NOTE 6: SHAREHOLDERS’ EQUITY AND EMPLOYEE BENEFIT PLANS

Common Stock and 401(k) Retirement Income Plan

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 instead of 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 Plan which were made in the form of issued and contributed shares of common stock or cash during the three months ended December 31, 2011 and January 1, 2011:

	Three months ended
(in thousands)	December 31, 2011		January 1, 2011
Number of common shares		n/a		42
Fair value based upon market price at date of distribution		n/a	$	279
Cash	$	246		n/a

Accumulated Other Comprehensive Income

The following table reflects accumulated other comprehensive income reflected on the Consolidated Balance Sheets as of December 31, 2011 and October 1, 2011:

	As of
(in thousands)	December 31, 2011			October 1, 2011
Gain from foreign currency translation adjustments	$	2,957		$	2,789
Unrecognized actuarial gain, Switzerland pension plan, net of tax		157			143
Switzerland pension plan curtailment		(388	)		(388	)
Accumulated other comprehensive income	$	2,726		$	2,544

The following table reflects the components of comprehensive income for the three months ended December 31, 2011 and January 1, 2011:

	Three Months Ended
(in thousands)	December 31, 2011		January 1, 2011
Net income	$	8,507	$	15,099
Gain from foreign currency translation adjustments		168		697
Unrecognized actuarial net gain (loss), Switzerland pension plan, net of tax		14		(42	)
Other comprehensive income	$	182	$	655
Comprehensive income	$	8,689	$	15,754

Equity-Based Compensation

As of December 31, 2011, the Company had seven equity-based employee compensation plans (the “Employee Plans”) 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”), 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 December 31, 2011, the Company’s one active plan, the 2009 Equity Plan, had 5.5 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, if granted, 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 months ended December 31, 2011 and January 1, 2011 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 Company did not issue any stock options during the three months ended December 31, 2011 or January 1, 2011. The following table reflects restricted stock and common stock granted during the three months ended December 31, 2011 and January 1, 2011:

	Three months ended
(shares in thousands)	December 31, 2011		January 1, 2011
Market-based restricted stock		428		349
Time-based restricted stock		686		616
Common stock		25		29
Equity-based compensation in shares		1,139		994

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 months ended December 31, 2011 and January 1, 2011:

	Three Months Ended
(in thousands)	December 31, 2011		January 1, 2011
Cost of sales	$	85	$	48
Selling, general and administrative		1,611		963
Research and development		403		276
Total equity-based compensation expense	$	2,099	$	1,287

The following table reflects equity-based compensation expense, by type of award, for the three months ended December 31, 2011 and January 1, 2011:

	Three Months Ended
(in thousands)	December 31, 2011		January 1, 2011
Market-based restricted stock	$	598	$	2
Time-based restricted stock		1,140		999
Performance-based restricted stock		172		71
Stock options		9		35
Common stock		180		180
Total equity-based compensation expense	$	2,099	$	1,287

Pension Plan

In accordance with regulations in Switzerland, the Company sponsors a Switzerland pension plan covering active employees whose minimum benefits are guaranteed. During fiscal 2011, the Company announced the intention to reduce its Switzerland workforce by approximately 50 employees, which triggered a curtailment of the Switzerland pension plan under ASC No. 715, Topic 30, Compensation – Retirement Benefits, Defined Benefit Plans. As a result, the Company recognized a pretax curtailment and settlement gain of approximately $1.8 million during three months ended December 31, 2011.