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Share-Based Compensation Plans
 12 Months Ended
Jan. 01, 2012
Share-Based Compensation Plans [Abstract]  
Share-Based Compensation Plans
(14) Share-Based Compensation Plans

2002 Stock Incentive Plan

In June 2002, the Company adopted the 2002 Stock Incentive Plan (“2002 Plan”). The 2002 Plan provided for the grant of incentive share option awards and non-qualified share option awards to the Company’s employees, directors and specified consultants. Share option awards granted under the 2002 Plan generally vested and became exercisable at the rate of 25% per year with a maximum life of ten years. Upon exercise of granted share option awards, shares are expected to be issued from new shares previously registered for the 2002 Plan. The 2002 Plan was terminated in connection with the approval of the 2007 Equity and Performance Incentive Plan, as described below. Consequently, at January 1, 2012, no shares remained available for future grant and 955,123 share option awards remained outstanding under the 2002 Plan, subject to adjustment to reflect any changes in the outstanding common stock of the Company by reason of any reorganization, recapitalization, reclassification, stock combination, stock dividend, stock split, reverse stock split, spin off or other similar transaction.

2007 Equity and Performance Incentive Plan

In June 2007, the Company adopted the 2007 Equity and Performance Incentive Plan (“2007 Plan”) and cancelled the 2002 Plan. The aggregate amount of shares authorized for issuance under the 2007 Plan is 2,399,250 shares of common stock of the Company, plus any shares subject to awards granted under the 2002 Plan which are forfeited, expire or are cancelled after April 24, 2007 (the effective date of the 2007 Plan). This amount represents the amount of shares that remained available for grant under the 2002 Plan as of April 24, 2007. Awards under the 2007 Plan may consist of share option awards (both incentive share option awards and non-qualified share option awards), stock appreciation rights, nonvested share awards, other stock unit awards, performance awards, or dividend equivalents. Any shares that are subject to awards of options or stock appreciation rights shall be counted against this limit as one share for every one share granted, regardless of the number of shares actually delivered pursuant to the awards. Any shares that are subject to awards other than share option awards or stock appreciation rights (including shares delivered on the settlement of dividend equivalents) shall be counted against this limit as 2.5 shares for every one share granted. The aggregate number of shares available under the 2007 Plan and the number of shares subject to outstanding share option awards will be increased or decreased to reflect any changes in the outstanding common stock of the Company by reason of any recapitalization, spin-off, reorganization, reclassification, stock dividend, stock split, reverse stock split, or similar transaction. Share option awards granted under the 2007 Plan generally vest and become exercisable at the rate of 25% per year with a maximum life of ten years. Share option awards, nonvested share awards and nonvested share unit awards provide for accelerated vesting if there is a change in control. The exercise price of the share option awards is equal to the quoted market price of the Company’s common stock on the date of grant. Upon the grant of nonvested share awards or the exercise of granted share option awards, shares are expected to be issued from new shares which were registered for the 2007 Plan.

 

Amendment and Restatement of 2007 Plan

On June 14, 2011, the Company’s shareholders approved an amendment and restatement of the Company’s 2007 Equity and Performance Incentive Plan (as so amended and restated, the “Amended 2007 Plan”). Generally, the amendment and restatement made the following revisions to the 2007 Plan that had been adopted as of April 24, 2007:

 

  •  

the maximum number of shares of the Company’s common stock that may be issued or subject to awards under the Amended 2007 Plan was increased by 1,250,000 from the number authorized by the 2007 Plan;

  •  

the term of the Amended 2007 Plan was extended through April 26, 2021 (i.e., by approximately four years from the scheduled expiration of the 2007 Plan);

  •  

the continuation of the terms of Article X of the Amended 2007 Plan was approved for purposes of Section 162(m) of the Internal Revenue Code; and

  •  

certain technical updates and enhancements were implemented, including an exception to certain vesting requirements for up to 10% of the shares authorized under the Amended 2007 Plan.

These principal features of the Amended 2007 Plan are not intended to be a complete discussion of all of the terms of the Amended 2007 Plan. A copy of the Amended 2007 Plan was filed in a Current Report on Form 8-K in the second quarter of fiscal 2011.

In fiscal 2011, the Company granted 152,100 nonvested share awards, 9,000 nonvested share unit awards and 44,000 share option awards to certain employees, as defined by ASC 718, Compensation—Stock Compensation, under the Amended 2007 Plan. At January 1, 2012, 1,728,552 shares remained available for future grant and 791,155 share option awards, 304,700 nonvested share awards and 9,000 nonvested share unit awards remained outstanding under the Amended 2007 Plan.

The Company accounts for its share-based compensation in accordance with ASC 718 and recognizes compensation expense on a straight-line basis over the requisite service period, net of estimated forfeitures, using the fair-value method for share option awards, nonvested share awards and nonvested share unit awards granted with service-only conditions. The estimated forfeiture rate considers historical employee turnover rates stratified into employee pools in comparison with an overall employee turnover rate, as well as expectations about the future. The Company periodically revises the estimated forfeiture rate in subsequent periods if actual forfeitures differ from those estimates. Compensation expense recorded under this method for fiscal 2011, 2010 and 2009 was $1.8 million, $1.7 million and $2.1 million, respectively, which reduced operating income and income before income taxes by the same amount. Compensation expense recognized in cost of sales was $0.1 million, $0.1 million and $0.1 million in fiscal 2011, 2010 and 2009, respectively, and compensation expense recognized in selling and administrative expense was $1.7 million, $1.6 million and $2.0 million in fiscal 2011, 2010 and 2009, respectively. The recognized tax benefit related to compensation expense for fiscal 2011, 2010 and 2009 was $0.5 million, $0.6 million and $0.8 million, respectively. Net income for fiscal 2011, 2010 and 2009 was reduced by $1.3 million, $1.1 million and $1.3 million, respectively, or $0.06, $0.05 and $0.06 per basic and diluted share, respectively.

 

Share Option Awards

The fair value of each share option award on the date of grant was estimated using the Black-Scholes method based on the following weighted-average assumptions:

 

      0000000000       0000000000       0000000000  
    Year Ended  
        January 1,    
2012		         January 2,    
2011		         January 3,    
2010		  
       

Risk-free interest rate

     2.0%        2.4%        2.3%   

Expected term

     7.30 years        6.50 years        6.50 years   

Expected volatility

     51.0%        55.2%        55.2%   

Expected dividend yield

     3.83%        1.54%        4.07%   

The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected term of the option award; the expected term represents the weighted-average period of time that option awards granted are expected to be outstanding giving consideration to vesting schedules and historical participant exercise behavior; the expected volatility is based upon historical volatility of the Company’s common stock; and the expected dividend yield is based upon the Company’s current dividend rate and future expectations.

The weighted-average grant-date fair value of share option awards granted for fiscal 2011, 2010 and 2009 was $2.84 per share, $6.26 per share and $1.92 per share, respectively.

A summary of the status of the Company’s share option awards is presented below:

 

                         
   

Shares

      

Weighted-

Average

Exercise

Price

  

Weighted-

Average
Remaining

Contractual

Life

(In Years)

      

Aggregate

Intrinsic

Value
             

Outstanding at January 2, 2011

   1,795,550    $   14.25             

Granted

   44,000        7.82             

Exercised

   (48,262)       6.56             

Forfeited or Expired

   (45,010)       16.16             
   

 

      

 

            

Outstanding at January 1, 2012

   1,746,278    $   14.25    4.87    $   3,044,384 
   

 

      

 

  

 

      

 

Exercisable at January 1, 2012

   1,362,740    $   16.52    4.18    $   1,384,423 
   

 

      

 

  

 

      

 

Vested and Expected to Vest at January 1, 2012

   1,741,941    $   14.27    4.86    $   3,025,700 
   

 

      

 

  

 

      

 

The aggregate intrinsic value in the preceding table represents the total pre-tax intrinsic value, based upon the Company’s closing stock price of $10.44 as of January 1, 2012, which would have been received by the share option award holders had all share option award holders exercised their share option awards as of that date.

The total intrinsic value of share option awards exercised for fiscal 2011, 2010 and 2009 was approximately $0.2 million, $0.9 million and $0.3 million, respectively. The total cash received from employees as a result of employee share option award exercises for fiscal 2011, 2010 and 2009 was approximately $0.3 million, $0.8 million and $0.4 million, respectively. The actual tax benefit realized for the tax deduction from share option award exercises of share-based compensation awards in fiscal 2011, 2010 and 2009 totaled $0.1 million, $0.3 million and $0.1 million, respectively.

As of January 1, 2012, there was $0.5 million of total unrecognized compensation cost related to nonvested share option awards granted. That cost is expected to be recognized over a weighted-average period of 1.3 years.

 

Nonvested Share Awards and Nonvested Share Unit Awards

Nonvested share awards and nonvested share unit awards granted by the Company vest from the date of grant in four equal annual installments of 25% per year. Nonvested share awards are delivered to the recipient upon their vesting. With respect to nonvested share unit awards, vested shares will be delivered to the recipient on the tenth business day of January following the year in which the recipient’s service to the Company is terminated. The total fair value of nonvested share awards which vested during fiscal 2011, 2010 and 2009 was $0.8 million, $0.5 million and $0.2 million, respectively.

The following table details the Company’s nonvested share awards activity for fiscal 2011:

 

                 
   

Shares

        

Weighted-
Average Grant-
   Date Fair Value   

Balance at January 2, 2011

   233,750       $     13.69  

Granted

   152,100             11.84  

Vested

   (72,525)            12.62  

Forfeited

   (8,625)            13.32  
   

 

          

 

Balance at January 1, 2012

   304,700       $     13.03  
   

 

          

 

The following table details the Company’s nonvested share unit awards activity for fiscal 2011:

 

                 
   

Units

        

Weighted-
Average Grant-
   Date Fair Value   

Balance at January 2, 2011

   —         $     —  

Granted

   9,000             8.26  

Vested

   —               —  

Forfeited

   —               —  
   

 

          

 

Balance at January 1, 2012

   9,000       $     8.26  
   

 

          

 

The weighted-average grant-date fair value of nonvested share awards and nonvested share unit awards is the quoted market price of the Company’s common stock on the date of grant, as shown in the tables above. The weighted-average grant-date fair value of nonvested share awards granted in fiscal 2011, 2010 and 2009 was $11.84, $15.52 and $13.17, respectively. The weighted-average grant-date fair value per share of the Company’s nonvested share unit awards granted in fiscal 2011 was $8.26. No nonvested share unit awards were granted in fiscal 2010 or fiscal 2009.

As of January 1, 2012, there was $2.8 million and $0.1 million of total unrecognized compensation cost related to nonvested share awards and nonvested share unit awards, respectively. That cost is expected to be recognized over a weighted-average period of approximately 2.5 years and 3.5 years for nonvested share awards and nonvested share unit awards, respectively.

To satisfy employee minimum statutory tax withholding requirements for nonvested share awards that vest, the Company withholds and retires a portion of the vesting common shares, unless an employee elects to pay cash. In fiscal 2011, the Company withheld 23,754 common shares with a total value of $0.3 million. This amount is presented as a cash outflow from financing activities in the accompanying consolidated statements of cash flows.