Quarterly report pursuant to Section 13 or 15(d)

Note 4 - Stock-based Compensation

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Note 4 - Stock-based Compensation
3 Months Ended
Jun. 28, 2015
Notes to Financial Statements  
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
N
ote
4
– Stock-based Compensation
 
The Company has two incentive stock plans, the 2006 Omnibus Incentive Plan (the “2006 Plan”) and the 2014 Omnibus Equity Compensation Plan (the “2014 Plan”). As a result of the approval of the 2014 Plan by the Company’s stockholders at the Company’s 2014 annual meeting, grants may no longer be issued under the 2006 Plan.
 
The Company believes that awards of long-term, equity-based incentive compensation will attract and retain directors, officers and employees of the Company and will encourage these individuals to contribute to the successful performance of the Company, which will lead to the achievement of the Company’s overall goal of increasing stockholder value. Awards granted under the 2014 Plan may be in the form of incentive stock options, non-qualified stock options, shares of restricted or unrestricted stock, stock units, stock appreciation rights or other stock-based awards. Awards may be granted subject to the achievement of performance goals or other conditions, and certain awards may be payable in stock or cash, or a combination of the two. The 2014 Plan is administered by the Compensation Committee of the Company’s Board of Directors (the “Board”), which selects eligible employees, non-employee directors and other individuals to participate in the 2014 Plan and determines the type, amount, duration and other terms of individual awards. At June 28, 2015, 1.0 million shares of the Company’s common stock were available for future issuance under the 2014 Plan.
 
Stock-based compensation expense is calculated according to FASB ASC Topic 718,
Compensation – Stock Compensation
, which requires stock-based compensation expense to be accounted for using a fair-value-based measurement. The Company recorded stock-based compensation expense of $256,000 and $215,000 during the three-month periods ended June 28, 2015 and June 29, 2014, respectively. The Company records the compensation expense related to stock-based awards granted to individuals in the same classifications as the cash compensation paid to those same individuals. No stock-based compensation costs have been capitalized as part of the cost of an asset as of June 28, 2015.
 
Stock Options:
The following table represents stock option activity for
the three-month periods ended June 28, 2015 and June 29, 2014
:
 
 
 
Three-Month Period Ended
 
 
Three-Month Period Ended
 
 
 
June 28, 2015
 
 
June 29, 2014
 
 
 
Weighted-
 
 
 
 
 
 
Weighted-
 
 
 
 
 
 
 
Average
 
 
Number of
 
 
Average
 
 
Number of
 
 
 
Exercise
 
 
Options
 
 
Exercise
 
 
Options
 
 
 
Price
 
 
Outstanding
 
 
Price
 
 
Outstanding
 
Outstanding at Beginning of Period
  $ 6.83       330,000     $ 5.76       185,000  
Granted
    8.38       110,000       7.90       165,000  
Outstanding at End of Period
    7.22       440,000       6.77       350,000  
Exercisable at End of Period
    6.47       247,500       5.62       135,000  
 
As of June 28, 2015, the intrinsic value of the outstanding and exercisable stock options was $403,000 and $391,000, respectively.
 
To determine the estimated fair value of stock options granted, the Company uses the Black-Scholes-Merton valuation formula, which is a closed-form model that uses an equation to estimate fair value. The following table sets forth the assumptions used to determine the fair value of the non-qualified stock options which were awarded to certain employees during the three-months ended June 28, 2015 and June 29, 2014, which options vest over a two-year period, assuming continued service.
 
 
 
Three-Month Periods Ended
 
 
 
June 28, 2015
 
 
June 29, 2014
 
Options issued
    110,000       165,000  
Grant date
 
June 12, 2015
   
June 18, 2014
 
Dividend yield
    3.82 %     4.05 %
Expected volatility
    20.00 %     30.00 %
Risk free interest rate
    1.12 %     0.95 %
Contractual term (years)
    10.00       10.00  
Expected term (years)
    3.00       3.00  
Forfeiture rate
    5.00 %     5.00 %
Exercise price (grant-date closing price) per option
  $ 8.38     $ 7.90  
Fair value per option
  $ 0.77     $ 1.19  
 
For the three-month periods ended June 28, 2015 and June 29, 2014, the Company recognized compensation expense associated with stock options as follows (in thousands):
 
 
 
 
Three-Month Period Ended June 28, 2015
 
 
Three-Month Period Ended June 29, 2014
 
 
 
Cost of
 
 
Other Marketing
 
 
 
 
 
 
Cost of
 
 
Other Marketing
 
 
 
 
 
 
 
Products
 
 
& Administrative
 
 
Total
 
 
Products
 
 
& Administrative
 
 
Total
 
Options Granted in Fiscal Year
 
Sold
 
 
Expenses
 
 
Expense
 
 
Sold
 
 
Expenses
 
 
Expense
 
2013
  $ -     $ -     $ -     $ 12     $ 12     $ 24  
2014
    7       7       14       7       7       14  
2015
    16       13       29       2       2       4  
2016
    1       1       2       -       -       -  
                                                 
Total stock option compensation
  $ 24     $ 21     $ 45     $ 21     $ 21     $ 42  
 
As of June 28, 2015, total unrecognized stock option compensation expense amounted to $178,000, which will be recognized as the underlying stock options vest over a weighted-average period of 1.25 years. The amount of future stock option compensation expense could be affected by any future stock option grants and by the separation from the Company of any individual who has received stock options that are unvested as of such individual’s separation date.
 
Non-vested Stock
Granted to Non-Employee Directors:
The Board granted the following shares of non-vested stock to the Company’s non-employee directors:
 
Number of Shares
Fair Value per Share
Three-Month Period Ended
28,000
$7.97
September 28, 2014
28,000
$6.67
September 29, 2013
42,000
$5.62
September 30, 2012
 
These shares vest over a two-year period, assuming continued service. The fair value of the non-vested stock granted to the Company’s non-employee directors was based on the closing price of the Company’s common stock on the date of each grant.
 
Non-vested Stock
Granted to Employees:
During the three-month period ended June 27, 2010, the Board awarded 345,000 shares of non-vested stock to certain employees in a series of grants, each of which was to vest only if (i) the closing price of the Company’s common stock was at or above certain target levels for any ten trading days out of any period of 30 consecutive trading days and (ii) the respective employees remained employed through July 29, 2015. The Company, with the assistance of an independent third party, determined that the aggregate grant date fair value of the awards amounted to $1.2 million.
 
With the closing price conditions having been met for these awards, the Board has at various times approved amendments to provide for the immediate vesting of all or a portion of several of the grants. The vesting of these awards was accelerated in order to maximize the eventual deductibility of the associated compensation expense by the Company for income tax purposes. As a result of the acceleration of these grants, 240,000 of the original 345,000 shares remained non-vested as of June 28, 2015.
 
Performance Bonus Plan:
  The Company maintains a performance bonus plan for certain executive officers that provides for awards of shares of common stock in the event that the aggregate average market value of the common stock during the relevant fiscal year, plus the amount of cash dividends paid in respect of the common stock during such period, increases.
These individuals
may instead be awarded cash, if and to the extent that insufficient shares of common stock are available for issuance from all shareholder-approved, equity-based plans or programs of the Company in effect. The performance bonus plan also imposes individual limits on awards and
provides that shares of common stock that may be awarded will vest over a two-year period. Compensation expense associated with performance bonus plan awards are recognized over a three-year period – the fiscal year in which the award is earned, plus the two-year vesting period.
 
In connection with the performance bonus plan, the Company, in respect of fiscal year 2015, awarded 58,532 shares of common stock with a fair value of $7.18 per share during the three-month period ended June 28, 2015. In connection with these awards, the Company recognized compensation expense of $140,000 during fiscal year 2015, and will recognize, on a straight-line basis, $140,000 in compensation expense during each of fiscal years 2016 and 2017.
 
 
In connection with the performance bonus plan, the Company, in respect of fiscal year 2014, awarded 188,232 shares of common stock with a fair value of $5.65 per share during the three-month period ended June 29, 2014. In connection with these awards, the Company recognized compensation expense of $354,000 during each of fiscal years 2014 and 2015, and will recognize, on a straight-line basis, $354,000 in compensation expense during fiscal year 2016. During the three-month period ended June 28, 2015, 94,116 of these shares vested, with such shares having an aggregate value of $735,000. Each of the individuals to which shares vested surrendered to the Company the shares necessary to satisfy the income tax withholding obligations that arose from the vesting of the shares, and the Company remitted $360,000 to the appropriate taxing authorities on their behalf.
 
For the three-month periods ended June 28, 2015 and June 29, 2014, the Company recognized compensation expense associated with stock grants, which is included in marketing and administrative expenses in the accompanying consolidated statements of income, as follows (in thousands):
 
 
 
 
Three-Month Period Ended June 28, 2015
 
 
Three-Month Period Ended June 29, 2014
 
 
 
 
 
 
 
Non-employee
 
 
Total
 
 
 
 
 
 
Non-employee
 
 
Total
 
Stock Granted in Fiscal Year
 
Employees
 
 
Directors
 
 
Expense
 
 
Employees
 
 
Directors
 
 
Expense
 
2011
  $ 36     $ -     $ 36     $ 41     $ -     $ 41  
2013
    -       -       -       -       20       20  
2014
    -       23       23       -       23       23  
2015
    89       28       117       89       -       89  
2016
    35       -       35       -       -       -  
                                                 
Total stock grant compensation
  $ 160     $ 51     $ 211     $ 130     $ 43     $ 173  
 
 
As of June 28, 2015, total unrecognized compensation expense related to the Company’s non-vested stock grants amounted to $652,000, which will be recognized over the respective vesting terms associated with each block of non-vested stock indicated above, such grants having an aggregate weighted-average vesting term of 5.1 months. The amount of future compensation expense related to the Company’s non-vested stock grants could be affected by any future non-vested stock grants and by the separation from the Company of any individual who has non-vested stock grants as of such individual’s separation date.