Stock Based Compensation

12 Months Ended

Jun. 30, 2013

Stock Based Compensation

Stock Based Compensation

Note 13. Stock Based Compensation

The Plan is administered by the Compensation Committee or such other Board committee (or the entire Board) as may be designated by the Board (the “Committee”).  Unless otherwise determined by the Board, the Committee will consist of two or more members of the Board who are non-employee directors within the meaning of Rule 16b-3 of the Securities Exchange Act of 1934 and “outside directors” within the meaning of Section 162(m) of the Internal Revenue Code of 1986, as amended.  The Committee will determine which eligible employees, consultants and directors receive awards, the types of awards to be received and the terms and conditions thereof. The Chief Executive Officer shall have the power and authority to make Awards under the Plan to employees and consultants not subject to Section 16 of the Exchange Act, subject to limitations imposed by the Committee.

At June 30, 2013, the Company has reserved approximately 13.0 million shares of common stock for issuance, including options previously authorized for issuance under the 1999 Stock Incentive Plan.

The amounts of stock-based compensation expense recognized in the periods presented are as follows:

	Years Ended
	June 30, 2013		July 1, 2012		July 3, 2011
	(in thousands, except per share data)
Stock options	$	477	$	1,073	$	1,181
Restricted stock awards	3,806		3,777		2,780
Total	4,283		4,850		3,961
Deferred income tax benefit	1,555		1,796		1,381
Stock-based compensation expense, net	$	2,728	$	3,054	$	2,580

Stock based compensation expense is recorded within the following line items of operating expenses:

	Years Ended
	June 30, 2013		July 1, 2012		July 3, 2011
	(in thousands)
Marketing and sales	$	1,499	$	1,755	$	1,587
Technology and development	428		600		791
General and administrative	2,356		2,495		1,583
Total	$	4,283	$	4,850	$	3,961

Stock-based compensation expense has not been allocated between business segments, but is reflected as part of Corporate overhead. (Refer to Note 15. Business Segments.)

Stock Option Plans

The weighted average fair value of stock options on the date of grant, and the assumptions used to estimate the fair value of the stock options using the Black-Scholes option valuation model, were as follows:

	Years ended
	June 30, 2013			July 1, 2012			July 3, 2011
Weighted average fair value of options granted	$	2.95		$	1.84		$	1.23
Expected volatility	72		%	72		%	68		%
Expected life (in years)	6.4			8.0			7.5
Risk-free interest rate	0.7		%	0.9		%	1.3		%
Expected dividend yield	0.0		%	0.0		%	0.0		%

The expected volatility of the option is determined using historical volatilities based on historical stock prices. The Company estimated the expected life of options granted based upon the historical weighted average. The risk-free interest rate is determined using the yield available for zero-coupon U.S. government issues with a remaining term equal to the expected life of the option. The Company has never paid a dividend, and as such the dividend yield is 0.0%.

The following table summarizes stock option activity during the year ended June 30, 2013:

	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (000s)
Outstanding beginning of period	6,711,280		$	4.48
Granted	35,000		$	4.55
Exercised	(191,947	)	$	2.36
Forfeited/Expired	(1,831,093	)	$	6.23
Outstanding end of period	4,723,240		$	3.89	5.1 years	$	12,536
Options vested or expected to vest at end of period	4,572,098		$	3.94	4.9 years	$	11,950
Exercisable at June 30, 2013	2,917,540		$	4.88	3.4 years	$	5,508

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of fiscal 2013 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on June 30, 2013. This amount changes based on the fair market value of the Company’s stock. The total intrinsic value of options exercised for the years ended June 30, 2013, July 1, 2012 and July 3, 2011 was $0.6 million, $0.0 million, and $0.0 million, respectively.

The following table summarizes information about stock options outstanding at June 30, 2013:

	Options Outstanding				Options Exercisable
Exercise Price	Options Outstanding	Weighted- Average Remaining Contractual Life	Weighted- Average Exercise Price		Options Exercisable	Weighted- Average Exercise Price
$1.69 – 1.79	1,080,500	7.3 years	$	1.79	257,000	$	1.79
$2.01 – 2.63	1,078,400	8.2 years	$	2.62	177,300	$	2.62
$2.77 – 3.11	1,193,753	3.1 years	$	3.09	1,156,153	$	3.09
$3.26 – 6.52	645,234	3.1 years	$	6.09	601,734	$	6.09
$6.90 – 11.81	725,353	2.1 years	$	8.28	725,353	$	8.28
	4,723,240	5.1 years	$	3.89	2,917,540	$	4.88

As of June 30, 2013, the total future compensation cost related to non-vested options not yet recognized in the statement of operations was $2.3 million and the weighted average period over which these awards are expected to be recognized was 5.5 years.

The Company grants shares of Common Stock to its employees that are subject to restrictions on transfer and risk of forfeiture until fulfillment of applicable service conditions and, in certain cases, holding periods (Restricted Stock).

The following table summarizes the activity of non-vested restricted stock during the year ended June 30, 2013:

	Shares		Weighted Average Grant Date Fair Value
Non-vested — beginning of period	3,855,320		$	2.37
Granted	1,668,490		$	3.55
Vested	(1,610,271	)	$	2.48
Forfeited	(480,184	)	$	3.06
Non-vested - end of period	3,433,355		$	2.80

The fair value of non-vested shares is determined based on the closing stock price on the grant date. As of June 30, 2013, there was $6.3 million of total unrecognized compensation cost related to non-vested restricted stock-based compensation to be recognized over a weighted-average period of 2.3 years.