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Stock-Based Compensation
 3 Months Ended
Mar. 30, 2012
Stock-Based Compensation

Note 12 — Stock-Based Compensation

 

The cost that has been charged against income for stock-based compensation is set forth below (in thousands):

 

    Three Months Ended
    March 30, 2012   April 1, 2011
Stock-based expense   $ 521     $ 270  
Restricted stock expense     127       96  
Consultant compensation     39       (11 )
         Total   $ 687     $ 355  

 

The Company recognized no net income tax benefit in its income statement for share-based compensation arrangements because the Company fully offsets net deferred tax assets with a valuation allowance. In addition, the Company capitalized $39,000 and $35,000 of stock compensation to inventory for the three months ended March 30, 2012 and April 1, 2011 and recognizes those amounts as expense in cost of sales as the inventory is sold.

 

Stock Option Plans

 

In fiscal year 2003, the Board of Directors approved the 2003 Omnibus Equity Incentive Plan (the “2003 Plan”) authorizing awards of equity compensation, including options to purchase common stock and restricted shares of common stock. The 2003 Plan amends, restates and replaces the 1991 Stock Option Plan, the 1995 Consultant Stock Plan, the 1996 Non-Qualified Stock Plan, and the 1998 Stock Option Plan (the “Restated Plans”). On May 19, 2010, the stockholders of STAAR approved the Restated 2003 Omnibus Plan, which increased the number of shares available for grants under the plan by 2,000,000 shares and extended the term of the plan to May 18, 2020. As of March 30, 2012, there were 1,205,199 shares authorized and available for grants under the Restated 2003 Omnibus Plan. The 2003 Plan provides for various forms of stock-based incentives. To date, of the available forms of awards under the 2003 Plan, the Company has granted only stock options, restricted stock, unrestricted share grants, and may grant in the future performance contingent shares. Options under the plan are granted at fair market value on the date of grant, become exercisable over a three year period, or as determined by the Board of Directors, and expire over periods not exceeding 10 years from the date of grant. Certain option and share awards provide for accelerated vesting if there is a change in control (as defined in the 2003 Plan). Pursuant to the plan, options for 3,335,445 shares were outstanding at March 30, 2012 with exercise prices ranging between $0.95 and $11.00 per share. Restricted stock grants under the 2003 Plan generally vest over a period of one, three or four years. There were 187,500 shares of restricted stock outstanding at March 30, 2012.

 

 

Assumptions

 

The fair value of each option award is estimated on the date of grant using a Black-Scholes option valuation model applying the assumptions noted in the following table. Expected volatilities are based on historical volatility of the Company’s stock. The Company uses historical data to estimate option exercise and employee termination behavior. The expected term of options granted is derived from the historical exercise activity over the past 15 years, and represents the period of time that options granted are expected to be outstanding. The Company has calculated a 9.92% estimated forfeiture rate used in the model for fiscal year 2012 option grants based on historical forfeiture experience. The risk-free rate for periods within the contractual life of the option is based on the U.S. Treasury yield curve in effect at the time of grant.

 

    Three Months Ended
    March 30, 2012   April 1, 2011
Expected dividend yield     0 %     0 %
Expected volatility     79.64 %     76.96 %
Risk-free interest rate     0.84 %     2.01 %
Expected term (in years)     5.21       5.49  

 

A summary of option activity under the Plans as of March 30, 2012 is presented below:

 

Options

  

Shares

(000’s)

  

 

Weighted-

Average

Exercise

Price

   Weighted-
Average
Remaining
Contractual
Term (Years)		  

Aggregate

Intrinsic

Value

(000’s)
Outstanding at December 31, 2011     3,064     $ 4.79       —         —    
Granted     424       10.97       —         —    
Exercised     (145 )     5.76       —         —    
Forfeited or expired     (8 )     6.51       —         —    
Outstanding at March 30, 2012     3,335     $ 5.53       6.75     $ 17,749  
Exercisable at March 30, 2012     2,079     $ 4.40       5.27     $ 13,366  

 

The weighted-average grant-date fair value of options granted during the three months ended March 30, 2012 and April 1, 2011 was $7.07 and $3.59 per option. The total fair value of options vested during the three months ended March 30, 2012 and April 1, 2011 was $739,673 and $285,049, respectively. During the three months ended March 30, 2012 and April 1, 2011, respectively, 145,332 and 160,165 options were exercised with an intrinsic value of $741,457 and $333,215.

 

A summary of the status of the Company’s non-vested shares as of March 30, 2012 and changes during the period is presented below:

 

 

 

 

Nonvested Shares

  

Shares

(000’s)

 Weighted-
Average
Grant Date
Fair Value
  Nonvested at December 30, 2011       1,085     $ 5.35  
  Granted       424       7.07  
  Vested       (245 )     3.01  
  Forfeited       (8 )     4.23  
  Nonvested at March 30, 2012       1,256     $ 4.81  

 

As of March 30, 2012, the Company had $4.9 million of total unrecognized compensation cost related to non-vested share-based compensation arrangements granted under the Plans. That cost is expected to be recognized over a weighted-average period of 2.37 years.