Stock-Based Compensation

STOCK OPTION PLANS

The number of shares authorized for issuance under the Company’s 2005 Stock Incentive Plan, as amended and restated (the “2005 Plan”), is 11,424 shares at December 31, 2014. On October 21, 2014, the Company's number of shares authorized for issuance under the 2005 Plan increased 3,406 shares, including 206 shares as a result of cancellations, forfeitures or terminations under the 1997 Plan. The 2005 Plan provides for the grant of non-qualified and incentive stock options, restricted stock, stock appreciation rights and deferred stock awards to employees and non-employees. All stock options are granted with an exercise price of not less than 100% of the fair value of the Company’s common stock at the date of grant and the options generally have a term of seven years. There were 3,548 shares available for future grant under the 2005 Plan at December 31, 2014.

On August 15, 2014, as part of the Company's ongoing annual equity grant program for employees, the Company granted, for the first time, performance-based restricted stock awards to certain executives pursuant to the 2005 Plan. These performance awards vest annually over a three year requisite service period subject to the achievement of specific financial performance targets related to adjusted EBITDA as a percentage of revenue. Based on the performance targets, these awards require graded vesting that results in more rapid expense recognition compared to traditional time-based vesting over the same vesting period. The Company will monitor the probability of achieving the performance targets on a quarterly basis and may adjust periodic compensation expense accordingly.

EMPLOYEE STOCK PURCHASE PLAN

The number of shares authorized for issuance under the Company’s 1997 Employee Stock Purchase Plan, as amended and restated (“ESPP”), is 1,400 shares. Under the ESPP, rights are granted to purchase shares of common stock at 85% of the lesser of the market value of such shares at either the beginning or the end of each six-month offering period. The ESPP permits employees to purchase common stock through payroll deductions, which may not exceed 10% of an employee’s compensation as defined in the ESPP. There were 41 and 55 shares issued under the ESPP during the six months ended December 31, 2014 and 2013, respectively. Shares available for future purchase under the ESPP totaled 123 at December 31, 2014.

STOCK OPTION AND AWARD ACTIVITY

The following table summarizes activity of the Company’s stock option plans since June 30, 2014:



	Options Outstanding
	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (Years)
Outstanding at June 30, 2014	1,435		$	11.76	2.23
Granted	—		—
Exercised	(221	)	7.63
Cancelled	(70	)	21.48
Outstanding at December 31, 2014	1,144		$	11.98	1.99

The following table summarizes the status of the Company’s non-vested restricted stock awards since June 30, 2014:



	Non-vested Restricted Stock Awards
	Number of Shares		Weighted Average Grant Date Fair Value
Outstanding at June 30, 2014	2,091		$	10.15
Granted	759		11.63
Vested	(733	)	10.37
Forfeited	(160	)	10.79
Outstanding at December 31, 2014	1,957		$	10.59

STOCK-BASED COMPENSATION EXPENSE

The Company recognized the full expense of its share-based payment plans in the consolidated statements of operations for the three and six months ended December 31, 2014 and 2013 in accordance with FASB ASC 718 and did not capitalize any such costs on the consolidated balance sheets, as such costs that qualified for capitalization were not material. Under the fair value recognition provisions of FASB ASC 718, stock-based compensation cost is measured at the grant date based on the value of the award and is recognized as expense over the service period, net of estimated forfeitures. The following table presents share-based compensation expenses included in the Company’s consolidated statements of operations:



	Three Months Ended December 31,						Six Months Ended December 31,
	2014			2013			2014			2013
Cost of revenues	$	115		$	192		$	266		$	399
Selling, general and administrative	1,778			2,004			3,744			4,318
Research and development	363			420			797			887
Share-based compensation expense before tax	2,256			2,616			4,807			5,604
Income tax benefit	(839		)	(894		)	(1,759		)	(1,966		)
Net compensation expense	$	1,417		$	1,722		$	3,048		$	3,638