Stock-Based Compensation

The Company's 2004 Equity Compensation Plan (the “Plan”) allows for grants of stock options, restricted stock and restricted stock units. In 2007, the Compensation Committee of the Board of Directors adopted an amendment to the Plan that provides for the grant of stock appreciation rights (“SARs”) and performance shares. Beginning in 2007, SARs, restricted stock and performance shares had replaced stock options as the equity compensation instruments used by the Company. The Company did not issue performance shares during 2011 or 2010.

General

The following table details the effect of stock-based compensation from the issuance of equity compensation instruments on operating earnings (loss), net earnings (loss), and basic and diluted earnings (loss) per share:



	2011			2010			2009
Cost of sales	$	86		$	129		$	160
Selling, general and administrative	2,169			2,978			2,911
Total stock-based compensation expense included in operating earnings (loss)	2,255			3,107			3,071
Income taxes benefit	(857		)	(1,182		)	(1,200		)
Impact on net earnings (loss) from continuing operations	$	1,398		$	1,925		$	1,871
Effect on basic and diluted earnings (loss) from continuing operations	$	0.05		$	0.06		$	0.06

As discussed in Note 18, the Company entered into a separation and release agreement with its former President and Chief Executive Officer during 2010. Pursuant to the terms of his employment, non-compete and severance agreements with the Company, all non-vested stock compensation was forfeited on his termination date, and $494 of compensation expense was reversed related to equity instruments that were initially expected to vest but were ultimately forfeited.

SARs

SARs are granted with lives of ten (10) years, are graded vesting over four (4) years and are settled in the Company's common stock. The estimated fair value is computed using the Black-Scholes option-pricing model. Expected volatility is based on historical periods commensurate with the expected life of SARs, and expected life is based on historical experience and expected exercise patterns in the future. Stock compensation expense is recognized in the consolidated statements of operations ratably over the vesting period based on the number of instruments that are expected to ultimately vest. The following table presents the assumptions used in valuing SARs granted during 2011, 2010 and 2009:



	2011		2010		2009
Weighted average fair value	$	4.86	$	5.62	$	1.69
Assumptions used:
Expected dividend yield	0%		0%		2%
Volatility	71%		70%		55%
Risk-free interest rates	1.0-2.2%		1.4-2.3%		1.6–1.8%
Expected lives	5.2 Years		5.5 Years		5.5 years

A summary of activity for SARs during 2011 is as follows (shares in thousands):



	Shares	Weighted Average Exercise Price
Outstanding, beginning of the year	1,356	$	9.84
Granted	400	8.12
Exercised	60	3.99
Forfeited	242	10.17
Outstanding, end of the year	1,454	$	9.56
Exercisable, end of the year	454	$	12.61

Information with respect to SARs outstanding at October 29, 2011 is as follows (shares in thousands):



Range of Exercise Prices	Outstanding Shares	Weighted Average Exercise Price		Remaining Contractual Life (in Years)	Exercisable Shares	Weighted Average Exercise Price
$2.33 - 6.98	444	$	5.38	8.2	103	$	3.74
$7.00 - 8.80	341	8.33		9.2	—	—
$9.61 - 10.84	415	9.84		8.0	153	9.90
$12.11 - 29.12	254	17.97		6.2	198	19.29
	1,454				454

The SARs outstanding at October 29, 2011 had an intrinsic value of $79.

Restricted Stock and Performance Shares

Restricted stock is granted at fair value based on the closing stock price on the date of grant and vests ratably over four (4) years. Stock compensation expense is recognized in the consolidated statements of operations ratably over the vesting period based on the number of instruments that are expected to ultimately vest.

Performance share awards permit the holder to receive, after a specified performance period, a number of shares of the Company's common stock for each performance share awarded. The number of shares of common stock to be received is determined by a predetermined formula based on the extent to which the Company achieves certain performance criteria specified in the award relative to a selected group of peer companies. The awards cliff vest at the end of the performance period, which is three (3) years. The fair value of performance shares is determined using a Monte Carlo simulation model and stock compensation expense is recognized in the consolidated statements of operations ratably over the vesting period based on the number of instruments that are expected to ultimately vest. The Company did not issue performance shares in 2011 or 2010. In connection with the Monte Carlo valuations for the 2009 performance share issuances, the following table presents the assumptions used:



	2009
Weighted average fair value	$	3.51
Assumptions used:
Volatility	71		%
Risk-free interest rates	1.2		%

A summary of activity for restricted stock and performance shares during 2011 is as follows (shares in thousands):



	Restricted Stock			Performance Shares
	Shares	Weighted Average Price		Shares	Weighted Average Price
Non-vested , beginning of the year	429	$	8.70	51	$	3.51
Granted	14	7.27		—	—
Vested	143	9.83		—	—
Forfeited	50	8.64		51	3.51
Non-vested , end of the year	250	$	7.98	—	$	—

The weighted average remaining requisite service periods for non-vested restricted stock and performance shares was 2.6 years as of October 29, 2011. There are no performance shares outstanding at October 29, 2011.

Restricted Stock Units

Restricted stock units, which have been awarded only to non-employee directors of the Company, provide the grantee the right to receive one share of common stock per restricted unit at the end of the restricted period and to receive dividend equivalents during the restricted period in the form of additional restricted stock units. For restricted stock unit awards prior to 2009, the restricted period ends one year after the director leaves the Board of Directors. In 2009, the Plan was amended to change the definition of the restriction period to “upon immediately leaving the Board of Directors.” This change was effective for awards granted in 2009 and forward. During 2011, 2010 and 2009, the Company granted 34,092, 36,421 and 39,501 restricted stock units with fair values of $300, $350 and $352, respectively, to non-employee directors based on the fair value of the Company's stock at the date of grant. As of October 29, 2011, there were 137,566 restricted stock units outstanding.

Stock Options

Beginning in 2007, the Company no longer granted stock options under its plan. Stock-based compensation expense is recognized in the consolidated statements of operations ratably over the vesting period based on the number of options that are expected to ultimately vest.

A summary of activity for stock options for 2011 is as follows (shares in thousands):



	Shares	Weighted Average Exercise Price
Outstanding, beginning of the year	763	$	21.20
Granted	—	—
Exercised	—	—
Forfeited	93	13.01
Outstanding, end of the year	670	$	22.34
Exercisable, end of the year	670	$	22.34

Information with respect to options outstanding at October 29, 2011 is as follows (shares in thousands):



Range of Exercise Prices	Outstanding Shares	Weighted Average Exercise Price		Remaining Contractual Life (in Years)	Exercisable Shares	Weighted Average Exercise Price
$18.08 - 21.10	228	$	19.94	0.4	228	$	19.94
$21.19 - 22.49	215	21.67		2.9	215	21.67
$23.48 - 26.02	227	25.39		2.7	227	25.39
	670				670

The total intrinsic value, cash received and actual tax benefits realized for stock options exercised in 2011, 2010 and 2009 were not material. Stock options outstanding and exercisable at October 29, 2011, had a remaining average term of 0.9 years, and no intrinsic value.

As of October 29, 2011, there was a total of $5,051 of unrecognized compensation cost for stock-based compensation awards, net of expected forfeitures. The unrecognized compensation cost is expected to be recognized over a weighted average period of 2.6 years.