NOTE 6: SHAREHOLDERS’ EQUITY AND EMPLOYEE BENEFIT PLANS

Common Stock

The Company has a 401(k) retirement income plan (the “Plan”) for its employees. Historically, the Company’s matching contributions to the Plan were made in the form of issued and contributed shares of Company common stock; however, beginning January 2, 2011, matching contributions to the Plan are made in cash rather than shares of the Company’s common stock. The Plan allows for employee contributions and matching Company contributions up to 4% or 6% of the employee’s contributed amount based upon years of service.

The following table reflects the Company’s matching contributions to the 401(k) retirement income plan which were made in the form of issued and contributed shares of Company common stock or cash during the three and nine months ended July 2, 2011 and July 3, 2010:

	Three months ended				Nine months ended
(in thousands)	July 2, 2011		July 3, 2010		July 2, 2011		July 3, 2010
Number of common shares		n/a		53		42		153
Fair value based upon market price at date of distribution		n/a	$	402	$	279	$	1,000
Cash	$	651		n/a		1,057		n/a

Accumulated Other Comprehensive Income

The following table reflects accumulated other comprehensive income reflected on the Consolidated Balance Sheets as of July 2, 2011 and October 2, 2010:

	As of
(in thousands)	July 2, 2011			October 2, 2010
Gain from foreign currency translation adjustments	$	3,161		$	1,767
Unrecognized actuarial net loss, Switzerland pension plan, net of tax		(735	)		(588	)
Switzerland pension plan curtailment		(388	)		(388	)
Accumulated other comprehensive income	$	2,038		$	791

The following table reflects the components of comprehensive income for the three and nine months ended July 2, 2011 and July 3, 2010:

	Three months ended						Nine months ended
	July 2, 2011			July 3, 2010			July 2, 2011			July 3, 2010
Net income	$	70,714		$	49,083		$	125,698		$	86,081
Gain (loss) from foreign currency translation adjustments		500			493			1,394			(162	)
Unrecognized actuarial net gain (loss), net of tax
Switzerland pension plan, net of tax		(105	)		(3	)		(147	)		6
Other comprehensive income (loss)		395			490			1,247			(156	)
Comprehensive income	$	71,109		$	49,573		$	126,945		$	85,925

Equity-Based Compensation

As of July 2, 2011, the Company had seven equity-based employee compensation plans (the “Employee Plan”) and three director compensation plans (the “Director Plans”) (collectively, the “Plans”). Under these Plans, market-based share awards (collectively, “market-based restricted stock”), time-based share awards (collectively, “time-based restricted stock”), stock options, performance-based share awards (collectively, “performance-based restricted stock”), 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 July 2, 2011, the Company’s one active plan, the 2009 Equity Plan, had 6.1 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 Philadelphia 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 or not 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. 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.

Performance-based restricted stock 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 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.

Equity-based compensation expense recognized in the Consolidated Statements of Operations for the three and nine months ended July 2, 2011 and July 3, 2010 was based upon awards ultimately expected to vest. In accordance with ASC 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 restricted stock, stock options and common stock granted during the three and nine months ended July 2, 2011 and July 3, 2010:

	Three months ended				Nine months ended
(number of shares in thousands)	July 2, 2011		July 3, 2010		July 2, 2011		July 3, 2010
Market-based restricted stock		0		0		368		398
Time-based restricted stock		0		0		708		784
Stock options		0		10		0		36
Common stock		20		24		74		89
Equity-based compensation in shares		20		34		1,150		1,307

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 during the three and nine months ended July 2, 2011 and July 3, 2010:

	Three months ended				Nine months ended
(in thousands)	July 2, 2011		July 3, 2010		July 2, 2011		July 3, 2010
Cost of sales	$	55	$	44	$	159	$	140
Selling, general and administrative (1)		1,673		1,231		4,784		3,218
Research and development		340		334		970		1,064
Equity-based compensation expense	$	2,068	$	1,609	$	5,913	$	4,422

The following table reflects equity-based compensation expense, by type of award, for the three and nine months ended July 2, 2011 and July 3, 2010:

	Three months ended				Nine months ended
(in thousands)	July 2, 2011		July 3, 2010		July 2, 2011		July 3, 2010
Market-based restricted stock (2)	$	776	$	271	$	1,649	$	659
Time-based restricted stock		932		464		3,054		1,521
Performance-based restricted stock (3)		165		586		600		1,324
Stock options		15		108		70		378
Common stock		180		180		540		540
Equity-based compensation expense	$	2,068	$	1,609	$	5,913	$	4,422

(1) Three and nine months ended July 2, 2011 selling, general and administrative expense includes $0.4 million and $1.0 million, respectively, related to the liability classified stock compensation expense for the retired former CEO. In connection with his retirement, deferred cash payments equal the difference, if any, between (i) the fair market value of the shares of common stock of the Company to which he would have been entitled pursuant to the performance share unit awards granted to him in fiscal 2008 and 2009 had he remained employed through June 30, 2011 and (ii) the fair market value of the shares of common stock of the Company actually received by him pursuant to such awards. The deferred cash payments will be paid in July 2011 and February 2012, respectively. An accrual for estimated deferred cash payments measured at fair value as of July 2, 2011 and October 2, 2010 was included within accrued expenses and other current liabilities and other liabilities on the Consolidated Balance Sheets.

(2) Three and nine months ended July 2, 2011 includes $0.3 million and $0.8 million, respectively, related to the liability classified stock compensation expense for the retired former CEO.

(3) Three and nine months ended July 2, 2011 includes $0.1 million and $0.2 million, respectively, related to the liability classified stock compensation expense for the retired former CEO.