STOCK-BASED COMPENSATION

Stock-based compensation cost recognized in operating results (included in selling, general, and administrative expenses) for the three months ended March 27, 2016 and March 29, 2015 was $1.1 million and $1.5 million ($1.1 million and $1.4 million, net of tax), respectively. The associated actual tax benefit realized for the tax deduction from option exercises of share-based payment units and awards released equaled $0.1 million and $0.2 million for the three months ended March 27, 2016 and March 29, 2015, respectively.

Stock Options

Option activity under the principal option plans as of March 27, 2016 and changes during the three months ended March 27, 2016 were as follows:



	Number of Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at December 27, 2015	2,265,992		$	16.59	4.49	$	19
Granted	16,200		6.04
Exercised	(35,943	)	7.80
Forfeited or expired	(153,481	)	20.67
Outstanding at March 27, 2016	2,092,768		$	16.36	4.11	$	1,053
Vested and expected to vest at March 27, 2016	2,040,374		$	16.50	3.99	$	984
Exercisable at March 27, 2016	1,744,174		$	17.38	3.17	$	623

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between our closing stock price on the last trading day of the first quarter of fiscal 2016 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on March 27, 2016. This amount changes based on the fair market value of our stock. The total intrinsic value of options exercised for the three months ended March 27, 2016 and March 29, 2015 was $0.1 million and $40 thousand, respectively.

As of March 27, 2016, $1.2 million of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted-average period of 1.8 years.

The fair value of share-based payment units was estimated using the Black-Scholes option pricing model. The table below presents the weighted-average expected life in years. The expected life computation is based on historical exercise patterns and post-vesting termination behavior. The expected dividend yield is based on the estimate of annual dividends expected to be paid at the time of the grant. Volatility is determined using changes in historical stock prices. The interest rate for periods within the expected life of the award is based on the U.S. Treasury yield curve in effect at the time of grant.

The weighted-average fair values and assumptions were as follows:



Three months ended	March 27, 2016			March 29, 2015
Weighted-average fair value of grants	$	2.15		$	5.54
Valuation assumptions:
Expected life (in years)	3.97			5.53
Expected dividend yield	0.00		%	0.00		%
Expected volatility	44.19		%	46.05		%
Risk-free interest rate	1.435		%	1.540		%

Restricted Stock Units

Nonvested restricted stock units as of March 27, 2016 and changes during the three months ended March 27, 2016 were as follows:



	Number of Shares		Weighted- Average Vest Date (in years)	Weighted- Average Grant Date Fair Value
Nonvested at December 27, 2015	942,916		0.74	$	16.88
Granted	505,680			$	7.25
Vested	(309,350	)		$	6.64
Forfeited	(34,224	)		$	13.15
Nonvested at March 27, 2016	1,105,022		1.51	$	15.46
Vested and expected to vest at March 27, 2016	990,689		1.43
Vested and deferred at March 27, 2016	345,625		—

The total fair value of restricted stock awards vested during the first three months of 2016 was $2.1 million as compared to $3.2 million in the first three months of 2015. As of March 27, 2016, there was $5.2 million of unrecognized stock-based compensation expense related to nonvested restricted stock units (RSUs). That cost is expected to be recognized over a weighted-average period of 2.1 years.

Long-Term Incentive Plans (LTIPs)

The following awards of restricted stock units (RSUs) with a performance or market condition are excluded from the balance of nonvested RSUs at March 27, 2016 in the table above.

On February 29, 2016, RSUs were awarded to certain key employees as part of the LTIP 2016 plan. These awards have a market condition and a service condition over the period January 2016 to December 2018. The number of shares for these units varies based on the relative ranking of our total shareholder return (TSR) against the TSRs of the constituents of a peer group established by our compensation committee. The value of these units is charged to compensation expense on a straight-line basis over the vesting period with periodic adjustments to account for changes in anticipated award amounts and estimated forfeitures rates. Compensation expense of $22 thousand was recognized in connection with these RSUs for the three months ended March 27, 2016. As of March 27, 2016, total unamortized compensation expense for these grants was $1.6 million. As of March 27, 2016, the maximum achievable RSUs outstanding under this plan are 305,400 units.

On February 27, 2014, RSUs were awarded to certain key employees as part of the LTIP 2014 plan. The number of shares for these units varies based on the growth of our earnings before interest, taxes, depreciation, and amortization (EBITDA) during the January 2014 to December 2016 performance period. The value of these units was charged to compensation expense on a straight-line basis over the vesting period with periodic adjustments to account for changes in anticipated award amounts and estimated forfeitures rates. Compensation expense of $50 thousand was recognized in connection with these RSUs for the three months ended March 29, 2015 without comparable expense for the three months ended March 27, 2016. As of September 27, 2015, we assessed the performance of our LTIP 2014 plan. Due to current and projected shortfalls in our EBIDTA growth compared to the LTIP 2014 plan requirements, we concluded that it was probable that these performance conditions would not be met. We therefore reversed $0.5 million of previously recognized compensation cost during the third quarter of 2015.

On February 27, 2013, RSUs were awarded to certain key employees as part of the LTIP 2013 plan. These awards have a market condition. The number of shares for these units varies based on the relative ranking of our total shareholder return (TSR) against the TSRs of the constituents of the Russell 2000 Index during the January 2013 to December 2015 performance period. The value of these units was charged to compensation expense on a straight-line basis over the vesting period with periodic adjustments to account for changes in anticipated award amounts and estimated forfeitures rates. Compensation expense of $2 thousand was reversed in connection with these RSUs in the first quarter of 2015. Due to not meeting the market condition set in the Plan requirements, no RSUs were earned under the plan.

On May 2, 2013 a cash-based performance award was awarded to our CEO under the terms of our LTIP 2013 plan. Our relative TSR performance determines the payout as a percentage of an established target cash amount of $0.4 million. Because the final payout of the award is made in cash, the award was classified as a liability and the fair value was marked-to-market each reporting period. The value of this award was charged to compensation expense on a straight-line basis over the vesting period which ended December 31, 2015. Compensation expense of $83 thousand was reversed in the first quarter of 2015. During the third quarter of 2015, due to our low ranking among peers and the short remaining period, the fair value of the award was reduced to zero. Compensation expense of $0.1 million was fully reversed in the first nine months of 2015.

Other Compensation Arrangements

On March 15, 2010, we initiated a plan in which time-vested cash unit awards were granted to eligible employees. The time-vested cash unit awards under this plan vest evenly over two or three years from the date of grant. The total amount accrued related to the plan equaled $0.2 million as of March 27, 2016, of which $0.3 million was expensed for the three months ended March 27, 2016. The total amount accrued related to the plan equaled $0.3 million as of March 29, 2015, of which $0.2 million was expensed for the three months ended March 29, 2015. The associated liability is included in Accrued Compensation and Related Taxes in the accompanying Consolidated Balance Sheets.