NOTE

– STOCK-BASED COMPENSATION

Stock Option

Awards

In accordance with accounting standards, the Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. That cost will be recognized over the period in which the employee is required to provide the services – the requisite service period (usually the vesting period) – in exchange for the award.

All outstanding stock options vested prior to the end of

2013,

and therefore there was

stock option compensation expense in the

first

quarter of

2018

2017.

As of

April 1, 2018,

there were

72,500

stock options outstanding and exercisable, at an average exercise price of

$7.99

per share. There were

stock options granted in

2018

2017.

There were

10,000

stock options exercised in the

first

quarter of

2018

and

forfeitures in the

first

quarter of

2018.

There were

exercises or forfeitures of stock options in the

first

quarter of

2017.

The aggregate intrinsic value of the outstanding and exercisable stock options was

$1.2

million as of

April 1, 2018.

Restricted Stock Awards

During the

three

months ended

April 1, 2018

and

April 2, 2017,

the Company granted restricted stock awards for

192,000

and

200,000

shares of common stock, respectively. Awards of restricted stock (or a portion thereof) vest with respect to each recipient over a

one

three

-year period from the date of grant, provided the individual remains in the employment or service of the Company as of the vesting date. Additionally, certain awards (or a portion thereof) could vest earlier in the event of a change in control of the Company, or upon involuntary termination without cause.

Compensation expense related to restricted stock grants was

$1.1

million and

$0.6

million for the

three

months ended

April 1, 2018,

and

April 2, 2017,

respectively. Accounting standards allow that the Company estimate forfeitures for restricted stock and reduce compensation expense accordingly. The Company has reduced its expense by the assumed forfeiture rate and will evaluate experience against this forfeiture rate going forward.

The following table summarizes restricted stock outstanding as of

April 1, 2018,

as well as activity during the

three

months then ended:

	Restricted Shares		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2017		463,000	$	17.79
Granted		192,000		25.60
Vested		48,000		17.29
Forfeited or canceled		5,000		17.57
Outstanding at April 1, 2018		602,000	$	23.30

As of

April 1, 2018,

the unrecognized total compensation cost related to unvested restricted stock was

$7.8

million. That cost is expected to be recognized by the end of

2020.

Performance

Share Awards

During the

three

months ended

April 1, 2018

and

April 2, 2017,

the Company issued awards of performance shares to certain employees. These awards will vest based on the achievement of certain performance-based goals over a performance period of

one

three

years, subject to the employee’s continued employment through the last date of the performance period, and will be settled in shares of our common stock or in cash at the Company’s election. The number of shares that

may

be issued in settlement of the performance shares to the award recipients

may

be greater (up to

200%

) or lesser than the nominal award amount depending on actual performance achieved as compared to the performance targets set forth in the awards.

The following table summarizes the performance shares outstanding as of

April 1, 2018,

as well as the activity during the

three

months then ended:

	Shares		Weighted Average Grant Date Fair Value
Outstanding at December 31, 2017		669,500	$	17.51
Granted		260,500		25.69
Vested		115,500		17.79
Forfeited or canceled		9,500		17.55
Outstanding at April 1, 2018		805,000	$	20.12

Compensation expense related to the performance shares was

$1.8

million and

$0.5

million for the

three

months ended

April 1, 2018,

and

April 2, 2017,

respectively. Unrecognized compensation expense related to these performance shares was approximately

$9.5

million as of

April 1, 2018.

That cost is expected to be recognized by the end of

2020.

The tax benefits recognized with regard to restricted stock and performance shares were approximately

$0.6

million in the

first

quarter of

2018.