Shareholders' Equity

6 Months Ended

Jun. 30, 2012

Shareholders' Equity

Shareholders' Equity

8.Shareholders’ Equity

The 2005 Plan was approved at our 2005 Annual Meeting of Shareholders and initially reserved for issuance of 410,518 shares of Common Stock, which is the number of reserved but unissued shares available for issuance under the 1995 Plan.  The number of shares of Common Stock reserved for issuance has been increased since 2005 to a total of 2,710,518 as of the date of this filing, pursuant to a series of amendments to the 2005 Plan approved by our shareholders.  If any shares of Common Stock subject to awards granted under the 2005 Plan are canceled, those shares will be available for future awards under the 2005 Plan.  The 2005 Plan expires in May 2015, and awards granted under the 2005 Plan may include: nonqualified stock options, incentive stock options, restricted stock, restricted stock units, stock appreciation rights, performance units and stock-reference awards.  Prior to May 2008, all stock option grants had a five year term.  The fair value of these stock option grants is amortized to expense over the vesting period, generally five years for employees and one year for the Board of Directors.  In May 2008, our Board of Directors approved a 10 year term for all future stock option grants, with vesting periods of five years and one year for employees and Board of Director members, respectively.

Restricted share activity for the six months ending June 30, 2012 was as follows:

	Number		Weighted Average Grant Date Fair Value
Nonvested at December 31, 2011	405,667		$	3.62
Granted	177,437		6.49
Vested	(63,667	)	3.30
Forfeited	—		—
Nonvested at June 30, 2012	519,437		$	4.64

During the six months ended June 30, 2012 and June 25, 2011, we recorded total share-based compensation expense from restricted stock of $0.1 million and $0.2 million, respectively.  As of June 30, 2012 the total unrecognized costs related to non-vested restricted stock awards granted was $1.4 million, which is expected to be recognized over a weighted average period of 1.35 years.  This expected compensation expense does not reflect any new awards, or modifications to existing awards, that could occur in the future.

The following table summarizes stock option activity during the six months ended June 30, 2012:

	Options Outstanding		Weighted Average Exercise Price		Aggregate Intrinsic Value (in-the-money options)		Weighted Average Remaining Contractual Life(in years)
Outstanding at January 1, 2012	1,786,500		$	2.52
Granted	197,500		6.55
Exercised	(333,700	)	2.44
Forfeited or expired	(129,900	)	2.80
Outstanding at June 30, 2012	1,520,400		$	3.05	$	4,990,998	6.04

The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based on our closing stock price of $6.30 as of June 30, 2012, which would have been received by the option holders had all option holders exercised options and sold the underlying shares on that date.

During the six months ended June 30, 2012 and June 25, 2011, we recorded total share-based compensation expense from stock options of $0.5 million and $0.3 million, respectively.  As of June 30, 2012 the total unrecognized costs related to non-vested stock option awards granted was $1.5 million, which is expected to be recognized over a weighted average period of 3.05 years.  This expected compensation expense does not reflect any new awards, or modifications to existing awards, that could occur in the future.

The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option pricing model with the following weighted-average assumptions for the quarters and six months ended:

	Quarter Ended		Six Months Ended
	June 30, 2012	June 25, 2011	June 30, 2012	June 25, 2011
Expected dividend yield (%)	0	0	0	0
Expected volatility (%)	56	58	56-58	58
Risk-free interest rate (%)	1.7	3.2	1.7 - 3.5	3.2 - 3.5
Expected life (years)	5.5-6.5	6.5	5.5-6.5	6.5

The expected dividend yield was based on our expectation of future dividend payouts. The volatility assumption was based on historical volatility during the time period that corresponds to the expected life of the option. The expected life (estimated period of time outstanding) of stock options granted was estimated based on historical exercise activity.  The risk-free interest rate assumption was based on the interest rate of U.S. Treasuries on the date the option was granted.

Issuer Purchases of Equity Securities

The Company’s Board of Directors approved a stock re-purchase program that was publically announced on Form 8-K filed with the SEC on June 21, 2011 whereby up to $3 million of common stock could be purchased from time to time at the discretion of management (the “2011 program”).  Repurchased shares under such a program are generally held as treasury stock and are available for general corporate purposes unless and until such shares are retired by the Board.  The 2011 program expired on June 20, 2012.  No shares were repurchased under the 2011 program.