STOCK OPTION AND BENEFIT PLANS

12 Months Ended

Jul. 01, 2023

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 29, 2022, the Company granted 145,000 SARs under the 2010 Incentive Plan to certain key employees and outside directors at a strike price of $5.10 and a grant date fair value of $2.09. As of July 1, 2023, 140,000 remain outstanding. The grant date fair value for the awards granted during fiscal year 2023, were estimated using the Black Scholes option valuation method with the following weighted average assumptions as of July 29, 2022:


			Fiscal Year 2023
			July 29, 2022
Expected dividend yield			—%
Risk – free interest rate			3.01%
Expected volatility			48.56%
Expected life			4.00

On August 9, 2021, the Company granted 165,000 SARs under the 2010 Incentive Plan to certain key employees and outside directors at a strike price of $7.17 and a grant date fair value of $2.73. As of July 1, 2023, 140,000 remain outstanding. The grant date fair value for the awards granted during fiscal year 2022, were estimated using the Black Scholes option valuation method with the following weighted average assumptions as of August 9, 2021:


			Fiscal Year 2022
			August 9, 2021
Expected dividend yield			—%
Risk – free interest rate			0.62%
Expected volatility			48.58%
Expected life			4.00

On July 23, 2020, the Company granted 155,000 SARs under the 2010 Incentive Plan to certain key employees and outside directors at a strike price of $6.94 and a grant date fair value of $2.32. As of July 1, 2023, 130,000 remain outstanding. The grant date fair value for the awards granted during fiscal year 2021, were estimated using the Black Scholes option valuation method with the following weighted average assumptions as of July 23, 2020:


			Fiscal Year 2021
			July 23, 2020
Expected dividend yield			—%
Risk – free interest rate			0.17%
Expected volatility			42.85%
Expected life			4.00

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 July 1, 2023 and July 2, 2022 was $0.3 million and $0.3 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 2023 and fiscal year 2022.

As of July 1, 2023, total unrecognized compensation expense related to nonvested share-based compensation arrangements was approximately $0.3 million. This expense is expected to be recognized over a weighted-average period of 1.90 years.

The following table summarizes the Company’s Options and SARs activity for all plans from July 3, 2022 through July 1, 2023:


	SARs Available For Grant	SARs Outstanding	Aggregate Intrinsic Value (in thousands)		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)
Balances, July 3, 2021	688,084	791,250	$	—	$	7.15	1.9
Shares authorized	—				$	—
SARs granted	(165,000)	165,000			$	7.17
SARs forfeited	197,500	(197,500)			$	8.17
SARs exercised
Balances, July 2, 2022	720,584	758,750	$	—	$	6.89	2.1
Shares authorized	—				—
SARs granted	(145,000)	145,000			5.10
SARs forfeited	277,500	(277,500)			7.03
SARs exercised	—	—	—		—
Balances, July 1, 2023	853,084	626,250	$	—	$	6.41	2.2
Exercisable at July 1, 2023		226,250	$	—	$	6.45	0.6

Additional information regarding SARs outstanding and exercisable as of July 1, 2023, 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
$4.93 – $7.43	525,000	2.1	$	6.06	120,000	$	4.93
$7.44 – $9.44	101,250	14.6	8.17		106,250	8.17

$4.93 to $9.44	626,250	2.2	$	6.41	226,250	$	6.45

The Company has defined contribution plans available to U.S. employees who have attained age 21. Company contributions to the plans were approximately $1.1 million and $0.9 million during fiscal years 2023 and 2022, respectively.