Stock-Based Compensation

12 Months Ended

Jan. 04, 2014

7. Stock-Based Compensation

We have two stock-based compensation plans covering officers, directors and certain employees and consultants: the 2004 Equity Incentive Plan (the “2004 Plan”) and the 2006 Long Term Equity Incentive Plan (the “2006 Plan”). The plans are designed to motivate and retain individuals who are responsible for the attainment of our primary long-term performance goals. The plans provide a means whereby our employees and directors develop a sense of proprietorship and personal involvement in our development and financial success and encourage them to devote their best efforts to our business. Although we do not have a formal policy on the matter, we issue new shares of our common stock to participants, upon the exercise of options, upon the granting of restricted stock or upon the vesting of performance shares, out of the total amount of common shares authorized for issuance under the 2004 Plan or the 2006 Plan.

The 2004 Plan provides for the grant of nonqualified stock options, incentive stock options and restricted shares of our common stock to participants of the plan selected by our Board of Directors or a committee of the Board that administers the 2004 Plan. We reserved 2,222,222 shares of our common stock for issuance under the 2004 Plan. The terms and conditions of awards under the 2004 Plan are determined by the administrator for each grant.

The 2006 Plan permits the grant of nonqualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance units, cash-based awards, and other stock-based awards to participants of the 2006 Plan selected by our Board of Directors or a committee of the Board that administers the 2006 Plan. We reserved 12,200,000 shares of our common stock for issuance under the 2006 Plan. The terms and conditions of awards under the 2006 Plan are determined by the administrator for each grant. Awards issued under the 2006 Plan are subject to accelerated vesting in the event of a change in control as such event is defined in the 2006 Plan.

During fiscal 2013, the Compensation Committee granted 1,202,185 restricted shares of our common stock to certain of our officers and directors. Due to the change in executive leadership, 1,081,071 restricted shares vested. In addition, 378,629 restricted shares of certain other executives vested as a result of the 2013 restructuring. Restricted shares of 2,587,452 vested in fiscal 2013 due to the completion of the vesting term and the modification related to the change in executive leadership and the 2013 restructuring. In addition, in fiscal 2013 the Compensation Committee granted certain of our executive officers and directors awards of performance shares of our common stock. These performance share awards, which totaled 2,969,424, and vest in three equal tranches, are contingent upon the successful achievement of certain financial and strategic goals approved by the Compensation Committee. In conjunction with the change in executive leadership and the 2013 restructuring, performance shares of 627,320 vested due to the removal of vesting and performance criteria. There were no stock options granted during fiscal 2013, 2012 or fiscal 2011.

We recognize compensation expense equal to the grant-date fair value for all share-based payment awards that are expected to vest. This expense is recorded on a straight-line basis over the requisite service period of the entire award, unless the awards are subject to market or performance conditions, in which case we recognize compensation expense over the requisite service period of each separate vesting tranche to the extent the occurrence of such conditions are probable. All compensation expense related to our share-based payment awards is recorded in “Selling, general and administrative” expense in the Consolidated Statements of Operations and Comprehensive Loss.

As of January 4, 2014, there was $1.4 million and $4.4 million of total unrecognized compensation expense related to restricted stock and performance shares, respectively. The unrecognized compensation expense is expected to be recognized over weighted average term of 1.4 years and 1.5 years for restricted stock and performance shares, respectively. As of December 29, 2012, there was $2.5 million of total unrecognized compensation expense related to restricted stock. There was no future compensation expense remaining for options as of January 4, 2014 and December 29, 2012. As of January 4, 2014, the weighted average remaining contractual term for our options, restricted stock, and performance shares was 4.1 years, 1.2 years and 1.2 years, respectively. As of December 29, 2012, the weighted average remaining contractual term for our options and restricted stock was 4.9 years and 1.4 years, respectively. The maximum contractual term for stock options, restricted stock, and performance shares is 10 years, 1 to 3 years, and 1 to 3 years, respectively.

For fiscal 2013, fiscal 2012 and fiscal 2011, our total stock-based compensation expense was $6.1 million, $2.8 million, and $2.0 million, respectively. We also recognized related income tax benefits of $2.4 million, $1.1 million and $0.8 million, respectively which has been offset by a valuation allowance. Approximately $2.9 million of total stock-based compensation during fiscal 2013 is related to the 2013 restructuring and the change in executive leadership.

The total fair value of the options vested in fiscal 2011 was $0.7 million. There were no options vested in fiscal 2012 and fiscal 2013. For restricted stock, the total fair value vested in 2013, fiscal 2012 and fiscal 2011 was $6.4 million, $2.3 million and $2.2 million, respectively. For performance shares, the total fair value vested in 2013 was $1.5 million.

There were no stock option exercises during fiscal 2013, fiscal 2012 or fiscal 2011. We present the benefits of tax deductions in excess of recognized compensation expense as both a financing cash inflow and an operating cash outflow in our Consolidated Statements of Cash Flows when present. There were $16 thousand excess tax benefits in fiscal 2013. There were no excess tax benefits in fiscal 2012 and fiscal 2011.

On December 30, 2013, the Compensation Committee approved an amendment to the 2013 Performance Share Award Agreement under the 2006 Plan (the “2013 Amendment”). The 2013 Amendment provides that the first tranche of the performance shares granted during fiscal 2013 will vest in fiscal 2014, despite the original performance criteria not being achieved. The 2013 Amendment was determined to be a modification of the award and an adjustment related to the difference in fair value was recorded in fiscal 2013. The related awards will vest in fiscal 2014.

On December 14, 2010, the Compensation Committee approved an amendment to the 2008 Performance Share Award Agreement under the 2006 Plan (the “2010 Amendment”). The 2010 Amendment provides that the Company may, at the discretion of the Compensation Committee, settle grants pursuant to Performance Share Award Agreements either in (i) one share of common stock of the Company for each Performance Share (as defined in the 2006 Plan) earned or (ii) a lump sum cash payment equal to the Fair Market Value (as defined in the 2006 Plan) of one share of common stock of the Company for each Performance Share earned. The 2010 Amendment was determined to be a modification of the award and an adjustment related to the difference in fair value was recorded in fiscal 2010. The award, which impacts eight employees, was classified as a liability award and was marked to market. On January 1, 2011, the fair value of these awards was based on the closing price of our common stock on December 31, 2010 of $3.66. These awards were settled in cash on January 7, 2011. Our restricted stock units were also settled in cash upon vesting and were considered liability awards. Therefore, these are not included in the computation of the basic and diluted earnings per share.

The tables below summarize activity and include certain additional information related to our outstanding employee stock options for the three years ended January 4, 2014. There have been no new employee stock option grants for the three years ended January 4, 2014.


	Shares			Weighted Average Exercise Price
Options outstanding at January 1, 2011		924,815		$	6.31
Options granted		—			—
Options exercised		—			—
Options forfeited		—			—
Options expired		(19,499	)		12.53
Options outstanding at December 31, 2011		905,316			6.18
Options granted		—			—
Options exercised		—			—
Options forfeited		—			—
Options expired		—			—
Options outstanding at December 29, 2012		905,316			6.18
Options granted		—			—
Options exercised		—			—
Options forfeited		—			—
Options expired		(120,816	)		13.58
Options outstanding at January 4, 2014		784,500			5.05
Options exercisable at January 4, 2014		784,500		$	5.05


	Outstanding						Exercisable
Price Range	Number of Options		Weighted Average Exercise Price		Remaining Contractual Life (in Years)		Number of Options		Weighted Average Exercise Price		Remaining Contractual Life (in Years)
$4.66		750,000	$	4.66		4.2		750,000	$	4.66		4.2
$11.40-$14.01		34,500	$	13.25		2.3		34,500	$	13.25		2.3
		784,500				4.1		784,500				4.1

The following tables summarize activity for our performance shares, restricted stock awards and restricted stock unit awards during fiscal 2013, fiscal 2012 and fiscal 2011:


	Restricted Stock					Performance Shares			Restricted Stock Units
				Weighted
	Number of			Average Fair		Number of			Number of
	Awards			Value		Awards			Awards (1)
Outstanding at January 1, 2011(2)		1,914,288			2.67		240,835			127,950
Granted		819,240			3.14		—			—
Vested(2)		(364,303	)		6.16		(240,835	)		(63,200	)
Forfeited		(7,801	)		3.26		—			(15,400	)
Outstanding at December 31, 2011		2,361,424			3.22		—			49,350
Granted		2,067,835			1.52		—			—
Vested		(681,484	)		3.39		—			(48,250	)
Forfeited		(193,037	)		2.76		—			(1,100	)
Outstanding at December 29, 2012		3,554,738			1.22		—			—
Granted(3)		1,202,185			3.15		2,969,424			—
Vested(3)		(2,587,452	)		2.48		(627,320	)		—
Forfeited(3)		(551,188	)		2.28		(149,236	)		—
Outstanding at January 4, 2014(3)		1,618,283		$	2.50		2,192,868			—

(1)	The restricted stock units were settled in cash. The fair value of these awards was marked-to-market each reporting period through the date of settlement. During fiscal 2012 and fiscal 2011, certain restricted stock units vested and approximately $0.1 million and $0.2 million, respectively, was paid out to settle these awards.

(2)	During fiscal 2011 certain performance shares vested and approximately $0.9 million was paid out to settle these awards. The fair value of these shares was marked to market each reporting period through the settlement date.

(3)	The performance shares granted in 2013 will be settled in shares of common stock of the Company. The weighted average fair value for performance shares granted, vested, and forfeited was $2.95, $2.36, and $3.13, respectively. The weighted average fair value for performance shares outstanding as of January 4, 2014 is $2.55.

- 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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