—Stock Options and Incentive Compensation

For the Company, FASB ASC Topic 718 “Compensation – Stock Compensation” affects the stock options that have been granted and requires the Company to expense share-based payment (“SBP”) awards with compensation cost for SBP transactions measured at fair value. The Company has elected to use the simplified method of calculating the expected term of the stock options and historical volatility to compute fair value under the Black-Scholes option-pricing model. The risk-free rate for periods within the contractual life of the option is based on the U.S. zero coupon Treasury yield in effect at the time of grant. Forfeitures have been estimated based upon the Company’s historical experience.

1993 Key Employee Stock Incentive Plan

The Company maintains the Amended and Restated 1993 Key Employee Stock Incentive Program (as amended and restated December 12, 2002 and December 10, 2009) (the “Incentive Plan”), which authorizes grants to officers and other key employees of the Company and its subsidiaries of (i) stock options that are intended to qualify as incentive stock options, (ii) nonqualified stock options and (iii) restricted stock awards. An aggregate of 2,700,000 shares of Common Stock, subject to adjustment upon occurrence of certain events to prevent dilution or expansion of the rights of participants that might otherwise result from the occurrence of such events, has been reserved for issuance pursuant to the Incentive Plan. An individual’s award of stock options is limited to 500,000 shares in a five-year period.

Non-qualified stock options and incentive stock options have been granted to date and all options have been granted at an exercise price at least equal to market price at the date of grant. Options expire over a period not to exceed ten years from the date of grant and vest ratably over a three year period. In December 2011, options to purchase 56,500 shares were awarded to several officers and employees at an exercise price of $8.10 for stock options that are intended to qualify as incentive stock options. No non-qualified stock options have been awarded since December 2011.

In September 2012, 80,257 shares of restricted stock were granted to the newly appointed chief executive officer as part of his compensation package.

A summary of option activity under the plans is as follows:



		Number of Shares Under Option		Weighted Average Option Price



Outstanding at	November 1, 2011	520,185		$8.54
	Granted	56,500		8.10
	Exercised	(158,513	)	$4.01
	Canceled	(56,087	)	$10.96
Outstanding at	October 31, 2012	362,085		$9.99
	Granted	—		$0.00
	Exercised	(47,804	)	$6.28
	Canceled	(78,147	)	$12.45
Outstanding at	October 31, 2013	236,134		$9.93

There were 176,134 options exercisable as of October 31, 2013 with a weighted average exercise price of $9.90. At October 31, 2013 options outstanding had an intrinsic value of $1,534 and options exercisable had an intrinsic value of $1,149. Options that have an exercise price greater than the market price on October 31, 2013 were excluded from the intrinsic value computation. The intrinsic value of options exercised during fiscal 2013 and 2012 was $485 and $1,167, respectively.

The following table provides additional information regarding options outstanding as of October 31, 2013:



Exercise Prices	Options Outstanding	Exercise Price of Options Outstanding and Options Exercisable	Options Exercisable	Weighted Average Remaining Contractual Life


$13.06	15,000	$13.06	15,000	1.99
$14.74	34,000	$14.74	34,000	3.54
$2.11	9,000	$2.11	9,000	5.12
$5.30	53,634	$5.30	53,634	5.78
$12.04	85,000	$12.04	56,000	7.11
$8.10	39,500	$8.10	8,500	8.15

Totals	236,134		176,134

There were 56,671 options not exercisable as of October 31, 2013 with a weighted average exercise price of $10.12. No options were granted during the year ended October 31, 2013.

A summary of non-vested options as of and for the year ended October 31, 2013 is as follows:



Non-vested Options		Number of Shares		Weighted Average Grant-Date Fair Value



Non-vested at beginning of period		136,500		$10.46
Granted		—		$0.00
Vested		(58,828	)	$10.84
Forfeited		(21,001	)	$10.32
Non-vested at	October 31, 2013	56,671		$10.12

For the fiscal years ended October 31, 2013 and 2012, the Company recorded compensation expense related to the stock options currently vesting, effectively reducing pretax income by $456 and $730, respectively. The impact on earnings per share for each of the fiscal years ended October 31, 2013 and 2012 was a reduction of $0.02 per share basic and diluted. The total compensation cost related to nonvested awards not yet recognized as of October 31, 2013 and 2012 is a total of $165 and $620, respectively, which will be recognized over the next three fiscal years. The total compensation cost related to the restricted stock currently vesting is $282 and for the non-vesting restricted stock is $510.

The fair values of these options were estimated at the date of grant using the Black-Scholes option-pricing model with the following weighted average assumptions used for grants awarded during fiscal year 2012:



	2012
Risk-free interest	1.20	%
Dividend yield	—	%
Volatility factor—market	88.26	%
Expected life of options—years	6.00 years

Based upon the preceding assumptions, the weighted average fair value of stock options granted during fiscal year 2012 was $8.10 per share


	Incentive Bonus Plans

The Company maintains a Management Incentive Plan ("MIP") to provide the Chief Executive Officer and certain eligible employees ("participants") incentives for superior performance. The MIP is administered by the Compensation Committee of the Board of Directors and entitles the participants to be paid a cash bonus based upon varying percentages of their respective salaries, the level of achievement of the corporate goals established by the Compensation Committee and specific individual goals as established by the Chief Executive Officer (for employees other than the CEO). For fiscal years 2013 and 2012, the Compensation Committee established goals for corporate office personnel based on the Company's earnings before interest, taxes, depreciation and amortization ("EBITDA") and return on invested capital ("ROIC"). For the remaining participants, 50% of the incentive depends upon meeting the operating targets and metrics of the participant's operating unit and 50% is based upon attaining the corporate goals for the Company's performance. For fiscal 2013, participants in the MIP are entitled to receive an aggregate of $3,293 under the MIP. For fiscal 2012, participants in the MIP received an aggregate bonus of $3,176 under the MIP, which was paid in the first quarter of fiscal 2013.