Stock Based Compensation

6 Months Ended

Dec. 31, 2011

Stock Based Compensation [Abstract]

STOCK-BASED COMPENSATION

NOTE 12. 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 and six months ended December 31, 2011 and January 1, 2011 were as follows:

	Three Months Ended						Six Months Ended
	December 31,			January 1,			December 31,			January 1,
	2011			2011			2011			2011
Expected life	4.8 years			4.5 years			4.8 years			4.5 years
Risk-free interest rate		1.1	%		1.0	%		1.0	%		1.2	%
Volatility		89.6	%		97.2	%		92.2	%		96.7	%
Dividend yield		—			—			—			—

The amounts included in cost of revenues and operating expenses for stock-based compensation for the three and six months ended December 31, 2011 and January 1, 2011 were as follows:

	Three Months Ended						Six Months Ended
	December 31,			January 1,			December 31,			January 1,
	2011			2011			2011			2011
	(Thousands)
Stock-based compensation by category of expense:
Cost of revenues	$	388		$	350		$	697		$	660
Research and development		374			391			741			709
Selling, general and administrative		913			933			1,820			1,663
	$	1,675		$	1,674		$	3,258		$	3,032
Stock-based compensation by type of award:
Stock options	$	869		$	907		$	1,753		$	1,670
Restricted stock awards		824			828			1,612			1,470
Inventory adjustment to cost of revenues		(18	)		(61	)		(107	)		(108	)
	$	1,675		$	1,674		$	3,258		$	3,032

As of December 31, 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 and six months ended December 31, 2011 is approximately $0.1 million and $0.1 million, respectively, in compensation cost related to the issuance of PSUs. As of December 31, 2011, we have determined that the achievement of the performance conditions associated with the PSUs is probable at 100 percent of the 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.