STOCK-BASED COMPENSATION

6 Months Ended

Jul. 01, 2011

STOCK-BASED COMPENSATION

NOTE 8: STOCK-BASED COMPENSATION

Stock-based compensation includes expense charges for all stock-based awards to employees and directors. Such awards include restricted stock awards, performance share units, stock options, and shares purchased under an employee stock purchase plan (“ESPP”).

Total stock-based compensation expense was (in millions):

	Thirteen weeks ended				Twenty-six weeks ended
	July 1, 2011		June 25, 2010		July 1, 2011		June 25, 2010
Restricted stock and performance share units expense	$	1.4	$	1.3	$	3.8	$	3.2
Stock option expense	0.1		0.2		0.2		0.6
ESPP expense	—		—		0.1		0.1
Total stock-based compensation	$	1.5	$	1.5	$	4.1	$	3.9

Restricted stock and performance share units

Stock-based awards are issued under our 2005 Long-Term Equity Incentive Plan. Restricted stock is granted to officers and key employees and vests over periods ranging from three to four years. Stock granted to our directors vested immediately. Restricted stock-based compensation expense is calculated based on the grant-date market value. We recognize stock-based compensation expense on a straight-line basis over the vesting period for the awards that are expected to vest.

Performance share units have been granted to executives since 2010. Vesting of the performance share units is contingent upon the achievement of revenue and profitability goals at the end of each three-year performance period. Each performance share unit is equivalent to a share of common stock. Compensation expense is calculated based on the grant-date market value of our stock and is recognized ratably over the performance period for the performance share units which are expected to vest. Our estimate of the performance units expected to vest is reviewed and adjusted as appropriate each quarter.

Restricted stock and performance share units activity was (shares in thousands):

	Twenty-six weeks ended
	July 1, 2011
	Shares		Price (1)
Nonvested at beginning of period	882		$	13.14
Granted	415		$	17.06
Vested	(334	)	$	13.75
Forfeited	(7	)	$	13.04
Nonvested at the end of the period	956		$	14.65

_____________________

(1) Weighted average market price on grant-date.

As of July 1, 2011, total unrecognized stock-based compensation expense related to non-vested restricted stock was approximately $7.8 million, of which $7.0 million is currently estimated to be recognized over a weighted average period of 1.6 years through 2015. As of July 1, 2011, total unrecognized stock-based compensation expense related to performance share units was approximately $3.0 million, of which $2.2 million is currently estimated to be recognized over a weighted average period of 2.2 years through 2014.

Stock options

Our 2005 Long-Term Equity Incentive Plan provides for both nonqualified stock options and incentive stock options (collectively, “stock options”) for directors, officers, and certain employees.

Stock option activity follows (shares in thousands):

	Twenty-six weeks ended
	July 1, 2011
	Shares		Price (1)
Outstanding, December 31, 2010	1,119		$	15.62
Granted	—		$	—
Exercised	(8	)	$	13.20
Expired/Forfeited	—		$	—
Outstanding, July 1, 2011	1,111		$	15.64
Exercisable, July 1, 2011	813		$	18.03
Options expected to vest, July 1, 2011	296		$	9.14

____________________

(1) Weighted average exercise price.

There were no stock options granted during the period ending July 1, 2011. A summary of the weighted average assumptions and results for stock options granted during the period ending June 25, 2010 is as follows:

	Twenty-six weeks ended
	July 1, 2011			June 25, 2010
Expected life (in years)	—			3.36
Expected volatility	—		%	59.6		%
Risk-free interest rate	—		%	1.3		%
Expected dividend yield	—		%	0.0		%
Weighted average fair value of options granted during the period	$	—		$	6.24

As of July 1, 2011, total unrecognized stock-based compensation expense related to non-vested stock options was approximately $0.2 million, which is currently estimated to be recognized over a weighted average period of 0.7 years through 2013.

Employee stock purchase plan

Our 2010 Employee Stock Purchase Plan (“2010 ESPP”) became effective on July 1, 2010, replacing our 1996 Employee Stock Purchase Plan, which expired on June 30, 2010. We have reserved for purchase under the 2010 ESPP 1.0 million shares of common stock. During the twenty-six weeks ended July 1, 2011 and June 25, 2010, participants purchased 35,500 and 39,000 shares from the plans for cash proceeds of $0.5 million and $0.4 million, respectively, for each period.