Note 6 - Stock-Based Compensation

The stock-based compensation expense for the three and nine months ended December 29, 2012 was $648,000 and $2,162,000, compared to $821,000 and $2,243,000, respectively, for the same periods of the prior fiscal year.

The Company granted options to employees with an estimated grant date fair value of $57,000 and $295,000 for the three and nine months ended December 29, 2012, respectively. For the three and nine months ended December 31, 2011, the Company granted options with an estimated grant date fair value of $348,000 and $2,924,000, respectively. As of December 29, 2012, the unrecorded stock-based compensation related to stock options was $3,752,000 (net of estimated forfeitures) and will be recognized over an estimated weighted average amortization period of approximately 1.7 years.

The Company’s shareholders approved the adoption of the 2001 Stock Option Plan (the “2001 Plan”) and the reservation of 2,000,000 shares of common stock for issuance under 2001 Plan at the August 17, 2001 annual meeting of shareholders. Options granted under the 2001 Plan were granted at the fair market value of the Company’s common stock on the date of grant and generally expired seven years from the date of grant or thirty days after termination of service, whichever occurs first. The options generally were exercisable beginning one year from date of grant and generally vest ratably over a five-year period. On August 24, 2006, the Company’s board of directors approved a change in grant policy of the 2001 Plan to only grant non-statutory stock options to better align the Company’s compensation plan to employee incentives and to Company objectives. On August 17, 2007, the Company’s board of directors approved that all future stock option grants would have a ten-year term, which is within the guidelines of the Company’s 2001 Plan, subject to earlier expiration thirty days after termination of service. As of August 14, 2009, no further options may be granted under the 2001 Plan.

The Company’s shareholders approved the adoption of the 2009 Equity Incentive Plan (the “2009 Plan”) at the August 14, 2009 annual meeting for shareholders. Under the 2009 Plan, the total number of shares of Company common stock reserved for issuance consists of 1,000,000 shares plus (1) the 159,509 shares which remained authorized for issuance under the 2001 Plan but which were not subject to outstanding stock awards as of August 14, 2009, and (2) those of the 1,440,400 shares, subject to stock awards outstanding under the 2001 Plan as of August 14, 2009, that terminate prior to exercise and would otherwise be returned to the share reserves under the 2001 Plan, with the total shares in addition to the 1,000,000 shares thus being up to a maximum of 1,599,909 shares. The 2009 Plan allows the Company to continue its prior option practices under the 2001 Plan to grant non-statutory options to key employees with an exercise price equal to the fair market value of the Company’s stock on the date of grant. The Company’s options typically have a term of ten years and vest in 20% installments on each of the first five anniversaries of the date of grant. The 2009 Plan also provides the Company with the flexibility in designing equity incentives, including restricted stock awards, stock appreciation rights, restricted stock unit awards, performance stock awards, and performance cash awards.

The following table summarizes the activities under the 2001 and 2009 Plans for the nine months ended December 29, 2012:



		Options Outstanding
	Available for Grant	Number of Shares		Weighted Average Exercise Price
Balance, March 31, 2012	677,429	1,677,962	$	26.49
Granted	(72,400)	72,400		17.40
Exercised	-	(14,320)		17.39
Canceled	82,122	(82,122)		27.68
Balance, December 29, 2012	687,151	1,653,920	$	26.11

The weighted average fair value of options, as determined under the authoritative guidance for stock compensation, granted to employees and directors under the 2009 Plan during the three and nine months ended December 29, 2012 were $6.67 and $6.97 per share, respectively, compared to $6.70 and $7.89 per share, respectively for the three and nine months ended December 31, 2011. The total intrinsic value of options exercised (which is the amount by which the stock price exceeded the exercise price of the option on the date of the exercise) during the three and nine months ended December 29, 2012 was zero and $26,000, respectively. During the three and nine months ended December 29, 2012, the amount of cash received from employees as a result of employee stock option exercises was zero and $249,000, respectively.

The options outstanding and exercisable as of December 29, 2012, under the 2001 and 2009 Plans are in the following exercise price ranges:



					Options Outstanding				Options Exercisable
Range of Exercise Prices					Number Outstanding	Weighted-Average Remaining Contractual Life (Years)		Weighted-Average Exercise Price	Number Outstanding		Weighted-Average Exercise Price
$	17.29	-	$	19.99	312,500	8.94	$	18.88	40,280	$	18.96
	20.00	-		24.99	589,960	6.75		21.38	343,996		21.16
	25.00	-		29.99	290,400	6.10		26.94	203,872		26.96
	30.00	-		34.99	233,060	1.96		33.77	233,060		33.77
	35.00	-		39.99	89,300	4.46		35.83	89,300		35.83
	40.00	-		44.99	120,700	0.86		40.85	120,700		40.85
	45.00	-		46.92	18,000	0.82		46.92	18,000		46.92
$	17.29	-	$	46.92	1,653,920	5.76	$	26.11	1,049,208	$	28.96

Options outstanding and options exercisable under the option plans both had a total intrinsic value of zero, as of December 29, 2012.

2000 Employee Stock Purchase Plan (“ESPP”). Under the ESPP, eligible employees may elect to withhold up to 20% of their cash compensation to purchase shares of the Company’s common stock at a price equal to 95% of the market value of the stock at the time of purchase, which is at the end of the six-month offering period. An eligible employee may purchase no more than 500 shares during any six-month offering period. For the three and nine months ended December 29, 2012, the amounts of cash received from employees as a result of ESPP purchases was $50,000 and $113,000 compared to $70,000 and $159,000, respectively, for the same periods of the prior fiscal year.