STOCK OPTION AND BENEFIT PLANS

12 Months Ended

Jun. 29, 2019

Share-based Payment Arrangement [Abstract]

The Company’s incentive plan provides for equity and liability awards to employees and non-employee directors in the form of stock options, stock appreciation rights (SARs), restricted stock, restricted stock units, stock awards, stock units, performance shares, performance units, and other stock-based or cash-based awards. Compensation cost is recognized on a straight-line basis over the requisite employee service period, which is generally the vesting period, and is recorded as employee compensation expense in cost of goods sold, research, development and engineering, and selling, general and administrative expenses. Share-based compensation is recognized only for those awards that are expected to vest, with forfeitures estimated at the date of grant based on historical experience and future expectations.

In addition to service conditions, these SARs contain a performance condition. The additional performance condition is based upon the achievement of Return on Invested Capital (ROIC) goals relative to a peer group. All awards with performance conditions are measured over the vesting period and are charged to compensation expense over the requisite service period based on the number of shares expected to vest. The SARs cliff vest after a three-year period from date of grant and expire five years from date of grant.

On July 27, 2018, the Company granted 161,250 SARs under the 2010 Incentive Plan to certain key employees and outside directors at a strike price of $8.17 and a grant date fair value of $2.27, as of June 29, 2019, 141,250 remain outstanding. The grant date fair value for the awards granted during fiscal year 2019, were estimated using the Black Scholes option valuation method with the following weighted average assumptions as of July 27, 2018:



	Fiscal Year 2019
	July 27, 2018
Expected dividend yield	—%
Risk – free interest rate	2.80%
Expected volatility	29.75%
Expected life	4.00

On July 28, 2017, the Company granted 272,500 SARs under the 2010 Incentive Plan to certain key employees and outside directors at a strike price of $7.26 and a grant date fair value of $1.89, as of June 29, 2019, 227,500 remain outstanding. The grant date fair value for the awards granted during fiscal year 2018, were estimated using the Black Scholes option valuation method with the following weighted average assumptions as of July 28, 2017:



	Fiscal Year 2018
	July 28, 2017
Expected dividend yield	—%
Risk – free interest rate	1.70%
Expected volatility	29.76%
Expected life	4.00

On October 28, 2016, the Company granted 10,000 SARs under the 2010 Incentive Plan to certain key employees and outside directors at a strike price of $8.04 and a grant date fair value of $2.30, as of June 29, 2019, 10,000 remain outstanding. The grant date fair value for the awards granted during fiscal year 2017, were estimated using the Black Scholes option valuation method with the following weighted average assumptions as of October 28, 2016:



	Fiscal Year 2017
	October 28, 2016
Expected dividend yield	—%
Risk – free interest rate	1.63%
Expected volatility	33.43%
Expected life	4.00

On July 26, 2016, the Company granted 242,500 SARs under the 2010 Incentive Plan to certain key employees and outside directors at a strike price of $8.18 and a grant date fair value of $2.42, as of June 29, 2019, 207,500 remain outstanding. The grant date fair value for the awards granted during fiscal year 2017, were estimated using the Black Scholes option valuation method with the following weighted average assumptions as of July 26, 2016:



	Fiscal Year 2017
	July 26, 2016
Expected dividend yield	—%
Risk – free interest rate	0.93%
Expected volatility	36.13%
Expected life	4.00

Subsequent to June 29, 2019, the Company granted 160,000 SARs with a strike price of $4.98 and a grant date fair value of $1.24.

Share-based compensation expense is recognized only for those awards that are expected to vest, with forfeitures estimated at the date of grant based on the Company’s historical experience and future expectations. This forfeiture rate will be revised, if necessary, in subsequent periods if actual forfeitures differ from the amount estimated. Share-based compensation expense for fiscal years ended June 29, 2019, June 30, 2018 and July 1, 2017 was $0.4 million, $0.4 million and $0.7 million, respectively.

The Black-Scholes option valuation model is used by the Company for estimating the fair value of SARs. Option valuation models require the input of highly subjective assumptions, particularly for the expected term and expected stock price volatility. Changes in these assumptions can materially affect the fair value estimates.

There were no SARs exercised during fiscal year 2019 or 2018. The intrinsic value for SARs exercised in fiscal year 2017 was $0.4 million.

As of June 29, 2019, total unrecognized compensation expense related to nonvested share-based compensation arrangements was approximately $0.4 million. This expense is expected to be recognized over a weighted-average period of 1.62 years.

The following table summarizes the Company’s Options and SARs activity for all plans from July 2, 2016 through June 29, 2019:



	SARs Available For Grant		SARs Outstanding		Aggregate Intrinsic Value (in thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)
Balances, July 2, 2016	634,669		971,665		$	339	$	8.75	2.4
Shares authorized	—						—
SARs granted	(252,500	)	252,500				8.17
SARs forfeited	12,166		(12,166	)			8.60
SARs exercised	—		(127,000	)	385		4.77
Balances, July 1, 2017	394,335		1,084,999		$	—	$	9.09	2.3
Shares authorized	—						—
SARs granted	(272,500	)	272,500				7.26
SARs forfeited	282,500		(282,500	)			7.84
SARs exercised	—		—		—		—
Balances, June 30, 2018	404,335		1,074,999		$	79	$	8.90	2.3
Shares authorized	—						—
SARs granted	(161,250	)	161,250				8.17
SARs forfeited	250,833		(250,833	)			10.59
SARs exercised	—		—		—		—
Balances, June 29, 2019	493,918		985,416		$	—	$	8.35	3.5
Exercisable at June 29, 2019			399,166		$	—	$	9.12	1.7

Additional information regarding SARs outstanding and exercisable as of June 29, 2019, is as follows:



Range of Exercise Prices	Number Outstanding	Weighted Avg. Remaining Contractual Life (yrs.)	Weighted Avg. Exercise Price		Number Exercisable	Weighted Avg. Exercise Price
$4.40 – $7.90	227,500	4.1	$	7.26	—	$	—
7.91 – 9.91	554,583	0.9	8.09		195,833	7.94
9.92 – 11.34	203,333	2.1	10.26		203,333	10.26
$4.40 to $11.34	985,416	3.5	$	8.35	399,166	$	9.12

The Company has defined contribution plans available to U.S. employees who have attained age 21. Company contributions to the plans were approximately $0.9 million, $0.8 million, and $0.6 million during fiscal years 2019, 2018 and 2017, respectively.