Stock-Based Compensation

2008 Equity Incentive Plan

Our 2008 Equity Incentive Plan, as amended (the "Plan"), authorizes us to issue up to 3.5 million shares of common stock, along with non-qualified stock options, stock appreciation rights, restricted stock and performance units to our officers, key employees, non-employee directors and consultants. At September 25, 2016, there were 1.8 million shares available for future grants under this Plan. No more than 600,000 shares may be used under the Plan as “full value” awards, which include restricted stock and performance stock units. It is our policy to issue shares from authorized but not issued shares upon the exercise of stock options.

Options are granted at not less than fair market value on the date of grant and expire no later than ten years after the date of grant. Options and restricted shares granted under this Plan generally require no less than a three year ratable vesting period. During the first nine months of 2016 no stock options were granted, 34,750 stock options expired, 85,408 stock options were exercised and 24,750 options were canceled.

Restricted stock awards, or “full value” awards, generally vest ratably over no less than a three year period. Shares of restricted stock granted under the Plan are considered issued and outstanding at the date of grant, have the same dividend and voting rights as other outstanding common stock, are subject to forfeiture if employment terminates prior to vesting, and are expensed ratably over the vesting period. Dividends paid on the restricted shares granted under the Plan are non-forfeitable if the restricted shares do not ultimately vest.

During the first quarter of 2015, the company implemented a long term incentive program for the benefit of certain members of company management. The program was designed to strengthen employee retention and to provide a more structured incentive program to stimulate improvement in future company results. Per the terms of the program, participants were granted, in 2016 and 2015, time value restricted stock units (“RSUs”), vesting ratably over a three year time period, and performance restricted stock units (“PSUs”), with a three year cliff vesting. Upon vesting, each restricted stock award is exchangeable for one share of the company’s common stock, with accrued dividends. The PSUs are categorized further into three individual categories whose vesting is contingent upon the achievement of certain targets as follows:


•	40% of the PSUs vest upon certain Return on Invested Capital targets for 2016 and 2015 units


•	40% of the PSUs vest upon certain Cumulative EPS targets for 2016 units


•	40% of the PSUs vest upon certain EBITDA margin targets for 2015 units


•	20% of the PSUs vest upon certain market based Shareholder Return targets for 2016 and 2015 units.

In the aggregate, the company granted a total of 343,428 RSUs and PSUs in 2016 and 2015, net of forfeitures, comprising:

2016 Grants


•	26,841 time value based RSUs with a grant date fair value of $22.82 per unit


•	32,051 time value based RSUs with a grant date fair value of $18.72 per unit


•	20,629 time value based RSUs with a grant date fair value of $25.45 per unit


•	901 time value based RSUs with a grant date fair value of $30.22 per unit


•	42,946 PSUs with an initial grant date fair value of $22.82 per unit


•	51,282 PSUs with an initial grant date fair value of $18.72 per unit


•	1,440 PSUs with a grant date fair value of $30.22 per unit


•	10,736 market based PSUs with a grant date fair value of $22.82 per unit


•	12,821 market based PSUs with a grant date fair value of $18.72 per unit


•	361 market based PSUs with a grant date fair value of $30.22 per unit

2015 Grants


•	43,367 time value based RSUs with a grant date fair value of $18.78 per unit


•	80,044 PSUs with an initial grant date fair value of $18.78 per unit


•	20,010 market based PSUs with a grant date fair value of $24.81 per unit.

Stock-based compensation expense related to our equity incentive plans in accordance with U.S. GAAP was allocated as follows:



(Dollars in thousands)	Thirteen Weeks Ended						Thirty-nine Weeks Ended
	September 25, 2016			September 27, 2015			September 25, 2016			September 27, 2015
Cost of sales	$	6		$	97		$	364		$	293
Selling, general and administrative expenses	338			692			2,294			1,766
Stock-based compensation expense before income taxes	344			789			2,658			2,059
Income tax benefit	(123		)	(277		)	(771		)	(577		)
Total stock-based compensation expense after income taxes	$	221		$	512		$	1,887		$	1,482

As of September 25, 2016, a total of $4.8 million of unrecognized compensation cost related to non-vested awards is expected to be recognized over a weighted average period of approximately 1.8 years. There were no significant capitalized stock-based compensation costs at September 25, 2016 and December 27, 2015.