Stock Based Compensation

3 Months Ended

Oct. 01, 2011

Stock Based Compensation [Abstract]

STOCK-BASED COMPENSATION

NOTE 11. STOCK-BASED COMPENSATION

We recognize compensation expense in our statement of operations related to all share-based awards, including grants of stock options, based on the grant date fair value of such share-based awards. Estimating the grant date fair value of such share-based awards requires us to make judgments in the determination of inputs into the Black-Scholes stock option pricing model which we use to arrive at an estimate of the grant date fair value for such awards. The assumptions used in this model to value stock option grants for the three months ended October 1, 2011 and October 2, 2010 were as follows:

	Three Months Ended
	October 1,			October 2,
	2011			2010
Expected life	4.8 years			4.5 years
Risk-free interest rate		1.0	%		1.3	%
Volatility		92.8	%		96.6	%
Dividend yield		—			—

The amounts included in cost of revenues and operating expenses for stock-based compensation for the three months ended October 1, 2011 and October 2, 2010 were as follows:

	Three Months Ended
	October 1,			October 2,
	2011			2010
	(Thousands)
Stock-based compensation by category of expense:
Cost of revenues	$	309		$	310
Research and development		367			318
Selling, general and administrative		907			730
	$	1,583		$	1,358
Stock-based compensation by type of award:
Stock options	$	884		$	763
Restricted stock awards		788			642
Inventory adjustment to cost of revenues		(89	)		(47	)
	$	1,583		$	1,358

As of October 1, 2011 and July 2, 2011, we had capitalized approximately $0.5 million and $0.4 million, respectively, of stock-based compensation as inventory.

Included in stock-based compensation for the three months ended October 1, 2011, is approximately $27,000 in compensation cost related to the issuance of PSUs. As of October 1, 2011, we have determined that the achievement of the performance conditions associated with the PSUs is probable at the 100 percent target level. The amount of stock-based compensation expense recognized in any one period can vary based on the achievement or anticipated achievement of the performance conditions. If the performance conditions are not met or not expected to be met, no compensation cost would be recognized on the underlying PSUs, and any previously recognized compensation expense related to those PSUs would be reversed.