Note 2 - Stock-Based Compensation

3 Months Ended

Mar. 31, 2014

Stockholders' Equity Note [Abstract]

Stockholders' Equity Note Disclosure [Text Block]

2. Stock-Based Compensation

Stock Plans

As of March 31, 2014, approximately 2.9 million shares were available for future issuance under the 2004 Equity Incentive Plan (the “2004 Plan”). The 2004 Plan will expire on November 12, 2014. Once the 2004 Plan expires, the Company will no longer be able to grant equity awards under the 2004 Plan, and any shares otherwise remaining available for future grants under the 2004 Plan will no longer be available for issuance.

The Company’s Board of Directors adopted the 2014 Equity Incentive Plan (the “2014 Plan”) in April 2013, and the Company’s stockholders approved it in June 2013. The 2014 Plan will become effective on November 13, 2014, the day after the 2004 Plan expires. The 2014 Plan provides for the issuance of up to 5,500,000 shares and will expire on November 13, 2024.

Stock-Based Compensation Expense

The Company recognized stock-based compensation expenses as follows (in thousands):

	Three Months Ended March 31,
	2014		2013
Cost of revenue	$	205	$	156
Research and development		2,005		1,373
Selling, general and administrative		5,388		3,131
Tax benefit		-		(47	)
Total	$	7,598	$	4,613

Restricted Stock

The Company’s restricted stock units (“RSUs”) include time-based RSUs, performance-based RSUs (“PSUs”) and market-based RSUs (“MSUs”). A summary of the RSUs is presented in the table below:

	Time-Based RSUs			Weighted- Average Grant Date Fair Value Per Share		PSUs			Weighted- Average Grant Date Fair Value Per Share		MSUs		Weighted- Average Grant Date Fair Value Per Share		Total			Weighted- Average Grant Date Fair Value Per Share
Outstanding at January 1, 2014		754,306		$	19.41		1,027,782		$	23.02		1,800,000	$	23.57		3,582,088		$	22.53
Awards granted (1)		120,135		$	32.06		756,684		$	31.58		-	$	-		876,819		$	31.65
Performance adjustment (2)		-		$	-		(155,255	)	$	29.65		-	$	-		(155,255	)	$	29.65
Awards released		(145,524	)	$	18.97		(165,136	)	$	17.76		-	$	-		(310,660	)	$	18.33
Awards forfeited		(3,892	)	$	18.39		-		$	-		-	$	-		(3,892	)	$	18.39
Outstanding at March 31, 2014		725,025		$	21.60		1,464,075		$	27.33		1,800,000	$	23.57		3,989,100		$	24.59

(1) The number of PSUs granted reflects the maximum number of shares that can ultimately be earned assuming the achievement of the highest level of performance conditions under the programs.

(2) The performance adjustment reflects the number of PSUs that have not been earned or will not ultimately be earned based on management’s probability assessment.

The intrinsic value related to awards released for the three months ended March 31, 2014 and 2013 was $10.2 million and $8.7 million, respectively. As of March 31, 2014, the total intrinsic value of outstanding awards was $154.7 million, based on the closing stock price of $38.77. As of March 31, 2014, unamortized compensation expense related to outstanding awards was approximately $61.2 million with a weighted-average remaining recognition period of approximately six years.

2014 Time-Based RSUs and PSUs:

In February 2014, the Board of Directors granted 336,000 shares to the Company’s executive officers. These grants included 25% time-based RSUs which vest over two years on a quarterly basis, and 75% PSUs which represent a target number of RSUs to be awarded based on the Company achieving an average two-year (2014 and 2015) revenue growth rate compared against the analog industry’s average two-year revenue growth rate as determined by the Semiconductor Industry Association (“2014 Executive PSUs”). The maximum number of 2014 Executive PSUs that an executive officer can ultimately earn is 300% of the target shares granted. Half of the 2014 Executive PSUs will vest in February 2016 if the pre-determined performance goals are met and approved by the Compensation Committee and the executive officer is employed by the Company. The remaining shares will vest over the following two years on a quarterly basis, subject to continued employment.

Stock Options

A summary of the stock options activities is presented in the table below:

	Stock Options			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
Outstanding at January 1, 2014		1,356,446		$	15.86		1.9	$	25,505,753
Options exercised		(350,920	)	$	15.83		-	$	-
Options forfeited and expired		(1,167	)	$	11.48		-	$	-
Outstanding at March 31, 2014		1,004,359		$	15.87		1.7	$	22,998,787
Options exercisable at March 31, 2014 and expected to vest		1,002,281		$	15.88		1.7	$	22,942,298
Options exercisable at March 31, 2014		942,757		$	16.01		1.5	$	21,459,665

Total intrinsic value of options exercised was $6.9 million and $5.6 million for the three months ended March 31, 2014 and 2013, respectively. The net cash proceeds from the exercise of stock options were $5.6 million and $9.8 million for the three months ended March 31, 2014 and 2013, respectively. At March 31, 2014, unamortized compensation expense related to unvested options was approximately $0.4 million with a weighted-average remaining recognition period of approximately one year.

Employee Stock Purchase Plan

For the three months ended March 31, 2014 and 2013, 43,000 and 65,000 shares, respectively, were issued under the Employee Stock Purchase Plan. As of March 31, 2014, 4.8 million shares were available for future issuance.

The intrinsic value of stock purchased was $0.5 million for both the three months ended March 31, 2014 and 2013. As of March 31, 2014, the unamortized expense was $0.2 million, which will be recognized over five months. The Black-Scholes model was used to value the employee stock purchase rights with the following assumptions:

	Three Months Ended March 31,
	2014			2013
Expected term (years)		0.5			0.5
Expected volatility		33.9	%		28.5	%
Risk-free interest rate		0.1	%		0.1	%
Dividend yield		-			-

Cash proceeds from employee stock purchases for the three months ended March 31, 2014 and 2013 were $1.1 million and $1.2 million, respectively.