SHAREHOLDERS’ EQUITY AND EMPLOYEE BENEFIT PLANS

Common Stock and 401(k) Retirement Income Plans

The Company has 401(k) retirement income plans (the “401(k) Plans”) for eligible U.S. employees. The 401(k) Plans allow for employee contributions and matching Company contributions up to 4% or 8% based upon terms and conditions of the 401(k) Plans in which they participate.

The following table reflects the Company’s contributions to the Plans during fiscal 2016 and 2015:



	Fiscal
(in thousands)	2016		2015
Cash	$	1,544	$	1,573

Stock Repurchase Program

On August 14, 2014, the Company’s Board of Directors authorized a program (the "Program") to repurchase up to $100 million of the Company’s common stock on or before August 14, 2017. The Company has entered into a written trading plan under Rule 10b5-1 of the Exchange Act, to facilitate repurchases under the Program. The Program may be suspended or discontinued at any time and is funded using the Company's available cash. Under the Program, shares may be repurchased through open market and/or privately negotiated transactions at prices deemed appropriate by management. The timing and amount of repurchase transactions under the Program depend on market conditions as well as corporate and regulatory considerations. During the year ended October 1, 2016, the Company repurchased a total of 1.4 million shares of common stock at a cost of $14.6 million. The stock repurchases were recorded in the periods they were delivered, and the payment of $14.6 million was accounted for as treasury stock in the Company’s Consolidated Balance Sheet. The Company records treasury stock purchases under the cost method using first-in, first-out (FIFO) method. Upon reissuance of treasury stock, amounts in excess of the acquisition cost are credited to additional paid-in capital. If the Company reissues treasury stock at an amount below its acquisition cost and additional paid-in capital associated with prior treasury stock transactions is insufficient to cover the difference between acquisition cost and the reissue price, this difference is recorded against retained earnings.

Accumulated Other Comprehensive Income

The following table reflects accumulated other comprehensive income reflected on the Consolidated Balance Sheets as of October 1, 2016 and October 3, 2015:



	As of
(in thousands)	October 1, 2016			October 3, 2015
Gain/(Loss) from foreign currency translation adjustments	$	462		$	(161	)
Unrecognized actuarial loss, Switzerland pension plan, net of tax	(588		)	(590		)
Switzerland pension plan curtailment	(2,138		)	(346		)
Unrealized loss on hedging	(462		)	—
Accumulated other comprehensive income	$	(2,726	)	$	(1,097	)

Equity-Based Compensation

As of October 1, 2016, the Company had seven equity-based employee compensation plans (the “Employee Plans”) and three director compensation plans (the “Director Plans”) (collectively, the “Equity Plans”). Under these Equity Plans, market-based share awards (collectively, “market-based restricted stock”), time-based share awards (collectively, “time-based restricted stock”), performance-based share awards (collectively, “performance-based restricted stock”), stock options, or common stock have been granted at 100% of the market price of the Company's common stock on the date of grant. As of October 1, 2016, the Company’s one active plan, the 2009 Equity Plan, had 2.9 million shares of common stock available for grant to its employees and directors.

•

Market-based restricted stock entitles the employee to receive common shares of the Company on the award vesting date if market performance objectives which measure relative total shareholder return (“TSR”) are attained. Relative TSR is calculated based upon the 90-calendar day average price of the Company's stock as compared to specific peer companies that comprise the GICS (45301020) Semiconductor Index. TSR is measured for the Company and each peer company over a performance period, which is generally three years. Vesting percentages range from 0% to 200% of awards granted. The provisions of the market-based restricted stock are reflected in the grant date fair value of the award; therefore, compensation expense is recognized regardless of whether the market condition is ultimately satisfied. Compensation expense is reversed if the award is forfeited prior to the vesting date.

•

In general, stock options and time-based restricted stock awarded to employees vest annually over a three-year period provided the employee remains employed by the Company. The Company follows the non-substantive vesting method for stock options and recognizes compensation expense immediately for awards granted to retirement-eligible employees, or over the period from the grant date to the date retirement eligibility is achieved.

•

In general, performance-based restricted stock (“PSU”) entitles the employee to receive common shares of the Company on the three-year anniversary of the grant date (if employed by the Company) if return on invested capital and revenue growth targets set by the Management Development and Compensation Committee (“MDCC”) of the Board of Directors on the date of grant are met. If return on invested capital and revenue growth targets are not met, performance-based restricted stock does not vest. Certain PSUs vest based on achievement of strategic goals over a certain time period or periods set by the MDCC. If the strategic goals are not achieved, the PSUs do not vest.

Equity-based compensation expense recognized in the Consolidated Statements of Operations for fiscal 2016, 2015, and 2014 was based upon awards ultimately expected to vest. In accordance with ASC No. 718, Stock Based Compensation, forfeitures have been estimated at the time of grant and were based upon historical experience. The Company reviews the forfeiture rates periodically and makes adjustments as necessary.

The following table reflects total equity-based compensation expense, which includes restricted stock, stock options and common stock, included in the Consolidated Statements of Operations for fiscal 2016, 2015, and 2014:



	Fiscal
(in thousands)	2016		2015		2014
Cost of sales	$	421	$	393	$	344
Selling, general and administrative ⁽¹⁾	3,244		9,127		8,906
Research and development	2,065		2,469		2,086
Total equity-based compensation expense	$	5,730	$	11,989	$	11,336

(1) The selling, general and administrative expense for fiscal 2016, includes the reversal of a $2.0 million expense due to the forfeiture of stock awards in connection with the October 2015 retirement of the Company's CEO.

The following table reflects equity-based compensation expense, by type of award, for fiscal 2016, 2015, and 2014:



	Fiscal
(in thousands)	2016			2015		2014
Market-based restricted stock	$	(33	)	$	4,677	$	4,960
Time-based restricted stock	5,255			6,129		5,419
Performance-based restricted stock	(43		)	131		131
Stock options	—			3		17
Common stock	551			1,049		809
Total equity-based compensation expense ⁽¹⁾	$	5,730		$	11,989	$	11,336

(1) The equity-based compensation expense for fiscal 2016, includes the reversal of a $2.0 million expense due to the forfeiture of stock awards in connection with the October 2015 retirement of the Company's CEO.

Equity-Based Compensation: employee market-based restricted stock

The following table reflects employee market-based restricted stock activity for fiscal 2016, 2015, and 2014:



	Number of shares (in thousands)		Unrecognized compensation expense (in thousands)		Average remaining service period (in years)	Weighted average grant date fair value per share
Market-based restricted stock outstanding as of September 28, 2013	1,085		$	5,913	1.1
Granted	335					$	13.46
Forfeited or expired	(19	)
Vested	(333	)
Market-based restricted stock outstanding as of September 27, 2014	1,068		$	5,271	1.0
Granted	232					$	16.83
Forfeited or expired	(48	)
Vested	(674	)
Market-based restricted stock outstanding as of October 3, 2015	578		4,465		1.4
Granted	172					$	12.26
Forfeited or expired	(256	)
Vested	(10	)
Market-based restricted stock outstanding as of October 1, 2016	484		$	2,924	1.0

The following table reflects the assumptions used to calculate compensation expense related to the Company’s performance-based restricted stock issued during fiscal 2016, 2015, and 2014:



	Fiscal
	2016			2015			2014
Grant Price	$	9.58		$	14.02		$	11.29
Expected dividend yield	N/A			N/A			N/A
Expected stock price volatility	30.85		%	35.48		%	44.88		%
Risk-free interest rate	0.89		%	0.89		%	0.69		%

Equity-Based Compensation: employee time-based restricted stock

The following table reflects employee time-based restricted stock activity for fiscal 2016, 2015, and 2014:



	Number of shares (in thousands)		Unrecognized compensation expense (in thousands)		Average remaining service period (in years)	Weighted average grant date fair value per share
Time-based restricted stock outstanding as of September 28, 2013	1,216		$	6,028	1.2
Granted	649					$	11.48
Forfeited or expired	(52	)
Vested	(756	)
Time-based restricted stock outstanding as of September 27, 2014	1,057		$	6,720	1.4
Granted	484					$	14.06
Forfeited or expired	(29	)
Vested	(663	)
Time-based restricted stock outstanding as of October 3, 2015	849		$	7,054	1.6
Granted	597					$	9.66
Forfeited or expired	(85	)
Vested	(346	)
Time-based restricted stock outstanding as of October 1, 2016	1,015		$	6,440	1.5

Equity-Based Compensation: employee performance-based restricted stock

The following table reflects employee performance-based restricted stock activity for fiscal 2016, 2015, and 2014:



	Number of shares (in thousands)		Unrecognized compensation expense (in thousands)	Average remaining service period (in years)
Performance-based restricted stock outstanding as of September 28, 2013	57		550	4.2
Granted	—
Performance-based restricted stock outstanding as of September 27, 2014	57		419	3.2
Granted	—
Performance-based restricted stock outstanding as of October 3, 2015	57		285	2.2
Granted	—
Forfeited or expired	(29	)
Vested	(28	)
Performance-based restricted stock outstanding as of October 1, 2016	—		—	—

The following table reflects employee stock option activity for fiscal 2016, 2015, and 2014:



	Number of shares (in thousands)		Weighted average exercise price		Average remaining contractual life (in years)	Aggregate intrinsic value (in thousands)
Options outstanding as of September 28, 2013	562		$	9.56
Exercised	(121	)	$	7.84		$	654
Forfeited or expired	(221	)	$	11.92
Options outstanding as of September 27, 2014	220		$	8.14
Exercised	(45	)	$	8.58		$	282
Forfeited or expired	(28	)	$	7.25
Options outstanding as of October 3, 2015	147		$	8.18
Exercised	(53	)	$	5.40		$	330
Forfeited or expired	(4	)	$	9.00
Options outstanding as of October 1, 2016	90		$	8.41	1.2	$	408
Options vested and expected to vest as of October 1, 2016	90		$	8.41	1.2	$	408
Options exercisable as of October 1, 2016	90		$	8.41	1.2
In the money exercisable options as of October 1, 2016	90					$	408

Since 2012, on average, 18% of stock options granted by the Company are forfeited or expire each year. Intrinsic value of stock options exercised is determined by calculating the difference between the market value of the Company's stock price at the time an option is exercised and the exercise price, multiplied by the number of shares. The intrinsic value of stock options outstanding and stock options exercisable is determined by calculating the difference between the Company's closing stock price on the last trading day of fiscal 2016 and the exercise price of in-the-money stock options, multiplied by the number of underlying shares. During fiscal 2016, the Company received $0.4 million in cash from the exercise of employee and non-employee director stock options.

As of October 1, 2016, there were no unvested employee stock options.

The following table reflects outstanding and exercisable employee stock options as of October 1, 2016:



	Options Outstanding				Options Exercisable
Range of exercise prices	Options outstanding (in thousands)	Weighted average remaining contractual life (in years)	Weighted average exercise price		Options exercisable (in thousands)	Weighted average exercise price
3.06 - 7.08	11	3.8	$	6.3	11	$	6.3
8.43 - 9.64	79	0.9	8.7		79	8.7
	90	1.2	$	8.4	90	$	8.4

Equity-Based Compensation: non-employee directors

The 2009 Equity Plan provides for the grant of common shares to each non-employee director upon initial election to the board and on the first business day of each calendar quarter while serving on the board. The grant to a non-employee director upon initial election to the board is that number of common shares closest in value to, without exceeding, $120,000. The quarterly grant to a non-employee director upon the first business day of each calendar year quarter is that number of common shares closest in value to, without exceeding, $30,000.

The following table reflects shares of common stock issued to non-employee directors and the corresponding fair value for fiscal 2016, 2015, and 2014:



	Fiscal
(in thousands)	2016		2015		2014
Number of common shares issued	50		83		63
Fair value based upon market price at time of issue	$	551	$	1,049	$	810

The following table reflects non-employee director stock option activity for fiscal 2016, 2015, and 2014:



	Number of shares (in thousands)		Weighted average exercise price		Average remaining contractual life (in years)	Aggregate intrinsic value (in thousands)
Options outstanding as of September 28, 2013	135		$	11.45		$	614
Exercised	(10	)	$	11.20
Forfeited or expired	(70	)	$	12.45
Options outstanding as of September 27, 2014	55		$	10.22		$	225
Exercised	(30	)	$	10.19
Forfeited or expired	(5	)	$	6.48
Options outstanding as of October 3, 2015	20		$	11.20		$	225
Forfeited or expired	(20	)	$	11.00
Options outstanding as of October 1, 2016	—		$	—	—	$	—
Options vested and expected to vest as of October 1, 2016	—		$	—	—	$	—
Options exercisable as of October 1, 2016	—		$	—	—
In the money exercisable options as of October 1, 2016	—					$	—

No non-employee director stock options were granted during fiscal 2016, 2015, and 2014.

Pension Plan

The following table reflects the Company's defined benefits pension obligations as of October 1, 2016 and October 3, 2015:



		As of
(in thousands)		October 1, 2016		October 3, 2015
Switzerland pension obligation		$	2,393	$	689
Taiwan pension obligation		925		1,196
	Total pension obligation	$	3,318	$	1,885

Other Plans

Some of the Company's other foreign subsidiaries have retirement plans that are integrated with and supplement the benefits provided by laws of the various countries. These other plans are not required to report nor do they determine the actuarial present value of accumulated benefits or net assets available for plan benefits as they are defined contribution plans.