Note 5. Equity Incentive Plan and Stock-Based Compensation

3 Months Ended

Mar. 31, 2013

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

5. Equity Incentive Plan and Stock-Based Compensation

Equity Incentive Plan

The Company’s 2010 Equity Incentive Award Plan (2010 Plan) provides for the grant of stock options, stock appreciation rights, restricted stock units, restricted stock, performance awards, and deferred stock to its employees, consultants and non-employee members of its Board of Directors.

In the first quarter of fiscal 2013, the Company granted performance-based restricted stock units (PSUs) to certain senior executives. The PSUs have vesting percentages ranging from 0% to 100%, calculated based on the relative Total Shareholder Return (TSR) of the Company’s common stock as compared to the TSR of its peer companies. These awards are divided into two equal tranches, each with an 18-month performance period. The first performance period is from February 1, 2013 through July 31, 2014 and the second performance period is from August 1, 2014 through January 31, 2016. The grant date fair value for these grants is estimated using the Monte-Carlo option pricing model. 

The numbers of shares of common stock available for grant under the 2010 Plan are shown in the following table:

	Shares Available For Grant
Balance as of December 30, 2012		1,103,450
Additional shares issuable under 2010 Plan (annual increase for 2013)		2,577,033
Stock options granted, net of forfeitures/cancellations		(381,869	)
RSU awards granted, net of forfeitures/cancellations		(203,485	)
PSU awards granted, net of forfeitures/cancellations		(376,000	)
Balance as of March 31, 2013		2,719,129

Stock-Based Compensation

The following table presents the total stock-based compensation expense by financial statement caption resulting from the Company’s stock options and RSU awards:

	Three Months Ended
	March 31, 2013		March 25, 2012
	(in thousands)
Cost of sales	$	1,472	$	1,296
Research and development		2,795		1,586
Sales, general and administrative		4,357		3,565
Stock-based compensation expense before income taxes		8,624		6,447
Stock-based compensation expense after income taxes(1)	$	8,624	$	6,447

(1)  There was no income tax benefit related to stock-based compensation because all of the Company's U.S. deferred tax assets, net of U.S. deferred tax liabilities, continue to be subject to a full valuation allowance.

        The weighted average fair value of the Company’s stock options granted is as follows:

	Three Months Ended
	March 31, 2013		March 25, 2012
Weighted average fair value of stock options granted	$	4.99	$	4.04

The fair value of each stock option was estimated at the date of grant using a Black-Scholes option pricing model, with the following assumptions for grants:

	Three Months Ended
	March 31, 2013			March 25, 2012
Expected volatility		54.03	%		51.36	%
Risk-free interest rate		0.60	%		0.92	%
Expected term (in years)		4.35			4.35
Dividend yield		0.00	%		0.00	%

As of March 31, 2013, the total unrecognized compensation cost related to unvested stock options and RSU awards was approximately $41.0 million after reduction for estimated forfeitures. These stock options and RSU awards will generally vest ratably through 2016.

The fair value of each PSU award granted in fiscal 2013 was $7.40 using a Monte-Carlo pricing model and was estimated with the following assumptions:

	Three Months Ended
	March 31, 2013
Stock price on grant date	$	11.50
Expected volatility		50.90	%
Risk-free interest rate		0.21	%
Dividend yield		0.00	%

Stock Option and Restricted Stock Unit Activity

The following table summarizes stock option activities and related information under the 2010 Plan for the three months ended March 31, 2013:

	Number of Shares			Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in Years)		Aggregate Intrinsic Value
								(in thousands)
Outstanding stock options as of December 30, 2012		6,641,892		$	13.06		5.34	$	15,228
Granted		408,000		$	11.50
Canceled/Forfeited		(26,131	)	$	14.43
Exercised		(68,505	)	$	9.34			$	202
Outstanding stock options as of March 31, 2013		6,955,256		$	13.00		5.19	$	12,039
Total vested and exercisable as of March 31, 2013		3,964,421		$	13.47		4.77	$	6,466

        No income tax benefit was realized from stock option exercises for the three months ended March 31, 2013.

The following table summarizes RSU award activities and related information for the three months ended March 31, 2013:

	RSU
	Number of Shares			Weighted Average Grant-date Fair Value
Outstanding as of December 30, 2012		2,518,916		$	13.72
Granted		237,975		$	11.50
Canceled/Forfeited		(34,490	)	$	12.25
Vested		(623,670	)	$	10.45
Outstanding as of March 31, 2013		2,098,731		$	14.46

The following table summarizes key executive RSU and PSU award activities and related information for the three months ended March 31, 2013.

	Key Executive RSU					PSU
	Number of Shares			Weighted Average Grant-date Fair Value		Number of Shares		Weighted Average Grant-date Fair Value
Outstanding as of December 30, 2012		1,792,171		$	12.02		-	$	-
Granted		-		$	-		376,000		7.40
Canceled/Forfeited		-		$	-		-	$	-
Vested		(764,382	)	$	11.56		-	$	-
Outstanding as of March 31, 2013		1,027,789		$	12.36		376,000	$	7.40