5.	STOCK-BASED COMPENSATION

As of

February

26,

2017,

the Company had a

2002

Stock Option Plan (the “Plan”) and no other stock-based compensation plan. The Plan has been approved by the Company’s shareholders and provides for the grant of stock options to directors and key employees of the Company. All options granted under the Plan have exercise prices equal to the fair market value of the underlying common stock of the Company at the time of grant, which, pursuant to the terms of the Plan, is the reported closing price of the common stock on the New York Stock Exchange on the date preceding the date the option is granted. Options granted under the Plan become exercisable

25%

one

year after the date of grant, with an additional

25%

exercisable each succeeding anniversary of the date of grant, and expire

years after the date of grant. Options to purchase a total of

1,800,000

shares of common stock were authorized for grant under the Plan. At

February

26,

2017,

1,466,030

shares of common stock of the Company were reserved for issuance upon exercise of stock options under the Plan, and

395,501

options were available for future grant under the Plan.

The compensation expense for stock options includes an estimate for forfeitures and is recognized on a straight-line basis over the requisite service period.

The future compensation expense to be recognized in earnings before income taxes for options outstanding at

February

26,

2017

was

$1,852,

which is expected to be recognized ratably over a weighted average vesting period of

2.02

years.

The Company records its stock-based compensation at fair value. The weighted average fair value for options was estimated at the dates of grants, using the Black-Scholes option pricing model.

The following table represents the weighted average fair value and valuation assumptions used for options granted in the

2017

2016

and

2015

fiscal years:

	Fiscal Year
	2017		2016				2015

Weighted average fair value per share of option grants		$3.15			$5.30				$8.05
Risk-free interest rates		1.77%		1.57	-	1.86%		2.03	-	2.18%
Expected stock price volatility		28.9%		27.91	-	31.71%		31.07	-	31.59%
Expected dividend yields		2.23%		1.84	-	2.76%		1.34	-	1.77%
Estimated option terms (in years)		5.3		5.3	-	7.9			7.8

The risk-free interest rates are based on U.S. Treasury rates at the date of grant with maturity dates approximately equal to the estimated term of the options at the date of the grant. Volatility factors are based on historical volatility of the Company’s common stock. The expected dividend yields are based on the regular quarterly cash dividend per share most recently declared by the Company and on the exercise price of the options granted during the

2017

fiscal year. The estimated terms of the options are based on evaluations of the historical and expected future employee exercise behavior.

During the

fourth

quarter of the

2015

fiscal year, the Company’s Board of Directors approved a reduction of

$1.50

per share in the exercise price of all outstanding options as a result of the special cash dividend of

$1.50

per share paid by the Company in

February

2015.

The reduction in the exercise price was treated as a modification of the stock options for accounting purposes. The modification, based on the fair value of the options both immediately before and after the modification, resulted in total incremental compensation expenses of

$47

and

$131

for the

2017

and

2016

fiscal years, respectively, which were recorded in selling, general and administrative expenses.

Information with respect to stock option activity follows:

	Outstanding Options			Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value

Balance, March 2, 2014		1,081,117		$	23.84
Granted		18,000			25.81
Exercised		(79,800	)		21.49
Terminated or expired		(52,625	)		24.21
Granted under option modification		996,892			22.55
Cancelled under option modification		(996,892	)		24.05
Balance, March 1, 2015		966,692		$	22.55
Granted		379,450			17.82
Exercised		(2,500	)		19.91
Terminated or expired		(117,250	)		21.53
Balance, February 28, 2016		1,226,392		$	21.19
Granted		1,250			14.07
Exercised		-			-
Terminated or expired		(157,113	)		21.66
Balance, February 26, 2017		1,070,529		$	21.08		5.52	$	-
Vested and exercisable, February 26, 2017		762,217		$	22.07		4.40	$	-
Expected to vest, February 26, 2017		1,009,509		$	21.08		5.52	$	-

The aggregate intrinsic values realized (the market value of the underlying shares on the date of exercise, less the exercise price, times the number of shares acquired) from the exercise of options during the

2017,

2016

and

2015

fiscal years were

$0,

and

$688,

respectively.

A summary of the status of the Company’s non-vested options at

February

26,

2017,

and changes during the fiscal year then ended, is presented below:

	Shares Subject to Options			Weighted Average Grant Date Fair Value

Non-vested, beginning of year		504,867		$	8.27
Granted		1,250			3.15
Vested		(136,505	)		6.44
Terminated or expired		(61,300	)		7.84
Non-vested, end of year		308,312		$	6.09