Stock Plans

The Company utilizes one stock-based compensation plan, the 2009 Incentive Plan (the “2009 Plan”). Under the 2009 Plan, 10.0 million shares of the Company’s common stock, as well as shares of the Company’s common stock previously granted under the Amended and Restated 2001 Incentive Plan and the 2005 Incentive Plan that were cancelled or forfeited without the shares being issued, are authorized for stock option grants, restricted stock awards, performance units and stock grants as part of the Company’s compensation programs (the “Plan”).

The following table summarizes total pre-tax compensation expense recognized related to the Company’s stock options, restricted stock, restricted stock units, performance units and stock grants, net of estimated forfeitures, included in the Company’s condensed consolidated statements of operations for the three and six months ended July 1, 2012 and July 3, 2011:



	Three Months Ended				Six Months Ended
	July 1, 2012		July 3, 2011		July 1, 2012		July 3, 2011
	(In thousands)
Cost of revenue	$	304	$	246	$	580	$	506
Research and development expenses	185		149		361		295
Selling, general and administrative expenses	4,287		4,511		9,311		7,159
Total stock-based compensation expense	$	4,776	$	4,906	$	10,252	$	7,960

The total income tax benefit recognized in the condensed consolidated statements of operations for stock-based compensation was $1.5 million and $3.4 million for the three and six months ended July 1, 2012, respectively. The total income tax benefit recognized in the condensed consolidated statements of operations for stock-based compensation was $1.7 million and $2.7 million for the three and six months ended July 3, 2011, respectively. Stock-based compensation costs capitalized as part of inventory were $0.3 million and $0.2 million as of July 1, 2012 and July 3, 2011, respectively. The excess tax benefit recognized from stock awards, classified as a financing cash activity, was $1.1 million and $8.6 million for the six months ended July 1, 2012 and July 3, 2011, respectively.

Stock Options: The fair value of each option grant is estimated using the Black-Scholes option pricing model. The Company’s weighted-average assumptions used in the Black-Scholes option pricing model were as follows:



	Three and Six Months Ended
	July 1, 2012		July 3, 2011
Risk-free interest rate	0.6	%	1.9	%
Expected dividend yield	1.2	%	1.1	%
Expected lives	4 years		4 years
Expected stock volatility	38.7	%	38.1	%

The following table summarizes stock option activity for the six months ended July 1, 2012:



	Number of Shares		Weighted- Average Price		Weighted-Average Remaining Contractual Term	Total Intrinsic Value
	(In thousands)				(In years)	(In millions)
Outstanding at January 1, 2012	5,346		$	20.57
Granted	740		26.25
Exercised	(637	)	18.44
Canceled	(206	)	22.26
Forfeited	(5	)	14.76
Outstanding at July 1, 2012	5,238		$	21.57	3.8	$	25.8
Exercisable at July 1, 2012	3,633		$	20.34	2.8	$	22.3
Vested and expected to vest in the future	4,783		$	21.57	3.8	$	23.5

The weighted-average per-share grant-date fair value of options granted for the three and six months ended July 1, 2012 was $7.73 and $7.35, respectively. The weighted-average per-share grant-date fair value of options granted for the three and six months ended July 3, 2011 was $8.29 and $7.86, respectively. The total intrinsic value of options exercised for the three and six months ended July 1, 2012 was $0.9 million and $5.2 million, respectively. The total intrinsic value of options exercised for the three and six months ended July 3, 2011 was $1.8 million and $6.9 million, respectively. Cash received from option exercises for the six months ended July 1, 2012 and July 3, 2011 was $11.7 million and $23.6 million, respectively.

The total compensation expense recognized related to the Company’s outstanding options was $1.3 million and $2.5 million for the three and six months ended July 1, 2012, respectively, and $1.1 million and $2.2 million for the three and six months ended July 3, 2011, respectively.

There was $8.8 million of total unrecognized compensation cost, net of estimated forfeitures, related to nonvested stock options granted as of July 1, 2012. This cost is expected to be recognized over a weighted-average period of 2.2 fiscal years and will be adjusted for any future changes in estimated forfeitures.

Restricted Stock Awards: The following table summarizes restricted stock award activity for the six months ended July 1, 2012:



	Number of Shares		Weighted- Average Grant- Date Fair Value
	(In thousands)
Nonvested at January 1, 2012	672		$	23.62
Granted	351		25.83
Vested	(179	)	23.27
Forfeited	(19	)	25.26
Nonvested at July 1, 2012	825		$	24.60

The weighted-average per-share grant-date fair value of restricted stock awards granted during the three and six months ended July 1, 2012 was $25.55 and $25.83, respectively. The weighted-average per-share grant-date fair value of restricted stock awards granted during the three and six months ended July 3, 2011 was $27.81 and $26.77, respectively. The fair value of restricted stock awards vested for the three and six months ended July 1, 2012 was $1.3 million and $4.2 million, respectively. The fair value of restricted stock awards vested for the three and six months ended July 3, 2011 was $2.4 million and $5.3 million, respectively. The total compensation expense recognized related to the Company’s outstanding restricted stock awards was $2.2 million and $4.1 million for the three and six months ended July 1, 2012, respectively, and $1.6 million and $3.0 million for the three and six months ended July 3, 2011, respectively.

As of July 1, 2012, there was $13.8 million of total unrecognized compensation cost, net of forfeitures, related to nonvested restricted stock awards. That cost is expected to be recognized over a weighted-average period of 1.7 fiscal years.

Performance Units: The Company granted 122,675 performance units and 89,828 performance units during the six months ended July 1, 2012 and July 3, 2011, respectively, as part of the Company’s executive incentive program. The weighted-average per-share grant-date fair value of performance units granted during the six months ended July 1, 2012 and July 3, 2011 was $26.18 and $26.71, respectively. The total compensation expense recognized related to these performance units was $0.6 million and $2.8 million for the three and six months ended July 1, 2012, respectively, and $1.4 million and $1.9 million for the three and six months ended July 3, 2011, respectively. As of July 1, 2012, there were 322,516 performance units outstanding and subject to forfeiture, with a corresponding liability of $6.3 million recorded in accrued expenses.

Stock Awards: The Company generally grants stock awards only to non-employee members of the Board. The Company granted 4,535 shares and 3,544 shares to each non-employee member of the Board during the six months ended July 1, 2012 and July 3, 2011, respectively. The weighted-average per-share grant-date fair value of stock awards granted during the six months ended July 1, 2012 and July 3, 2011 was $27.87 and $28.22, respectively. The total compensation expense recognized related to these stock awards was $0.7 million for each of the three and six months ended July 1, 2012, and $0.8 million for each of the three and six months ended July 3, 2011.

Employee Stock Purchase Plan: During the six months ended July 1, 2012, the Company issued 53,961 shares of common stock under the Company's Employee Stock Purchase Plan at a weighted-average price of $24.51 per share. At July 1, 2012, an aggregate of 1.2 million shares of the Company’s common stock remained available for sale to employees out of the 5.0 million shares authorized by shareholders for issuance under this plan.