Stock-Based Compensation

6 Months Ended

Jun. 30, 2012

Stock-Based Compensation [Abstract]

Stock-Based Compensation

9. Stock-Based Compensation

The condensed consolidated statements of operations include $0.9 million and $1.6 million of stock compensation expense for the three and six months ended June 30, 2012, respectively. Stock compensation expense for the three months ended June 30, 2012 consists of $0.8 million for restricted stock awards, and $0.1 million for stock option and stock purchase plan expenses. Stock compensation expense for the six months ended June 30, 2012 consists of $1.5 million for restricted stock awards, and $0.1 million for stock option and stock purchase plan expenses.

The condensed consolidated statements of operations include $1.0 million and $1.8 million of stock compensation expense for the three and six months ended June 30, 2011, respectively. Stock compensation expense for the three months ended June 30, 2011 consists of $0.9 million for restricted stock awards and $0.1 million for performance share awards, stock option and stock purchase plan expenses. Stock compensation expense for the six months ended June 30, 2011 consists of $1.6 million for restricted stock awards, $0.1 million for performance share awards, and $0.1 million for stock option and stock purchase plan expenses.

The Company did not capitalize any stock compensation expense during the three and six months ended June 30, 2012 or 2011. The Company did not issue any stock awards to employees or contributors of PCTEL Secure during the three and six months ended June 30, 2012 and 2011.

Total stock-based compensation is reflected in the condensed consolidated statements of operations as follows:

	Three Months Ended June 30,				Six Months Ended June 30,
	2012		2011		2012		2011
Cost of revenues	$	99	$	68	$	203	$	137
Research and development		149		156		289		312
Sales and marketing		128		157		257		338
General and administrative		567		608		891		1,023
Total	$	943	$	989	$	1,640	$	1,810

Restricted Stock – Service Based

The Company grants restricted shares as employee incentives as permitted under the Company’s 1997 Stock Plan, as amended and restated (“1997 Stock Plan”). In connection with the grant of restricted stock to employees, the Company records deferred stock compensation representing the fair value of the common stock on the date the restricted stock is granted. Stock-based compensation expense is recorded ratably over the vesting period of the applicable shares. These grants vest over various periods, but typically vest over four years.

For the three months ended June 30, 2012, the Company did not issue any restricted stock awards and recorded cancellations of 46,668 shares with grant date fair value of $0.3 million. For the six months ended June 30, 2012, the Company issued 229,950 shares of restricted stock with grant date fair value of $1.6 million and recorded cancellations of 52,656 shares with grant date fair value of $0.4 million.

For the three months ended June 30, 2012, 14,025 restricted shares vested with grant date fair value and intrinsic value of $0.1 million, respectively. For the six months ended June 30, 2012, 466,255 restricted shares vested with grant date fair value of $2.7 million and intrinsic value of $3.5 million.

For the three months ended June 30, 2011, the Company did not issue any restricted stock awards and recorded cancellations of 17,100 shares with grant date fair value of $0.1 million. For the six months ended June 30, 2011, the Company issued 154,750 shares of restricted stock with grant date fair value of $1.0 million and recorded cancellations of 22,425 shares with grant date fair value of $0.1 million.

For the three months ended June 30, 2011, 14,525 restricted shares vested with grant date fair value of $0.1 million and intrinsic value of $0.1 million. For the six months ended June 30, 2011, 396,221 restricted shares vested with grant date fair value of $2.5 million and intrinsic value of $2.9 million.

At June 30, 2012, total unrecognized compensation expense related to restricted stock was approximately $5.5 million, net of forfeitures to be recognized through 2016 over a weighted average period of 1.4 years.

The following table summarizes restricted stock activity for the six months ended June 30, 2012:

	Shares			Weighted Average Grant Date Fair Value
Unvested Restricted Stock Awards - December 31, 2011		1,122,296		$	5.90
Shares awarded		229,950			7.04
Performance share units converted to restricted stock awards		139,150			6.47
Shares vested		(466,255	)		5.87
Shares cancelled		(52,656	)		6.70
Unvested Restricted Stock Awards - June 30, 2012		972,485		$	6.24

Stock Options

The Company may grant stock options to purchase common stock. The Company issues stock options with exercise prices no less than the fair value of the Company’s stock on the grant date. Employee stock options contain gradual vesting provisions, whereby 25% vest one year from the date of grant and thereafter in monthly increments over the remaining three years. The Board of Director stock options vest on the first anniversary of the grant year. Stock options may be exercised at any time prior to their expiration date or within ninety days of termination of employment, or such shorter time as may be provided in the related stock option agreement. Historically, the Company has granted stock options with a ten year life. Beginning with options granted in July 2010, the Company granted stock options with a seven year life. During 2012 and 2011, the Company awarded stock options to eligible new employees for incentive purposes.

The fair value of each unvested stock option was estimated on the date of grant using the Black-Scholes option valuation model. The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options, which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility and expected option life. Because the Company’s employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, the existing models may not necessarily provide a reliable single measure of the fair value of the employee stock options.

During the three months and six months ended June 30, 2012 the Company issued 4,500 stock options with a weighted average grant date value of $2.77. The Company received proceeds of $25 from the exercise of 3,719 options during the three and six months ended June 30, 2012. The intrinsic value of these options exercised was $3. During the three and six months ended June 30, 2012, 96,802 and 216,350 options were cancelled or expired.

During the three months ended June 30, 2011 the Company issued 200 stock options with a weighted average grant date value of $3.20. During the six months ended June 30, 2011 the Company issued 4,000 stock options with a weighted average grant date value of $3.15. The Company received proceeds of $18 from the exercise of 2,500 options during the three and six months ended June 30, 2011. The intrinsic value of these options exercised was $1. During the three and six months ended June 30, 2011, respectively, 5,360 and 74,560 options were either forfeited or expired.

As of June 30, 2012, the unrecognized compensation expense related to the unvested portion of the Company’s stock options was approximately $32, net of estimated forfeitures to be recognized through 2016 over a weighted average period of 1.3 years.

The range of exercise prices for options outstanding and exercisable at June 30, 2012 was $5.50 to $11.84. The following table summarizes information about stock options outstanding under all stock plans at June 30, 2012:

	Options Outstanding			Options Exercisable
Range of Exercise Prices	Number Outstanding	Weighted Average Contractual Life (Years)	Weighted- Average Exercise Price	Number Exercisable	Weighted Average Exercise Price
$5.50 — $6.86	122,687	4.84	$6.64	111,598	$6.68
6.87 — 7.84	121,536	2.10	7.46	113,061	7.49
7.85 — 8.62	176,372	2.61	8.26	176,372	7.26
8.63 — 9.09	164,000	3.26	8.95	164,000	8.95
9.11 — 9.12	14,627	3.59	9.12	14,627	9.12
9.16 — 9.16	132,000	4.09	9.16	132,000	9.16
9.19 — 10.25	131,780	3.77	9.67	131,780	9.67
10.46 — 10.75	121,460	1.65	10.68	121,431	10.68
10.80 — 11.38	147,050	1.84	11.23	147,050	11.23
11.55 — 11.84	64,500	1.54	11.78	64,500	11.78
$5.50 — $11.84	1,196,012	2.93	$9.17	1,176,419	$9.22

The intrinsic value and contractual life of the options outstanding and exercisable at June 30, 2012 were as follows:

	Weighted Average Contractual Life (years)		Intrinsic Value
Options Outstanding		2.93	$	9
Options Exercisable		2.88	$	6

The intrinsic value is based on the share price of $6.47 at June 30, 2012.

The following table summarizes the stock option activity for the six months ended June 30, 2012:

	Options Outstanding			Weighted Average Exercise Price
Outstanding at December 31, 2011		1,411,581		$	9.02
Granted		4,500			7.15
Exercised		(3,719	)		6.72
Expired or Cancelled		(216,350	)		8.17
Outstanding at June 30, 2012		1,196,012		$	9.17
Exercisable at June 30, 2012		1,176,419		$	9.22

Performance Units

The Company grants performance units to certain executive officers. Shares are earned upon achievement of defined performance goals such as revenue and earnings. Certain performance units granted are subject to a service period before vesting. The fair value of the performance units issued is based on the Company’s stock price on the date the performance units are granted. The Company records expense for the performance units based on estimated achievement of the performance goals.

During the six months ended June 30, 2012, the Company granted 169,650 performance units with a grant date fair value of $1.2 million and cancelled 11,320 performance units with a grant date fair value of $79. During the six months ended June 30, 2012, 4,836 performance units vested with a grant date fair value of $33 and intrinsic value of $36. During the six months ended June 30, 2012, 139,150 performance units were converted to time-based restricted stock awards. The Company did not record expense for performance share awards during the six months ended June 30, 2012 because the Company does not expect the 2012 fiscal year targets associated with the performance shares to be met.

During the six months ended June 30, 2011, the Company granted 139,691 performance units with a grant date fair value of $1.0 million and cancelled 35,083 performance units with a grant date fair value of $0.4 million. During the six months ended June 30, 2011, 30,037 performance units vested with a grant date fair value of $290 and intrinsic value of $225, and 102,941 performance units were converted to time-based restricted stock awards.

Based on the Company’s evaluation of the performance targets, there was no unrecognized compensation expense related to the unvested performance units as of June 30, 2012.

The following table summarizes the performance share activity during the six months ended June 30, 2012:

	Shares			Weighted Average Grant Date Fair Value
Unvested Performance Units - December 31, 2011		132,906		$	6.48
Units awarded		169,650			7.00
Units vested		(4,836	)		6.75
Performance share units converted to restricted stock awards		(139,150	)		6.47
Units cancelled		(11,320	)		7.01
Unvested Performance Units - June 30, 2012		147,250		$	7.04

Restricted Stock Units

The Company grants restricted stock units as employee incentives as permitted under the Company’s 1997 Stock Plan. Employee restricted stock units are time-based awards and are amortized over the vesting period. At the vesting date, these units are converted to shares of common stock. These units vest over various periods, but typically vest over four years. The fair value of the restricted stock units issued is based on the Company’s stock price on the date the restricted stock units are granted.

The Company issued 5,000 time-based restricted stock units with a fair value of $35 to employees during the six months ended June 30, 2012. During the six months ended June 30, 2012, 2,600 restricted stock units vested with a grant date fair value of $16 and intrinsic value of $20.

No time-based restricted stock units were granted or vested during the three or six months ended June 30, 2011. The Company issued 4,400 time-based restricted stock units with a fair value of $28 to employees during the six months ended June 30, 2011. During the first quarter of 2011, 1,500 restricted stock units vested with a grant date fair value of $9 and intrinsic value of $11.

As of June 30, 2012, the unrecognized compensation expense related to the unvested portion of the Company’s restricted stock units was approximately $100, to be recognized through 2016 over a weighted average period of 1.6 years.

The following table summarizes the restricted stock unit activity during the six months ended June 30, 2012:

	Shares			Weighted Average Grant Date Fair Value
Unvested Restricted Stock Units - December 31, 2011		10,150		$	6.28
Units awarded		5,000			7.04
Units vested		(2,600	)		6.33
Unvested Restricted Stock Units - June 30, 2012		12,550		$	6.58

Employee Stock Purchase Plan (“ESPP”)

The ESPP enables eligible employees to purchase common stock at the lower of 85% of the fair market value of the common stock on the first or last day of each offering period. Each offering period is six months. The Company received proceeds of $0.3 million from the issuance of 48,032 shares under the ESPP in February 2012 and received proceeds of $0.3 million from the issuance of 54,751 shares under the ESPP in February 2011.

Based on the 15% discount and the fair value of the option feature of this plan, this plan is considered compensatory. Compensation expense is calculated using the fair value of the employees’ purchase rights under the Black-Scholes model.

The Company calculated the fair value of each employee stock purchase grant on the date of grant using the Black-Scholes option-pricing model using the following assumptions:

	June 30,
	2012			2011
Dividend yield		1.8	%		None
Risk-free interest rate		0.2	%		0.3	%
Expected volatility		51	%		52	%
Expected life (in years)		0.5			0.5

The Company issued its first quarterly dividend in November 2011 and plans to continue to issue quarterly dividends of $0.03 per share. The dividend yield rate was calculated by dividing the Company’s annual dividend by the closing price on the grant date. The Company used a dividend yield of “None” in the valuation model for stock options issued through the third quarter 2011. Until November 2011, the Company had paid one cash dividend in May 2008, which was a special dividend as a partial distribution of the proceeds received from the sale of the Company’s Mobility Solutions Group. The risk-free interest rate was based on the U.S. Treasury yields with a remaining term that approximates the expected life of the options granted. The dividend yield rate is calculated by dividing the Company’s annual dividend by the closing price on the grant date. The Company calculates the volatility based on a five-year historical period of the Company’s stock price. The expected life used is based on the offering period.

Short Term Bonus Incentive Plan (“STIP”)

For the Company’s 2011 Short Term Incentive Plan (“STIP”), all bonuses were paid in cash in February 2012. Bonuses related to the Company’s 2010 STIP were paid 50% in cash and 50% in the Company’s common stock to executives, and 100% in cash to non-executives. The shares earned under the plan were issued in the first quarter following the end of the fiscal year. In March 2011, the Company issued 48,345 shares, net of shares withheld for payment of withholding tax under the 2010 STIP.

Employee Withholding Taxes on Stock Awards

For ease in administering the issuance of stock awards, the Company holds back shares of vested restricted stock awards and short-term incentive plan stock awards for the value of the statutory withholding taxes. For each individual receiving a share award, the Company redeems the shares it computes as the value for the withholding tax and remits this amount to the appropriate tax authority. The Company paid $1.2 million for withholding taxes related to stock awards during the six months ended June 30, 2012 and 2011, respectively.

Stock Repurchases

The Company repurchases shares of common stock under share repurchase programs authorized by the Board of Directors. All share repurchase programs are announced publicly. On August 4, 2010, the Company’s Board of Directors authorized the repurchase of shares up to a value of $5.0 million. The Company completed its purchase of shares under this share repurchase program in September 2011. During 2011, the Company repurchased 405,628 shares for $2.6 million. No shares were repurchased during the six months ended June 30, 2012, and as of June 30, 2012, no additional shares may be repurchased under any share repurchase program.