Stock-Based Compensation

9 Months Ended

Sep. 29, 2012

Stock-Based Compensation [Abstract]

Stock-Based Compensation

6. Stock-Based Compensation

Our 2008 Stock Option and Stock Incentive Plan (the “Plan”) was approved by our shareholders on May 20, 2009. Under the terms of the Plan, our Board of Directors may grant up to 2,000,000 shares of common stock in the form of incentive stock options, non-qualified stock options and shares of restricted stock or combinations thereof to officers, directors, employees, consultants and advisors. Grants under the Plan must be made within ten years of the date the Plan was approved and stock options are exercisable upon the terms set forth in the grant agreement approved by the Board of Directors, but in no event more than ten years from the date of grant. At September 29, 2012, 1,676,200 shares were available for grant under the Plan.

We expense the grant-date fair value of stock options. Compensation cost is recognized on a straight-line basis over the vesting period during which employees perform related services. The compensation cost charged against income for stock options for the thirty-nine weeks ended September 29, 2012 and September 24, 2011 was $151,000 and $188,000, respectively, before taxes. The compensation cost recognized is classified as selling, general and administrative expense in our Consolidated Statements of Operations. No compensation cost was capitalized during fiscal 2012 or fiscal 2011. We have included a forfeiture assumption of 5.4% for fiscal 2012 and fiscal 2011 in the calculation of compensation cost. Cash flows resulting from tax deductions in excess of compensation cost recognized in the financial statements are classified as a cash flow from financing activities.

We use the Black-Scholes option valuation model to estimate the fair value of options granted. Expected volatility and expected dividend yield are based on the actual historical experience of our common stock. The expected life represents the period of time that options granted are expected to be outstanding and is calculated using historical option exercise data. The risk-free rate is based on a U.S. Treasury security with terms equal to the expected time of exercise as of the grant date. We granted 20,000 stock options during the thirty-nine weeks ended September 29, 2012.

The following table summarizes our stock option activity for the thirty-nine weeks ended September 29, 2012:

	Shares			Weighted Average Price		Weighted Average Remaining Term (In years)		Aggregate Intrinsic Value
Balance at December 31, 2011		692,800		$	5.46
Granted		20,000			22.71
Exercised		(344,100	)		4.22
Balance at September 29, 2012		368,700		$	7.55		4.6	$	8,835,000
Options exercisable at September 29, 2012		228,700		$	5.32		3.2	$	5,990,000

The total intrinsic value of stock options exercised in the thirty-nine weeks ended September 29, 2012 was $6.8 million. Cash received from option exercises under the Plan in the thirty-nine weeks ended September 29, 2012 was $1.4 million. The excess tax benefit generated from options which were exercised in the thirty-nine weeks ended September 29, 2012 was $2.4 million and was credited to additional paid in capital.

As of September 29, 2012, there was approximately $0.5 million of unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of approximately 3.3 years.

We grant restricted stock to certain employees and members of our Board of Directors. The value of restricted stock issued is based on the fair value of our common stock on the grant date. Vesting of restricted stock is conditional based on continued employment or service for a specified period. Compensation cost related to restricted stock is recognized on a straight-line basis over the vesting period. We retain the restricted stock until the vesting provisions have been met. No dividends are paid on restricted stock. Compensation cost related to restricted stock was $599,000 and $267,000 for the thirty-nine weeks ended September 29, 2012 and September 24, 2011, respectively. We granted 10,000 shares of restricted stock during the thirty-nine weeks ended September 29, 2012.

The following table summarizes our restricted stock activity for the thirty-nine weeks ended September 29, 2012:

	Shares			Weighted Average Price
Nonvested at December 31, 2011		204,800		$	17.12
Granted		10,000			22.71
Vested		(34,750	)		16.18
Nonvested at September 29, 2012		180,050		$	17.61

As of September 29, 2012, there was approximately $2.7 million of unrecognized compensation cost related to nonvested restricted stock, which is expected to be recognized over a weighted-average period of approximately 3.5 years.