Shareholders' Equity

9 Months Ended

Oct. 02, 2011

Shareholders' Equity [Abstract]

SHAREHOLDERS' EQUITY

7. SHAREHOLDERS’ EQUITY

a. Common Stock

In February 2011, we issued 11,276 shares of common stock to our non-employee directors, valued at $77.

In May 2011, we issued 17,036 shares of common stock to our non-employee directors, valued at $76.

In August 2011, we issued 15,981 shares of common stock to our non-employee directors, valued at $77.

b. Treasury Stock

At October 2, 2011 and December 31, 2010, we had 1,372,757 and 1,371,900 shares, respectively, of treasury stock outstanding, valued at $7,658 and $7,652, respectively. The increase in treasury shares related to the vesting of restricted stock awards for certain key employees, a portion of which were withheld to cover estimated individual income taxes, since the vesting of such awards is a taxable event for such employees.

c. Stock Options

We have various stock-based employee compensation plans, for which we follow the provisions of the Financial Accounting Standards Board’s (“FASB”) guidance on share-based payments, which requires that compensation cost relating to share-based payment transactions be recognized in the financial statements. The cost is measured at the grant date, based on the fair value of the award, and is recognized as an expense over the employee’s requisite service period (generally the vesting period of the equity award).

Our shareholders have approved various equity-based plans that permit the grant of stock options, restricted stock and other equity-based awards. In addition, our shareholders have approved certain grants of stock options outside of these plans.

In June 2004, shareholders adopted the 2004 Long-Term Incentive Plan (“LTIP”) pursuant to which we were authorized to issue up to 750,000 shares of common stock and grant stock options, restricted stock awards, stock appreciation rights and other stock-based awards. Through shareholder approved amendments to the LTIP in 2006, 2008 and 2011, the total number of authorized shares under the LTIP increased to 2,900,000.

Stock options granted under the LTIP are either Incentive Stock Options (“ISOs”) or Non-Qualified Stock Options (“NQSOs”). Key employees are eligible to receive ISOs and NQSOs; however, directors and consultants are eligible to receive only NQSOs. Most ISOs vest over a three- or five-year period and expire on the sixth or seventh anniversary of the grant date. All NQSOs issued to non-employee directors vest immediately and expire on either the sixth or seventh anniversary of the grant date. Some NQSOs issued to non-employees vest immediately and expire within three years; others have the same vesting characteristics as options issued to employees. As of October 2, 2011, there were 2,221,136 stock options outstanding under the LTIP.

On December 19, 2005, we granted our former President and Chief Executive Officer, John D. Kavazanjian, an option to purchase 48,000 shares of common stock at $12.96 per share outside of any of our equity-based compensation plans, subject to shareholder approval. Shareholder approval was obtained on June 8, 2006. The stock option is fully vested and expires on June 8, 2013.

On March 7, 2008, in connection with his becoming employed by us, we granted our Chief Financial Officer and Treasurer, Philip A. Fain, an option to purchase 50,000 shares of common stock at $12.74 per share outside of any of our equity-based compensation plans. The stock option is fully vested and expires on March 7, 2015.

On December 30, 2010, pursuant to the terms of his employment agreement, we granted our President and Chief Executive Officer, Michael D. Popielec, options to purchase shares of common stock under the LTIP as follows: (i) 50,000 shares at $6.42, vesting in annual increments of 12,500 shares over a four-year period commencing December 30, 2011; (ii) 250,000 shares at $6.42, vesting in annual increments of 62,500 shares over a four-year period commencing December 30, 2011; (iii) 200,000 shares at $10.00, with vesting to begin on the date the stock reaches a closing price of $10.00 per share for 15 trading days within a 30-day trading period, with such vesting in annual increments of 50,000 shares over the four anniversary dates of that date; and (iv) 200,000 shares at $15.00, with vesting to begin on the date the stock reaches a closing price of $15.00 per share for 15 trading days within a 30-day trading period, with such vesting in annual increments of 50,000 shares over the four anniversary dates of that date. All such options in items (i) and (ii) shall expire on December 30, 2017. All such options in items (iii) and (iv) shall expire as of the later of December 30, 2017 and five years after the initial vesting commences, but in no event later than December 30, 2020. The options set forth in items (ii), (iii) and (iv) were subject to shareholder approval, which approval was obtained on June 7, 2011.

On January 3, 2011, pursuant to the terms of his employment agreement, we granted our President and Chief Executive Officer, Michael D. Popielec, an option to purchase 50,000 shares of common stock at $6.58 under the LTIP. The option vests in annual increments of 12,500 shares over a four-year period commencing December 30, 2011. The option expires on December 30, 2017.

In conjunction with FASB’s guidance for share-based payments, we recorded compensation expense related to stock options of $282 and $683 for the three- and nine-month periods ended October 2, 2011, respectively, and $175 and $533 for the three- and nine-month periods ended September 26, 2010, respectively. As of October 2, 2011, there was $1,552 of total unrecognized compensation costs related to outstanding stock options, which is expected to be recognized over a weighted average period of 2.26 years.

We use the Black-Scholes option-pricing model to estimate the fair value of non-market performance stock-based awards. The following weighted average assumptions were used to value non-market performance stock options granted during the nine-month periods ended October 2, 2011 and September 26, 2010.

	Nine-Month Periods Ended
	October 2,			September 26,
	2011			2010
Risk-free interest rate		1.22	%		2.09	%
Volatility factor		60.63	%		79.34	%
Dividends		0.00	%		0.00	%
Weighted average expected life (years)		3.82			3.51

We use a Monte Carlo simulation option-pricing model to estimate the fair value of market performance stock-based awards. The following weighted average assumptions were used to value market performance stock options granted during the nine-month period ended October 2, 2011. There were no market performance stock options granted during the nine-months ended September 26, 2010.

	Nine-Month
	Period Ended
	October 2,
	2011
Risk-free interest rate		2.74	%
Volatility factor		63.78	%
Dividends		0.00	%
Weighted average expected life (years)		5.51

We calculate expected volatility for stock options by taking an average of historical volatility over the past five years and a computation of implied volatility. The computation of expected term was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards and vesting schedules. The interest rate for periods within the contractual life of the award is based on the U.S. Treasury yield in effect at the time of grant.

Stock option activity for the first nine months of 2011 is summarized as:

						Weighted
				Weighted		Average
				Average		Remaining	Aggregate
	Number			Exercise Price		Contractual	Intrinsic
	of Shares			Per Share		Term	Value
Shares under option at January 1, 2011		1,794,694		$	9.71
Options granted		795,900			9.37
Options exercised		(14,500	)		3.94
Options forfeited		(105,116	)		5.37
Options expired		(151,842	)		12.90
Shares under option at October 2, 2011		2,319,136		$	9.62	4.43 years	$	342
Vested and expected to vest as of October 2, 2011		2,095,837		$	10.05	4.27 years	$	277
Options exercisable at October 2, 2011		1,065,311		$	11.69	1.94 years	$	107

The total intrinsic value of stock options (which is the amount by which the stock price exceeded the exercise price of the options on the date of exercise) exercised during the nine-month period ended October 2, 2011 was $45.

FASB’s guidance for share-based payments requires cash flows from excess tax benefits to be classified as a part of cash flows from financing activities. Excess tax benefits are realized tax benefits from tax deductions for exercised stock options in excess of the deferred tax asset attributable to stock compensation costs for such stock options. We did not record any excess tax benefits in the first nine months of 2011 and 2010. Cash received from stock option exercises under our stock-based compensation plans for the nine-month periods ended October 2, 2011 and September 26, 2010 was $57 and $-0-, respectively.

d. Warrants

On May 19, 2006, in connection with our acquisition of ABLE New Energy Co., Ltd., we granted the sellers warrants to acquire 100,000 shares of common stock. The exercise price of the warrants was $12.30 per share and the warrants had a five-year term. In January 2008, warrants to acquire 82,000 shares of common stock were exercised, for total proceeds received of $1,009. In January 2009, warrants to acquire 10,000 shares of common stock were exercised, for total proceeds received of $123. In May 2011, the remaining outstanding warrants to acquire 8,000 shares of common stock expired without being exercised.

e. Restricted Stock Awards

No restricted stock was awarded during the nine-month periods ended October 2, 2011 and September 26, 2010.

The activity of restricted stock awards for the nine months of 2011 is summarized as follows:

				Weighted Average
	Number of Shares			Grant Date Fair Value
Unvested at December 31, 2010		9,048		$	11.94
Granted		—			—
Vested		(4,925	)		12.01
Forfeited		(2,905	)		12.07
Unvested at October 2, 2011		1,218		$	11.33

We recorded compensation expense related to restricted stock awards of $(8) and $(31) for the three- and nine-month periods ended October 2, 2011, respectively, and $27 and $63 for the three- and nine-month periods ended September 26, 2010, respectively. As of October 2, 2011, we had $4 of total unrecognized compensation expense related to restricted stock awards, which is expected to be recognized over the remaining weighted average period of approximately 0.28 years. The total fair value of these grants that vested during the nine-month period ended October 2, 2011 was $32.