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Employee Stock Plans - Note 8

6 Months Ended

Jul. 03, 2011

Employee Stock Plans [Abstract]

Employee Stock Plans Disclosure

8. Employee Stock Plans

As of July 3, 2011, the Company had approximately 1.6 million shares available for future grants under the Company's 2005 Equity Incentive Plan (the "2005 Plan"). The following table summarizes the combined activity under all of the Company's equity incentive plans for the six months ended July 3, 2011:

							Weighted-		Restricted		Weighted-
			Awards		Stock		Average		Stock		Average
			Available		Options		Exercise		Units		Grant Date
			For Grant		Outstanding		Price		Outstanding		Fair Value
			(thousands)		(thousands)				(thousands)
Balances at December 31, 2010			2,263		6,278		$ 5.51		343		$ 3.67
Stock options:
Granted			(1,270)		1,270		$ 2.39		-		-
Exercised			-		(47)		$ 1.01		-		-
Cancelled or forfeited			576		(576)		$ 9.09		-		-
Restricted stock units:
Granted			-		-		-		-		-
Released			12		-		-		(18)		$ 6.14
Cancelled or forfeited			1		-		-		(1)		$ 5.65
Balances at July 3, 2011			1,582		6,925		$ 4.67		324		$ 3.53

Stock Options

Stock options granted under the 2005 Plan are for periods not to exceed seven years. Generally, options to purchase stock under the 2005 Plan are granted at exercise prices that are at least 100 percent of the fair market value of the Company's common stock on the date of grant. Generally, 25 percent of the options vest on the first anniversary of the vesting commencement date, and the remaining options vest 1/36 per month for the next 36 months thereafter.

During the three months ended July 3, 2011 and June 27, 2010, the Company granted options to purchase 0.1 million shares of common stock each period, with an estimated total grant-date fair value of $0.1 million and $0.4 million, respectively. During the six months ended July 3, 2011 and June 27, 2010, the Company granted options to purchase 1.3 million and 1.4 million shares of common stock, respectively, with an estimated total grant-date fair value of $1.9 million and $2.7 million, respectively.

Supplemental disclosure information about the Company's stock options outstanding as of July 3, 2011:

						Weighted-
				Weighted-		Average
				Average		Remaining		Aggregate
				Exercise		Contractual		Intrinsic
		Shares		Price		Life		Value
		(thousands)				(in years)		(thousands)
Stock options:
Outstanding options		6,925		$ 4.67		4.4		$ 1,140
Vested and exercisable options		4,339		$ 5.84		3.5		$ 876

The aggregate intrinsic value shown in the table above represents the total pretax intrinsic value, based on the Company's closing stock price of $1.97 as of July 1, 2011, which would have been received by the option holders had all option holders exercised their "in-the-money" options at that date. The Company settles employee exercises of options with newly issued shares of common stock.

Restricted Stock Units ("RSUs")

The Company's 2005 Plan provides for grants of time-based and performance-based RSUs.

Time-Based Restricted Stock Units

Generally, 25 percent of the time-based RSUs vest on each anniversary of the vesting commencement date or date of grant. On occasion, the Company grants time-based RSUs for varying purposes with different vesting schedules. Time-based RSUs granted under the 2005 Plan are counted against the total number of shares of common stock available for grant under the plan at 1.75 shares of common stock for every one share of common stock subject thereto.

During the three and six months ended July 3, 2011 and June 27, 2010, the Company did not grant any time-based RSUs. The associated stock-based compensation expense on time-based RSUs is determined based on the fair value of the Company's common stock on the date of grant of the RSU and recognized over the vesting period.

Performance-Based Restricted Stock Units

The vesting of performance-based RSUs is contingent on the Company's achievement of certain predetermined financial goals and in some cases, the achievement of certain market performance. The amount of stock-based compensation expense recognized in any one period can vary based on the achievement or anticipated achievement of specific performance goals. If a performance goal is not met or is not expected to be met, no compensation cost would be recognized on the underlying RSUs, and any previously recognized compensation expense on those RSUs would be reversed.

During the first quarter of 2008, the Company's Board of Directors approved the grant of 0.7 million performance-based RSUs to certain of its senior-level management, with vesting in four equal tranches upon the achievement of four sequentially increasing revenue performance targets and contingent on the achievement of certain operating profit margin and stock price thresholds. By December 31, 2008, the Company determined that due to the deteriorating market conditions during the fourth quarter of 2008, it was not probable that any of the four revenue targets and the operating profit targets would be met by the specified dates. As a result, the stock-based compensation related to these RSUs was deemed unrecognizable. Since the fourth quarter of 2008, the Company has cancelled a total of 0.4 million of these performance-based RSUs based on employee terminations, leaving 0.3 million units outstanding as of July 3, 2011. If and when the Company determines that the related targets are probable of being achieved, the Company will begin recognizing expenses in the period that such determination is made. The outstanding performance-based RSUs will expire during the first quarter of 2012 if the performance targets are not achieved by then. The Company did not record any compensation expense related to these performance-based RSUs during the three and six months ended July 3, 2011 and June 27, 2010.

Supplemental disclosure information about the Company's stock options and RSUs with time-based vesting is as follows:

		Three Months Ended				Six Months Ended
		July 3,		June 27,		July 3,		June 27,
		2011		2010		2011		2010
		(thousands, except weighted-				(thousands, except weighted-
		average fair values)				average fair values)
Stock options:
Weighted-average fair value of options granted		$ 2.22		$ 2.96		$ 2.39		$ 1.99
Intrinsic value of options exercised ⁽¹⁾		$ 15		$ 110		$ 69		$ 224
Cash received from options exercised		$ 10		$ 22		$ 48		$ 59
Restricted stock units with time-based vesting:
Weighted-average fair value of
time-based RSUs granted		$ -		$ 3.96		$ -		$ 3.96

⁽¹⁾ Amount represents the difference between the exercise price of the option and the Company's closing stock price on the date of exercise.

Tabular disclosure of components of a stock option or other award plan under which equity-based compensation is awarded to employees, typically comprised of the amount of unearned compensation (deferred compensation cost), compensation expense, and changes in the quantity and fair value of the shares (or other type of equity) granted, exercised, forfeited, and issued and outstanding pertaining to that plan. Disclosure may also include nature and general terms of such arrangements that existed during the period and potential effects of those arrangements on shareholders, effect of compensation cost arising from equity-based payment arrangements on the income statement, method of estimating the fair value of the goods or services received, or the fair value of the equity instruments granted, during the period, cash flow effects resulting from equity-based payment arrangements and, for registrants that accelerate vesting of out of the money share options, reasons for the decision to accelerate.

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