Shareholders' Equity

6 Months Ended

Jun. 30, 2011

Shareholders' Equity and Comprehensive(Loss)/Income [Abstract]

SHAREHOLDERS' EQUITY

NOTE 2 — SHAREHOLDERS’ EQUITY

Share-Based Compensation

As of June 30, 2011, the Company maintained (i) its Equity Incentive Plan (the “EI Plan”), which is a successor to the Company’s 2004 Stock Option, Restricted and Non-Restricted Stock Plan (the “2004 Option Plan”, and together with the EI Plan, the “Plans”) and (ii) the 2009 Employee Stock Purchase Plan (the “2009 ESPP”), which was a successor to the Company’s Amended and Restated 2004 Employee Stock Purchase Plan (the “2004 ESPP”). The EI Plan and the 2009 ESPP were each approved by the Company’s shareholders on July 10, 2008. In addition, the Company may issue equity awards outside of the Plans. As of June 30, 2011, there were 20,000 stock options outstanding that were granted outside the Plans. The exercise or measurement price for equity awards issued under the Plans or otherwise is generally equal to the closing price of KID’s common stock on the New York Stock Exchange as of the date the award is granted. Generally, equity awards under the Plans (or otherwise) vest over a period ranging from three to five years from the grant date as provided in the award agreement governing the specific grant. Options and stock appreciation rights generally expire 10 years from the date of grant. Shares in respect of equity awards are issued from authorized shares reserved for such issuance or treasury shares.

The EI Plan, which became effective July 10, 2008 (at which time no further awards could be made under the 2004 Option Plan), provides for awards in any one or a combination of: (a) Stock Options, (b) Stock Appreciation Rights, (c) Restricted Stock, (d) Stock Units, (e) Non-Restricted Stock, and/or (f) Dividend Equivalent Rights. Any award under the EI Plan may, as determined by the committee administering the EI Plan (the “Plan Committee”) in its sole discretion, constitute a “Performance-Based Award” (an award that qualifies for the performance-based compensation exemption of Section 162(m) of the Internal Revenue Code of 1986, as amended). All awards granted under the EI Plan are evidenced by a written agreement between the Company and each participant (which need not be identical with respect to each grant or participant) that provides the terms and conditions, not inconsistent with the requirements of the EI Plan, associated with such awards, as determined by the Plan Committee in its sole discretion. A total of 1,500,000 shares of Common Stock have been reserved for issuance under the EI Plan. In the event all or a portion of an award is forfeited, terminated or cancelled, expires, is settled for cash, or otherwise does not result in the issuance of all or a portion of the shares of Common Stock subject to the award in connection with the exercise or settlement of such award (“Unissued Shares”), such Unissued Shares will in each case again be available for awards under the EI Plan pursuant to a formula set forth in the EI Plan. The preceding sentence applies to any awards outstanding on July 10, 2008 under the 2004 Option Plan, up to a maximum of an additional 1,750,000 shares of Common Stock. At June 30, 2011, 1,035,199 shares were available for issuance under the EI Plan.

The 2009 ESPP became effective on January 1, 2009. A total of 200,000 shares of Common Stock have been reserved for issuance under the 2009 ESPP. At June 30, 2011, 60,947 shares were available for issuance under the 2009 ESPP.

Impact on Net (Loss)/Income

The components of share-based compensation expense follows (in thousands):

	Three Months Ended June 30,				Six Months Ended June 30,
	2011		2010		2011		2010
Stock option expense	$	137	$	159	$	253	$	318
Restricted stock expense		89		99		168		199
Restricted stock unit expense		48		47		107		67
SAR expense		156		124		334		201
2009 ESPP expense		34		33		68		66
Total share-based payment expense	$	464	$	462	$	930	$	851

The Company records share-based compensation expense in the statements of operations within the same categories that payroll expense is recorded in selling general and administrative expense. No share-based compensation expense was capitalized in inventory or any other assets for the three and six months ended June 30, 2011 or 2010. The relevant Financial Accounting Standards Board (“FASB”) standard requires the cash flows related to tax benefits resulting from tax deductions in excess of compensation costs recognized for those equity compensation grants (excess tax benefits) to be classified as financing cash flows.

The fair value of stock options and stock appreciation rights (SARs) granted under the Plans or otherwise is estimated on the date of grant using a Black-Scholes-Merton options pricing model using assumptions with respect to dividend yield, risk-free interest rate, volatility and expected term, which are included below for SARs only, as there were no stock options issued during the three and six months ended June 30, 2011 or 2010. Expected volatilities are calculated based on the historical volatility of the KID’s Common Stock. The expected term of options or SARs granted is derived from the vesting period of the award, as well as historical exercise behavior, and represents the period of time that the award is expected to be outstanding. Management monitors exercises and employee termination patterns to estimate forfeiture rates within the valuation model. Separate groups of employees, directors and officers that have similar historical exercise behavior are considered separately for valuation purposes. The risk-free interest rate is based on the Treasury note interest rate in effect on the date of grant for the expected term of the award.

Stock Options

Stock options are rights to purchase KID’s Common Stock in the future at a predetermined per share exercise price (generally the closing price for such stock on the New York Stock Exchange on the date of grant). Stock options may be either: “Incentive Stock Options” (stock options which comply with Section 422 of the Code), or “Nonqualified Stock Options” (stock options which are not Incentive Stock Options). There were no stock options issued during the three and six months ended June 30, 2011 or 2010.

As of June 30, 2011, the total remaining unrecognized compensation cost related to unvested stock options, net of forfeitures, was approximately $1.0 million, and is expected to be recognized over a weighted-average period of 1.9 years.

Activity regarding outstanding stock options for the six months ended June 30, 2011 is as follows:

	All Stock Options Outstanding
				Weighted Average
	Shares			Exercise Price
Options Outstanding as of December 31, 2010		704,175		$	13.53
Options Granted		—			—
Options Forfeited/Cancelled*		(37,200	)	$	13.65
Options Outstanding as of June 30, 2011		666,975		$	13.52
Option price range at June 30, 2011	$	6.63-$34.05

* See disclosure below regarding forfeitures.

The aggregate intrinsic value of the unvested and vested outstanding stock options was $0 and $239,250 at June 30, 2011 and December 31, 2010, respectively. The aggregate intrinsic value is the total pretax value of in-the-money stock options, which is the difference between the fair value at the measurement date and the exercise price of each stock option. No stock options were exercised during the three and six months ended June 30, 2011 or 2010, respectively. No stock options vested during the three and six months ended June 30, 2011.

A summary of the Company’s unvested stock options at June 30, 2011 and changes during the six months ended June 30, 2011 is as follows:

				Weighted Average Grant
Unvested stock options	Options			Date Fair Value
Unvested at December 31, 2010		278,200		$	5.22
Granted		—		$	—
Vested		—		$	—
Forfeited/cancelled*		(16,800	)	$	5.21
Unvested stock options at June 30, 2011		261,400		$	5.22

* See disclosure below regarding forfeitures.

Restricted Stock

Restricted Stock is Common Stock that is subject to restrictions, including risks of forfeiture, determined by the Plan Committee in its sole discretion, for so long as such Common Stock remains subject to any such restrictions. A holder of restricted stock has all rights of a shareholder with respect to such stock, including the right to vote and to receive dividends thereon, except as otherwise provided in the award agreement relating to such award. Restricted Stock Awards are equity classified within the consolidated balance sheets. The fair value of each restricted stock grant is estimated on the date of grant using the closing price of KID’s Common Stock on the New York Stock Exchange on the date of grant.

During the three and six months ended June 30, 2011 and 2010, respectively, there were no shares of restricted stock issued under the EI Plan or otherwise. At June 30, 2011 and December 31, 2010, there were 26,690 and 29,270 shares of unvested restricted stock outstanding, respectively. These restricted stock grants have vesting periods ranging from four to five years, with fair values (per share) at date of grant ranging from $13.65 to $16.77. Compensation expense is determined for the issuance of restricted stock by amortizing over the requisite service period, or the vesting period, the aggregate fair value of the restricted stock awarded based on the closing price of KID’s Common Stock effective on the date the award is made. No restricted stock vested during the three and six months ended June 30, 2011.

A summary of the Company’s unvested restricted stock at June 30, 2011 and changes during the six months ended June 30, 2011 is as follows:

				Weighted Average Grant
Unvested Restricted Stock	Restricted Stock			Date Fair Value
Unvested at December 31, 2010		29,270		$	15.91
Granted		—		$	—
Vested		—		$	—
Forfeited/cancelled*		(2,580	)	$	13.65
Unvested restricted stock at June 30, 2011		26,690		$	16.13

* See disclosure below regarding forfeitures.

As of June 30, 2011, the total remaining unrecognized compensation cost related to issuances of restricted stock was approximately $0.2 million, and is expected to be recognized over a weighted-average period of 0.7 years.

Restricted Stock Units

A Restricted Stock Unit (“RSU”) is a notional account representing a participant’s conditional right to receive at a future date one (1) share of Common Stock or its equivalent in value. Shares of Common Stock issued in settlement of an RSU may be issued with or without other consideration as determined by the Plan Committee in its sole discretion. RSUs may be settled in the sole discretion of the Plan Committee: (i) by the distribution of shares of Common Stock equal to the grantee’s RSUs, (ii) by a lump sum payment of an amount in cash equal to the fair value of the shares of Common Stock which would otherwise be distributed to the grantee, or (iii) by a combination of cash and Common Stock. The RSUs issued under the EI Plan vest (and will be settled) ratably over a 5-year period commencing from the date of grant and are equity classified in the consolidated balance sheets. There were 10,000 and 20,000 RSU’s issued to employees of the Company during the three and six months ended June 30, 2011, respectively. There were 2,000 and 149,250 RSU’s issued to employees of the Company during the three and six months ended June 30, 2010, respectively.

The fair value of each RSU grant is estimated on the grant date. The fair value is set using the closing price of KID’s Common Stock on the New York Stock Exchange on the date of grant. Compensation expense for RSUs is recognized ratably over the vesting period, based upon the market price of the shares underlying the awards on the date of grant.

A summary of the Company’s unvested RSUs at June 30, 2011 and changes during the six months ended June 30, 2011 is as follows:

				Weighted
	Restricted			Average
	Stock			Grant-Date
	Units			Fair Value
Unvested at December 31, 2010		174,730		$	5.22
Granted		20,000		$	7.17
Vested		(26,650	)	$	5.08
Forfeited/cancelled*		(13,400	)	$	5.03
Unvested at June 30, 2011		154,680		$	5.51

* See disclosure below regarding forfeitures.

As of June 30, 2011, there was approximately $0.8 million of unrecognized compensation cost related to unvested RSUs. That cost is expected to be recognized over a weighted-average period of 3.6 years.

Stock Appreciation Rights

A Stock Appreciation Right (a “SAR”) is a right to receive a payment in cash, Common Stock or a combination thereof, as determined by the Plan Committee, in an amount or value equal to the excess of: (i) the fair value, or other specified valuation (which may not exceed fair value), of a specified number of shares of Common Stock on the date the right is exercised, over (ii) the fair value or other specified amount (which may not be less than fair value) of such shares of Common Stock on the date the right is granted; provided, however, that if a SAR is granted in tandem with or in substitution for a stock option, the designated fair value for purposes of the foregoing clause (ii) will be the fair value on the date such stock option was granted. No SARs will be exercisable later than ten (10) years after the date of grant. The SARs issued under the EI Plan vest ratably over a period ranging from zero to five years and unless terminated earlier, expire on the tenth anniversary of the date of grant. SARs are typically granted at an exercise price equal to the closing price of KID’s Common Stock on the New York Stock Exchange on the date of grant. There were 35,000 and 85,000 SARs granted during the three and six months ended June 30, 2011, respectively. There were 6,000 and 429,250 SARs granted during the three and six months ended June 30, 2010. SARs are accounted for at fair value at the date of grant in the consolidated statement of operations, are generally amortized on a straight line basis over the vesting term, and are equity-classified in the consolidated balance sheets.

The assumptions used to estimate the weighted average fair value of the SARs granted during the six months ended June 30, 2011 and 2010 were as follows:

	Six Months Ended June 30,
	2011			2010
Dividend yield		0.0	%		0.0	%
Risk-free interest rate		1.39	%		2.36	%
Volatility		0.957	%		0.830	%
Expected term (years)		3.8			5.0
Weighted-average fair value of SARs granted	$	4.75		$	3.39

Activity regarding outstanding SARs for the six months ended June 30, 2011 is as follows:

	All SARs Outstanding
				Weighted Average
	Shares			Exercise Price
SARs Outstanding as of December 31, 2010		1,111,513		$	4.17
SARs Granted		85,000		$	7.33
SARs Exercised		(1,100	)	$	5.54
SARs Forfeited/Cancelled*		(133,600	)	$	2.82
SARs Outstanding as of June 30, 2011		1,061,813		$	4.59
SAR price range at June 30, 2011	$	1.36-9.86

* See disclosure below regarding forfeitures.

The aggregate intrinsic value of the unvested and vested outstanding SARs at June 30, 2011 and December 31, 2010 was $1.3 million and $4.9 million, respectively. The aggregate intrinsic value is the total pretax value of in-the-money SARs, which is the difference between the fair value at the measurement date and the exercise price of each SAR. There were 0 and 5,180 SARs exercised for the three months ended June 30, 2011 and 2010, respectively. There were 1,100 (all of which were settled in cash) and 5,180 (all of which were settled in stock) SARs exercised for the six months ended June 30, 2011 and 2010, respectively.

A summary of the Company’s unvested SARs at June 30, 2011 and changes during the six months ended June 30, 2011 is as follows:

				Weighted-Average Grant
	Shares			Date Fair Value Per Share
Unvested at December 31, 2010		888,830		$	2.90
Granted		85,000		$	4.75
Vested		(131,750	)	$	2.35
Forfeited*		(84,200	)	$	2.04
Unvested at June 30, 2011		757,880		$	3.30

* See disclosure below regarding forfeitures.

As of June 30, 2011, there was approximately $2.2 million of unrecognized compensation cost related to unvested SARs, which is expected to be recognized over a weighted-average period of 3.4 years.

Option/SAR Forfeitures

All of the forfeited options/SARs described in the charts set forth above resulted from the termination of the employment of the respective grantees and the resulting forfeiture of unvested and/or vested but unexercised options/SARs. Pursuant to the Plans, upon the termination of employment of a grantee, such grantee’s outstanding unexercised options/SARs are typically cancelled and deemed terminated as of the date of termination; provided, that if the termination is not for cause, all vested options/SARs generally remain outstanding for a period ranging from 30 to 90 days, and then expire to the extent not exercised.

Restricted Stock/RSU Forfeitures

All of the forfeited Restricted Stock and RSUs described in the charts set forth above resulted from the termination of the employment of the respective grantees and the resulting forfeiture of unvested Restricted Stock and RSUs. Pursuant to the award agreements governing the outstanding Restricted Stock and RSUs, upon a grantee’s termination of employment, such grantee’s outstanding unvested Restricted Stock and RSUs are forfeited, except in the event of disability or death, in which case all restrictions lapse.

Employee Stock Purchase Plan

Under the 2009 ESPP, eligible employees are provided the opportunity to purchase KID’s Common Stock at a discount. Pursuant to the 2009 ESPP, options are granted to participants as of the first trading day of each plan year, which is the calendar year, and may be exercised as of the last trading day of each plan year, to purchase from KID the number of shares of Common Stock that may be purchased at the relevant purchase price with the aggregate amount contributed by each participant. In each plan year, an eligible employee may elect to participate in the 2009 ESPP by filing a payroll deduction authorization form for up to 10% (in whole percentages) of his or her compensation. No employee shall have the right to purchase KID’s Common Stock under the 2009 ESPP that has a fair value in excess of $25,000 in any plan year or the right to purchase more than 25,000 shares in any plan year. The purchase price is the lesser of 85% of the closing market price of KID’s Common Stock on either the first trading day or the last trading day of the plan year. If an employee does not elect to exercise his or her option, the total amount credited to his or her account during that plan year is returned to such employee without interest, and his or her option expires. At June 30, 2011, 60,947 shares were available for issuance under the 2009 ESPP. At June 30, 2011, there were 118 enrolled participants in the 2009 ESPP.

The fair value of each option granted under the 2009 ESPP is estimated on the date of grant using the Black-Scholes-Merton option-pricing model with the following assumptions:

	Six Months Ended June 30,
	2011			2010
Dividend yield		0	%		0	%
Risk-free interest rate		0.29	%		0.45	%
Volatility		73.5	%		89.2	%
Expected term (years)		1.0			1.0

Expected volatilities are calculated based on the historical volatility of KID’s Common Stock. The risk-free interest rate is based on the U.S. Treasury yield with a term that is consistent with the expected life of the options. The expected life of options granted under the 2009 ESPP is one year, or the equivalent of the annual plan year.