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STOCK OPTION AND BENEFIT PLANS | 12 Months Ended
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Jun. 30, 2012
STOCK OPTION AND BENEFIT PLANS | 7. STOCK OPTION AND BENEFIT PLANS The Company’s incentive plan provides for equity and liability awards to employees and non-employee directors in the form of stock options, stock appreciation rights (SARs), restricted stock, restricted stock units, stock awards, stock units, performance shares, performance units, and other stock –based or cash-based awards. Compensation cost is recognized on a straight-line basis over the requisite employee service period, which is generally the vesting period, and is recorded as employee compensation expense in cost of goods sold and selling general and administrative expenses. Share-based compensation is recognized only for those awards that are expected to vest, with forfeitures estimated at the date of grant based on historical experience and future expectations. On July 27, 2011, the Company granted 184,666 SARs under the 2010 Incentive Plan to certain key employees and outside directors at a strike price of $4.40 and a grant date weighted average fair market value of $2.20. On January 26, 2012, the Company granted 32,000 SARs under the 2010 Incentive Plan to certain key employees at a strike price of $6.30 and a grant date weighted average fair market value of $3.08. In addition to service conditions, these SARs contain a performance condition. The additional performance condition is based upon the achievement of Return on Invested Capital (ROIC) goals relative to a peer group. All awards with performance conditions are measured over the vesting period and are charged to compensation expense over the requisite service period based on the number of shares expected to vest. The SARs cliff vest after a three-year period from date of grant and expire five years from date of grant. The grant date fair value for the awards granted during fiscal year 2012 were estimated using the Black Scholes option valuation method with the following weighted average assumptions on grant date:
|  | Fiscal Year 2012 |
|  | January 26, 2012 |  |  | July 27, 2011 |
Expected dividend yield |  |  | 0.00 | % |  |  | 0.00 | %
Risk – free interest rate |  |  | 0.52 | % |  |  | 1.16 | %
Expected volatility |  |  | 64.90 | % |  |  | 65.50 | %
Expected life |  |  | 4.00 |  |  |  | 4.00 |
On October 21, 2010, the Company obtained shareholder approval of the 2010 Incentive Plan at the Annual Shareholder Meeting. As a result, the Company replaced the cash-settlement feature with a net-share-settlement feature for the SARs granted during the fourth quarter of fiscal 2010. Therefore, the awards were reclassified from liability awards to equity awards effective October 21, 2010 at a weighted average fair value of $2.89. The fair value for the liability awards amended to equity awards during fiscal year 2011 were estimated using the Black-Scholes option valuation model with the following weighted average assumptions as of October 21, 2010:
|  | Fiscal Year 2011 |
|  | October 21, 2010 |
Expected dividend yield |  |  | 0.00 | %
Risk – free interest rate |  |  | 0.73 | %
Expected volatility |  |  | 68.30 | %
Expected life |  |  | 3.56 |
Stock-based compensation expense is recognized only for those awards that are expected to vest, with forfeitures estimated at the date of grant based on the Company’s historical experience and future expectations. This forfeiture rate will be revised, if necessary, in subsequent periods if actual forfeitures differ from the amount estimated. Stock-based compensation expense for fiscal years ended June 30, 2012, July 2, 2011 and July 3, 2010 was $0.6 million, $0.5 million and $0.1 million, respectively. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which differ significantly from the SARs, as traded options have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions, particularly for the expected term and expected stock price volatility. Changes in these assumptions can materially affect the fair value estimates. The intrinsic value for options exercised in fiscal years 2012, 2011 and 2010 was $0.3 million, $0.2 million and $0.5 million, respectively. As of June 30, 2012, total unrecognized compensation expense related to nonvested share-based compensation arrangements was approximately $0.8 million. This expense is expected to be recognized over a weighted-average period of 1.47 years. The following table summarizes option/SARs activity of all plans from July 2, 2011 through June 30, 2012:
|  | Shares Available For Grant |  |  | Options/SARs Outstanding |  |  | Aggregate Intrinsic Value (in thousands) |  |  | Weighted Average Exercise Price |  |  | Weighted Average Remaining Contractual Life (in years) |
Balance at July 2, 2011 |  |  | 678,000 |  |  |  | 668,613 |  |  | $ | 240 |  |  | $ | 5.29 |  |  |  | 3.3 |
Shares authorized |  |  | — |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Options/SARs granted |  |  | (216,666 | ) |  |  | 216,666 |  |  |  |  |  |  |  |  |  |  |  |  |
Options canceled and expired |  |  | — |  |  |  | (18,750 | ) |  |  |  |  |  |  |  |  |  |  |  |
Options exercised |  |  | — |  |  |  | (82,169 | ) |  |  |  |  |  |  |  |  |  |  |  |
Balance at June 30, 2012 |  |  | 461,334 |  |  |  | 784,360 |  |  | $ | 2,261 |  |  | $ | 5.36 |  |  |  | 3.1 |
Exercisable at June 30, 2012 |  |  |  |  |  |  | 45,694 |  |  | $ | 264 |  |  | $ | 2.47 |  |  |  | 1.3 |
The following is a summary of plan activity:
|  | Number of Options/SARs |  |  | Weighted Average Exercise Price |
Outstanding June 27, 2009 |  |  | 784,827 |  |  | $ | 3.48 |
Exercised during 2010 |  |  | (198,416 | ) |  |  | 3.05 |
Canceled |  |  | (262,917 | ) |  |  | 3.69 |
Outstanding July 3, 2010 |  |  | 323,494 |  |  |  | 3.57 |
Amended to equity |  |  | 522,000 |  |  |  | 5.89 |
Exercised during 2011 |  |  | (134,797 | ) |  |  | 3.66 |
Canceled |  |  | (42,084 | ) |  |  | 4.85 |
Outstanding, July 2, 2011 |  |  | 668,613 |  |  |  | 5.29 |
Granted during 2012 |  |  | 216,666 |  |  |  | 4.68 |
Exercised during 2012 |  |  | (82,169 | ) |  |  | 2.74 |
Canceled |  |  | (18,750 | ) |  |  | 6.50 |
Outstanding, June 30, 2012 |  |  | 784,360 |  |  | $ | 5.36 |
Additional information regarding options outstanding as of June 30, 2012, is as follows:
|  |  |  |  | Options/SARs Outstanding |  |  |  |  |  | Options/SARs Exercisable |  |  |  |
Range of Exercise Prices |  | Number Outstanding |  |  | Weighted Avg. Remaining Contractual Life (yrs.) |  |  | Weighted Avg. Exercise Price |  |  | Number Exercisable |  |  | Weighted Avg. Exercise Price |
$1.20 – $1.80 |  |  | 7,500 |  |  |  | 0.3 |  |  | $ | 1.20 |  |  |  | 7,500 |  |  | $ | 1.20 |
1.81 – 2.71 |  |  | 15,000 |  |  |  | 1.3 |  |  |  | 2.20 |  |  |  | 15,000 |  |  |  | 2.20 |
2.73 – 4.09 |  |  | 23,194 |  |  |  | 1.5 |  |  |  | 3.06 |  |  |  | 23,194 |  |  |  | 3.06 |
4.10 – 6.15 |  |  | 706,666 |  |  |  | 3.2 |  |  |  | 5.50 |  |  |  | — |  |  |  | — |
6.16 – 6.30 |  |  | 32,000 |  |  |  | 4.6 |  |  |  | 6.30 |  |  |  | — |  |  |  | — |
$1.20 to $6.30 |  |  | 784,360 |  |  |  | 3.1 |  |  | $ | 5.36 |  |  |  | 45,694 |  |  | $ | 2.47 |
The Company also has a defined contribution plan (401(k)) available to U.S. employees who have attained age 21. The Company contributes an amount equal to 100% of the employee’s contribution on the first 3% of the employee’s compensation and an additional 50% of the employee’s contribution on the following 2% of the employee’s compensation. Company contributions to the plan were approximately $0.5 million, $0.5 million, and $0.4 million during fiscal years 2012, 2011, and 2010, respectively.

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- 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. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Statement of Position (SOP) -Number 93-6 -Paragraph 53 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 64, 65, A240 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 + Details
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