognized stock option compensation costs of $0.1 million and $0.2 million, respectively. The remaining unrecognized compensation cost related to unvested awards at September 30, 2012, approximated $0.1 million, and the weighted average period of time over which this cost will be recognized is approximately one year.

The following table summarizes stock options outstanding as of September 30, 2012, as well as activity during the nine months then ended:

	Shares		Weighted Average Exercise  Price
Outstanding at January 1, 2012		592,500	$	9.12
Granted		0		0
Exercised		45,000		6.52
Forfeited or canceled		34,000		15.79
Outstanding at September 30, 2012		513,500	$	8.94
Exercisable at September 30, 2012		498,500	$	8.75

At September 30, 2012, the aggregate intrinsic value of in-the-money options outstanding and options exercisable was $2.3 million and $2.3 million, respectively (the intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option).

Cash proceeds and intrinsic value related to total stock options exercised during the first nine months of fiscal years 2012 and 2011 are provided in the table below. The Company did not recognize any significant tax benefit with regard to stock options in either period presented.

	Nine Months Ended
	Sept. 30, 2012		Oct. 2, 2011
	(In millions)
Proceeds from stock options exercised	$	0.3	$	2.6
Intrinsic value of stock options exercised		0.3		5.9

Restricted Stock Awards

During the nine months ended September 30, 2012, and October 2, 2011, the Company granted restricted stock awards for 573,500 and 668,000 shares, respectively, of common stock. These awards (or a portion thereof) vest with respect to each recipient over a two to five year period from the date of grant, provided the individual remains in the employment or service of the Company as of the vesting date. Additionally, awards (or a portion thereof) could vest earlier upon the attainment of certain performance criteria, in the event of a change in control of the Company, or upon involuntary termination without cause.

Compensation expense related to restricted stock grants was $3.2 million and $8.6 million for the nine months ended September 30, 2012, and October 2, 2011, respectively. Accounting standards require that the Company estimate forfeitures for restricted stock and reduce compensation expense accordingly. The Company has reduced its expense by the assumed forfeiture rate and will evaluate experience against this forfeiture rate going forward.

The following table summarizes restricted stock activity as of September 30, 2012, and during the nine months then ended:

	Shares		Weighted Average Grant  Date Fair Value
Outstanding at January 1, 2012		1,749,000	$	15.08
Granted		573,000		13.25
Vested		264,000		13.37
Forfeited or canceled		84,500		14.87
Outstanding at September 30, 2012		1,973,500	$	14.79

As of September 30, 2012, the unrecognized total compensation cost related to unvested restricted stock was approximately $11.8 million. That cost is expected to be recognized by the end of 2015.

For the nine months ended September 30, 2012, and October 2, 2011, the Company recognized tax benefits with regard to restricted stock of $0.5 million and $2.4 million, respectively.