Note 4 - Stock-Based Compensation

Stock-based compensation includes stock options, cash-settled stock appreciation rights (SARs) and restricted stock awards. Additionally, we recognize stock-based compensation expense for the discount on shares sold to employees through our employee stock purchase plan. Stock-based compensation expense for the employee stock purchase plan was $7,000 before the income tax benefit of $3,000 and$29,000 before the income tax benefit of $11,000 for the thirteen and thirty-nine weeks ended November 2, 2013, respectively. For the thirteen and thirty-nine weeks ended October 27, 2012, compensation expense for the employee stock purchase plan was $6,000 before the income tax benefit of $2,000 and $28,000 before the income tax benefit of $11,000, respectively.

The following table summarizes the share transactions for our restricted stock awards:

	Number of Shares			Weighted- Average Grant Date Fair Value
Restricted stock at February 2, 2013		499,280		$	18.84
Granted		220,800			20.80
Vested		(132,000	)		17.67
Forfeited or expired		(39,155	)		19.34
Restricted stock at November 2, 2013		548,925		$	19.88

The weighted-average grant date fair value of stock awards granted during the thirty-nine week periods ended November 2, 2013 and October 27, 2012 was $20.80 and $19.39, respectively. The total fair value at grant date of previously non-vested stock awards that vested during the first nine months of fiscal 2013 was $2.3 million. The total fair value at grant date of previously non-vested stock awards that vested during the first nine months of fiscal 2012 was $40,000. The 39,155 restricted stock awards that were forfeited or that expired during the first nine months of fiscal 2013, included 33,905 shares of restricted stock awards that expired unvested, as the performance measure was not achieved. These awards represented the third tier of the restricted stock granted on March 13, 2007 that expired in the first quarter of fiscal 2013.

The following section summarizes information regarding stock-based compensation expense recognized for restricted stock awards:

(In thousands)	Thirteen Weeks Ended November 2, 2013		Thirteen Weeks Ended October 27, 2012		Thirty-nine Weeks Ended November 2, 2013		Thirty-nine Weeks Ended October 27, 2012
Stock-based compensation expense before the recognized income tax benefit	$	719	$	555	$	2,425	$	3,273
Income tax benefit	$	278	$	220	$	926	$	1,298

As of November 2, 2013, approximately $6.6 million of unrecognized compensation expense remained related to both our performance-based and service-based restricted stock awards. The cost is expected to be recognized over a weighted average period of approximately 2.4 years. This incorporates our current assumptions with respect to the estimated requisite service period required to achieve the designated performance conditions for performance-based stock awards.

During the second quarter of fiscal 2012, stock-based compensation expense was increased by $789,000 due to a cumulative catch-up in expense for awards that management then determined were probable to vest based on our improved financial outlook. During the third quarter of fiscal 2012, a cumulative reduction in stock-based compensation expense of $835,000 was recorded as the applied forfeiture rate was increased on the non-vested performance-based awards due to the retirement of our former President and Chief Executive Officer.

The following table summarizes the SARs activity:

	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)
Outstanding at February 2, 2013		123,750		$	17.17
Granted		0			0.00
Forfeited		(2,500	)		17.17
Exercised		(41,000	)		17.17
Outstanding at November 2, 2013		80,250		$	17.17		3.24

Exercisable at November 2, 2013		0		$	0.00		0.00

In accordance with current authoritative guidance, our cash-settled SARs are classified as Other liabilities on the Condensed Consolidated Balance Sheets. The fair value of these liability awards are remeasured, using a trinomial lattice model, at each reporting period until the date of settlement. Increases or decreases in stock-based compensation expense are recognized over the vesting period, or immediately for vested awards. The weighted-average fair value of outstanding, non-vested SAR awards was $5.10 as of November 2, 2013.

The fair value was estimated using a trinomial lattice model with the following assumptions:

	November 2, 2013
Risk free interest rate yield curve		0.03% - 1.37	%
Expected dividend yield		1.0	%
Expected volatility		51.16	%
Maximum life		3.24 Years
Exercise multiple		1.38
Maximum payout	$	6.67
Employee exit rate		2.2% - 9.0	%

The risk free interest rate was based on the U.S. Treasury yield curve in effect at the end of the reporting period. The expected dividend yield was based on our quarterly cash dividends in fiscal 2012, with the assumption that quarterly dividends would continue at that rate. Expected volatility was based on the historical volatility of our stock. The exercise multiple and employee exit rate are based on historical option data.

The following table summarizes information regarding stock-based compensation expense recognized for SARs:

(In thousands)	Thirteen Weeks Ended November 2, 2013		Thirteen Weeks Ended October 27, 2012		Thirty-nine Weeks Ended November 2, 2013		Thirty-nine Weeks Ended October 27, 2012
Stock-based compensation expense before the recognized income tax benefit	$	59	$	108	$	208	$	257
Income tax benefit	$	23	$	43	$	79	$	102

As of November 2, 2013, approximately $116,000 in unrecognized compensation expense remained related to non-vested SARs. This expense is expected to be recognized over a weighted-average period of approximately 0.8 years.