Shareholders' Equity

12 Months Ended

Sep. 30, 2011

Shareholders' Equity [Abstract]

Shareholders' Equity

10. Shareholders’ Equity

Common Stock

The Company’s authorized capital consists of 200,000,000 shares of common stock, par value $0.01 per share.

Stock-Based Award Plans - Successor

Conexant Holdings maintains the Plan, under which it has reserved 25 million shares for issuance. Awards issued to employees of Conexant under the Plan are settled in shares of Class A Common Stock of Conexant Holdings. All awards granted in the successor period from April 20, 2011 through September 30, 2011 were service-based awards. Since Conexant’s employees are the beneficiaries of the stock options granted under the Conexant Holdings Plan, expense for the stock options is recorded in the financial statements of Conexant. As of September 30, 2011, approximately 12.2 million shares of Conexant Holdings Class A Common Stock are available for grant under the Plan.

The following weighted average assumptions were used in the estimated grant date fair value calculations for stock options:

Fair market value of stock	$	0.01
Expected volatility		47	%
Risk-free rate		2	%
Expected life (years)		6.5

Stock options are granted with exercise prices of not less than the fair market value at grant date, generally vest over five years and expire ten years after the grant date. The fair market value of Conexant Holdings Class A Common stock was determined based on the current-value method. Expected volatility is based on historical volatility of a group of public companies considered to be peers of the Company. The risk free interest rates are based on the U.S. Treasury bill yield curve in effect at the time of grant for periods corresponding with the expected life of the stock option. The expected life represents the weighted average period of time that options granted are expected to be outstanding, calculated using the simplified method as prescribed by the SEC.

A summary of stock option activity is as follows (shares in thousands):

	Successor
	Shares			Weighted Average Exercise Price
Outstanding, April 20, 2011		—		$	—
Granted		12,876			3.21
Exercised		—			—
Forfeited		(73	)		3.21
Outstanding, September 30, 2011		12,803			3.21
Shares vested and expected to vest, September 30, 2011		11,404			3.21
Exercisable, September 30, 2011		—		$	—

Expense recorded for stock options issued under the Plan in the successor period from April 20, 2011 through September 30, 2011 was immaterial. At September 30, 2011, the total unrecognized fair value compensation cost related to non-vested stock options was less than $5,000 which is expected to be recognized over a remaining period of approximately five years. The weighted average remaining contractual term of the options outstanding is approximately 10 years.

Stock-Based Award Plans - Predecessor

All of the predecessor Company’s stock-based award plans were cancelled at the consummation of the Merger. All stock options and RSUs outstanding at the time of the Merger were cancelled. Stock options to acquire Company Common Stock that were outstanding and unexercised immediately prior to the Effective Time were cancelled and converted into the right to receive, with respect to each such option, an amount of cash equal to the excess, if any, of the Gold Merger Consideration over the exercise price per share under the option for each share subject to such option. Any option with an exercise price greater than or equal to the Gold Merger Consideration was cancelled without consideration. Each RSU that, as of immediately prior to the Effective Time, was outstanding and either held by a non-employee director of the Company, or held by a management-level employee of the Company at the rank of senior vice president or above was cancelled and converted into the right to receive an amount of cash equal to the Gold Merger Consideration. All remaining RSUs were cancelled with the holders of such RSUs being entitled to receive with respect to each RSU on the date that the RSU would have otherwise vested had the Effective Time not occurred an amount of cash equal to the Gold Merger Consideration (“replacement award”); provided that such payment will only be required if (a) the employee continues to be employed continuously by the surviving corporation through and including the original vesting date of such RSUs and (b) the employee has not otherwise been issued or granted any incentive compensation following the Effective Time (but prior to such original vesting date) that the surviving corporation’s board of directors has determined in good faith in its sole discretion to be an appropriate replacement for such RSUs.

The following predecessor disclosures regarding stock-based awards are for the period October 2, 2010 through April 19, 2011.

Stock Options

Prior to the Merger, stock options were granted with exercise prices of not less than the fair market value at the grant date, generally vested over four years and expired eight or ten years after the grant date. The Company settled stock option exercises with newly issued shares of Company Common Stock. The expected stock price volatility rates were based on the historical volatility of the Company’s common stock. The risk free interest rates were based on the U.S. Treasury yield curve in effect at the time of grant for periods corresponding with the expected life of the option or award. The average expected life represented the weighted average period of time that options or awards granted were expected to be outstanding.

A summary of stock option activity is as follows (shares in thousands):

	Predecessor
	Shares			Weighted Average Exercise Price
Outstanding, October 1, 2010		2,296		$	21.45
Granted		—			—
Exercised		(1	)		0.70
Forfeited		(706	)		21.89
Outstanding, April 19, 2011		1,589			21.25
Shares vested and expected to vest, April 19, 2011		1,589			21.26
Exercisable, April 19, 2011		1,559		$	21.57

During the predecessor period from October 2, 2010 through April 19, 2011 and the fiscal years ended October 1, 2010 and October 2, 2009, the Company recognized stock-based compensation expense for stock options of $0.1 million, $1.4 million, and $4.1 million, respectively.

Effective at the Merger date, all of the stock options were cancelled. Holders of stock options which had an exercise price less than the Gold Merger Consideration, either vested or unvested, were paid in cash the excess of the Gold Merger Consideration over the exercise price. Total cash paid was approximately $15,000 representing 11,400 vested stock options which was included in the Merger consideration, and $15,000 representing 13,000 unvested stock options, which was charged to expense.

Restricted Stock Units

The Company’s long-term incentive plans provided for the issuance of share-based RSU awards to officers and other employees and certain non-employees of the Company. These awards were subject to forfeiture if employment terminated during the prescribed vesting period (generally within one to three years of the date of award).

A summary of RSU award activity under the Company’s long-term incentive plans is as follows (shares in thousands):

	Predecessor
	Shares			Weighted Average Grant Date Fair Value
Outstanding, October 1, 2010		4,773		$	2.69
Granted		230			1.68
Vested		(1,337	)		2.81
Forfeited		(63	)		2.12
Outstanding, April 19, 2011		3,603		$	2.59

During the predecessor period from October 2, 2010 through April 19, 2011 and the fiscal years ended October 1, 2010 and October 2, 2009, the Company recognized stock-based compensation expense for RSU awards of $3.9 million, $5.2 million, and $1.6 million, respectively.

Effective at the Merger date, all of the RSUs were cancelled. RSUs held by either non-employee directors of the Company, or held by management-level employees of the Company at the rank of senior vice president or above were converted into the right to receive an amount of cash equal to the Gold Merger Consideration. Total cash paid was approximately $6.4 million representing 2,674,000 converted RSUs which was included in the Merger consideration.

Employee Stock Purchase Plan

The Company’s ESPP allowed eligible employees to purchase shares of the Company’s Common Stock at nine-month intervals during an offering period at 85% of the lower of the fair market value on the first day of the offering period or the purchase date. Under the ESPP, employees could authorize the Company to withhold up to 15% of their compensation for each pay period, up to a maximum annual amount of $25,000, to purchase shares under the plan, subject to certain limitations, and employees were limited to the purchase of 600 shares per offering period. Offering periods generally commenced on the first trading day of February and August of each year and were generally nine months in duration, but could be terminated earlier under certain circumstances. The ESPP was suspended effective January 1, 2011. The final purchase under the ESPP was for the offering period ending on January 31, 2011, under which 53,000 shares were purchased by employees. During the period from October 2, 2010 through April 19, 2011 the Company recognized stock-based compensation expense for the ESPP of $33,000 in its consolidated statements of operations.

During the predecessor period from October 2, 2010 through April 19, 2011 and the fiscal years ended October 1, 2010 and October 2, 2009, the Company recognized stock-based compensation expense for the ESPP of $33,000, $0.1 million, and $0.1 million, respectively.