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. Stock options are exercisable upon the vesting date set forth in each stock option agreement but in no event more than ten years from the date of grant. Restricted stock vest in accordance with the terms set forth in each restricted stock agreement. At September 28, 2013, 1,703,326 shares were available for grant under the Plan.

We expense the grant-date fair value of employee 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 28, 2013 and September 29, 2012 was $119,000 and $151,000, 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 2013 or fiscal 2012. We have included a forfeiture assumption of 5.4% for fiscal 2013 and fiscal 2012 in the calculation of compensation cost.

We use the Black-Scholes option valuation model to estimate the fair value of stock 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 was calculated using historical option exercise data. The risk-free rate was based on a U.S. Treasury security with terms equal to the expected time of exercise as of the grant date.

The following table summarizes our stock option activity for the thirty-nine weeks ended September 28, 2013:


	Shares			Weighted Average Price		Weighted Average Remaining Term (In years)		Aggregate Intrinsic Value
Balance at December 29, 2012		274,000		$	8.62
Exercised		(89,000	)	$	7.29
Cancelled		(20,000	)	$	12.39

Balance at September 28, 2013		165,000		$	8.60		4.4	$	6,778,000

Options exercisable at September 28, 2013		115,000		$	6.57		3.4	$	4,957,000

The total intrinsic value of stock options exercised in the thirty-nine weeks ended September 28, 2013 was $2.9 million. As of September 28, 2013, there was approximately $0.3 million of unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of approximately 2.6 years.

Cash received from option exercises and cash flows resulting from tax deductions in excess of compensation cost recognized in the financial statements are classified as cash flows from financing activities. Cash received from option exercises were approximately $0.5 million and $1.4 million in the thirty-nine weeks ended September 28, 2013 and September 29, 2012, respectively. The excess tax benefit generated from options which were exercised in the thirty-nine weeks ended September 28, 2013 and September 29, 2012 was $0.8 million and $2.4 million, respectively, and was credited to additional paid in capital.

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, and any dividends paid thereto, until the vesting provisions have been met. Compensation cost related to restricted stock was $650,000 and $599,000 for the thirty-nine weeks ended September 28, 2013 and September 29, 2012, respectively.

The following table summarizes our restricted stock activity for the thirty-nine weeks ended September 28, 2013:


	Shares			Weighted Average Price
Balance at December 29, 2012		174,154		$	18.02
Granted		23,000		$	44.68
Vested		(36,750	)	$	16.52
Cancelled		(35,126	)	$	17.27

Balance at September 28, 2013		125,278		$	23.55

As of September 28, 2013, there was approximately $2.4 million of unrecognized compensation cost related to nonvested restricted stock, which is expected to be recognized over a weighted-average period of approximately 2.9 years. The excess tax benefit generated from restricted shares which were vested in the thirty-nine weeks ended September 28, 2013 was $0.3 million and was credited to additional paid in capital.