Note 5 - Stock-based Compensation

9 Months Ended

Oct. 02, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 5 – STOCK-BASED COMPENSATION

Stock Option Awards

In accordance with accounting standards, the Company measures the cost of employee services received in exchange for an award of equity instruments based on the grant date fair value of the award. That cost will be recognized over the period in which the employee is required to provide the services – the requisite service period (usually the vesting period) – in exchange for the award.

All outstanding stock options vested prior to the end of 2013, and therefore there was no stock option compensation expense in the first nine months of 2015 or 2016.

As of October 2, 2016, there were 87,500 stock options outstanding and exercisable, at an average exercise price of $8.75 per share. There were no stock options granted in 2016 or 2015. There were no exercises or forfeitures of stock options in the first nine months of 2016. The aggregate intrinsic value of the outstanding and exercisable stock options was $0.7 million as of October 2, 2016.

Restricted Stock Awards

During the nine months ended October 2, 2016 and October 4, 2015, the Company granted restricted stock awards for 272,000 and 597,000 shares of common stock, respectively. Awards of restricted stock (or a portion thereof) vest with respect to each recipient over a two to three-year period from the date of grant, provided the individual remains in the employment or service of the Company as of the vesting date. Additionally, certain awards (or a portion thereof) could vest earlier upon the attainment of certain performance criteria, in the event of a change in control of the Company, or upon involuntary termination without cause.

Compensation expense related to restricted stock grants was $2.4 million and $10.9 million for the nine months ended October 2, 2016 and October 4, 2015, respectively. Accounting standards require that the Company estimate forfeitures for restricted stock and reduce compensation expense accordingly. The Company has reduced its expense by the assumed forfeiture rate and will evaluate experience against this forfeiture rate going forward.

The following table summarizes restricted stock outstanding as of October 2, 2016, as well as activity during the nine months then ended:

	Restricted Shares		Weighted Average Grant Date Fair Value
Outstanding at January 3, 2016		1,470,000	$	17.92
Granted		272,000		17.36
Vested		1,004,000		18.47
Forfeited or canceled		174,000		16.71
Outstanding at October 2, 2016		564,000	$	17.04

As of October 2, 2016, the unrecognized total compensation cost related to unvested restricted stock was $5.6 million. That cost is expected to be recognized by the end of 2019.

Performance Share Awards

In 2016, the Company issued awards of performance shares to certain employees. These awards vest based on the achievement of certain performance-based goals over a performance period of one to three years, subject to the employee’s continued employment through the last date of the performance period, and will be settled in shares of our common stock or in cash at the Company’s election. The number of shares that may be issued in settlement of the performance shares to the award recipients may be greater (up to 200%) or lesser than the nominal award amount depending on actual performance achieved as compared to the performance targets set forth in the awards.

The following table summarizes the performance shares outstanding as of October 2, 2016, as well as the activity during the nine months then ended:

	Performance Shares		Weighted Average Grant Date Fair Value
Outstanding at January 3, 2016		0	$	0
Granted		441,000		17.23
Vested		3,500		17.22
Forfeited or canceled		7,500		17.22
Outstanding at October 2, 2016		430,000	$	17.23

Compensation expense related to the performance shares for the nine months ended October 2, 2016 was $1.0 million. Unrecognized compensation expense related to these performance shares was approximately $6.5 million as of October 2, 2016. No performance shares were granted or outstanding during 2015.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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