Stock Based-Compensation

6 Months Ended

Jul. 02, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock Based-Compensation

NOTE 4. STOCK BASED-COMPENSATION

Exercises

For the three months ended July 2, 2016, there were 31,200 options exercised at a weighted average exercise price of $2.15 per share. For the six months ended July 2, 2016, there were 123,081 options exercised at a weighted average exercise price of $1.23 per share.

Issuance

On March 3, 2016, we granted 251,370 restricted stock awards to certain executives and non-executive employees of the Company. The restrictions on these stock awards lapse over time based solely on continued service. However, the quantity of restricted shares granted on half of these shares, or 125,685 shares, is fixed, whereas the quantity granted on the remaining half, or 125,685 shares, is subject to Company-specific performance criteria. The restricted stock awards have a fair value on date of grant of $9.23 per share based on the closing NASDAQ market price of the common stock on the day prior to the day the awards were granted. Those restricted shares whose quantity is fixed vest in equal amounts over a three-year period on the first, second and third anniversary dates of the grant. Those restricted shares whose quantity is subject to Company performance criteria vest in equal amounts over a two-year period on the second and third anniversary dates of the grant.

The performance criteria, as defined in the share awards, provides for a graded awarding of shares based on the percentage by which the Company meets earnings before interest and taxes, as defined, in our 2016 business plan. The performance percentages, ranging from less than 80% to greater than 120%, provide for the awarding of shares ranging from no shares to 150% of the original amount of shares.

On May 20, 2016, we granted 39,004 restricted stock awards to the seven non-management members of the board of directors of the Company relating to their annual compensation for service on the board. The restricted stock awards have a fair value on date of grant of $10.32 per share based on the closing NASDAQ market price of the common stock on the day prior to the day the awards were granted. The restrictions on these stock awards lapse based solely on continued service on the first anniversary date of the grant.

Stock Compensation Expense

We record stock compensation expense over an award’s vesting period based on the award’s fair value at the date of grant. We recorded compensation expense for stock based awards of $0.6 million for the three months ended July 2, 2016 and $0.5 million for the three months ended July 4, 2015. We recorded compensation expense for stock based awards of $1.1 million for the six months ended July 2, 2016 and $0.9 million for the six months ended July 4, 2015. As of July 2, 2016, and July 4, 2015, there was $2.7 million and $2.2 million, respectively, of total unrecognized compensation cost related primarily to restricted share awards. These costs are expected to be recognized in earnings on a straight-line basis over the weighted average remaining vesting period of 1.5 years at July 2, 2016, and 1.8 years at July 4, 2015.