Stock-Based Compensation

3 Months Ended

Mar. 31, 2013

Stock-Based Compensation [Abstract]

Stock-Based Compensation

9. Stock-Based Compensation

The condensed consolidated statements of operations include $0.6 million and $0.7 million of stock compensation expense for the three months ended March 31, 2013 and 2012, respectively. Stock compensation expense for the three months ended March 31, 2013 consists of $0.6 million for restricted stock awards, and $59 for stock option and stock purchase plan expenses. Stock compensation expense for the three months ended March 31, 2012 consists of $0.6 million for restricted stock 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 months ended March 31, 2013 or 2012. The Company did not issue any stock awards to employees or contributors of PCTEL Secure during the three months ended March 31, 2013 and 2012.

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

	Three Months Ended
	March 31,
	2013		2012
Cost of revenues	$	85	$	104
Research and development		147		140
Sales and marketing		106		130
General and administrative		286		324
Total	$	624	$	698

Restricted Stock – Service Based

The Company grants shares of restricted stock 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.

During the three months ended March 31, 2013, the Company did not issue any shares of restricted stock and recorded cancellations of 2,500 shares with grant date fair value of $17.

During the three months ended March 31, 2012, the Company issued 229,950 shares of restricted stock with grant date fair value of $1.6 million and recorded cancellations of 5,988 shares with grant date fair value of $39. During the three months ended March 31, 2012, the Company also converted 139,150 performance units with a grant date fair value of $0.9 million to time-based restricted stock.

For the three months ended March 31, 2013, 339,553 restricted shares vested with grant date fair value of $2.0 million and intrinsic value of $2.5 million. For the three months ended March 31, 2012, 452,230 restricted shares vested with grant date fair value of $2.6 million and intrinsic value of $3.4 million.

At March 31, 2013, total unrecognized compensation expense related to restricted stock was approximately $2.4 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 three months ended March 31, 2013:

				Weighted
				Average
				Grant Date
	Shares			Fair Value
Unvested Restricted Stock Awards - December 31, 2012		940,685		$	6.24
Shares vested		(339,553	)		5.77
Shares cancelled		(2,500	)		6.64
Unvested Restricted Stock Awards - March 31, 2013		598,632		$	6.50

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. 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 the first quarter 2013, the Company awarded stock options to eligible new employees for incentive purposes. The Company issued stock options to employees for long-term incentive purposes in April 2013.

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 ended March 31, 2013 the Company issued 1,500 stock options with a weighted average grant date value of $2.97. The Company received proceeds of $73 from the exercise of 10,194 options. The intrinsic value of these options exercised was $4. During the three months ended March 31, 2013, 91,537 options were cancelled or expired.

During the three months ended March 31, 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. The intrinsic value of these options exercised was $3. During the three months ended March 31, 2012, 119,548 options were cancelled or expired.

As of March 31, 2013, the unrecognized compensation expense related to the unvested portion of the Company’s stock options was approximately $72, net of estimated forfeitures to be recognized through 2016 over a weighted average period of 1.4 years.

The range of exercise prices for options outstanding and exercisable at March 31, 2013 was $5.50 to $11.84. The following table summarizes information about stock options outstanding under all stock plans at March 31, 2013:

	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		109,845		5.16	$	6.53		81,678	$	6.64
6.87   —         7.93		104,076		2.32		7.62		90,724		7.68
8.07   —         8.63		104,037		2.55		8.55		104,037		8.55
8.76   —         8.76		44,000		2.89		8.76		44,000		8.76
9.09   —         9.09		100,000		2.34		9.09		100,000		9.09
9.11   —         9.12		14,627		2.84		9.12		14,627		9.12
9.16   —         9.16		132,000		3.34		9.16		132,000		9.16
9.19   —       10.25		121,780		2.95		9.70		121,780		9.70
10.46   —       11.00		100,960		1.71		10.72		100,960		10.72
11.01   —       11.84		167,550		1.06		11.50		167,550		11.50
$  5.50   —   $  11.84		998,875		2.63	$	9.24		957,356	$	9.35

The intrinsic value and contractual life of the options outstanding and exercisable at March 31, 2013 were as follows:

	Weighted Average Contractual Life (years)		Intrinsic Value
Options Outstanding		2.63	$	64
Options Exercisable		2.48	$	38

The intrinsic value is based on the share price of $7.10 at March 31, 2013.

The following table summarizes the stock option activity for the three months ended March 31, 2013:

				Weighted
				Average
	Options			Exercise
	Outstanding			Price
Outstanding at December 31, 2012		1,099,106		$	9.06
Granted		1,500			7.71
Exercised		(10,194	)		7.19
Expired or Cancelled		(72,537	)		7.57
Forfeited		(19,000	)		6.30
Outstanding at March 31, 2013		998,875		$	9.24
Exercisable at March 31, 2013		957,356		$	9.35

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 three months ended March 31, 2013, the Company did not grant any performance units and cancelled 147,250 performance units with a grant date fair value of $1.0 million.

During the three months ended March 31, 2012, the Company granted 169,650 performance units with a grant date fair value of $1.2 million and cancelled 1,320 performance units with a grant date fair value of $9. In the first quarter of 2012, 4,836 performance units vested with a grant date fair value of $33 and intrinsic value of $36. During the three months ended March 31, 2012, 139,150 performance units were converted to time-based restricted stock awards.

As of March 31, 2013, there are no unvested performance units. The following table summarizes the performance share activity during the three months ended March 31, 2013:

				Weighted
				Average
				Grant Date
	Shares			Fair Value
Unvested Performance Units - December 31, 2012		147,250		$	7.04
Units cancelled		(147,250	)		7.04
Unvested Performance Units - March 31, 2013		—		$	0.00

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 did not issue any time-based restricted stock units and cancelled 1,125 shares with a grant date fair value of $8 during the three months ended March 31, 2013. During the three months ended March 31, 2013, 3,850 restricted stock units vested with a grant date fair value of $25 and intrinsic value of $28.

The Company issued 5,000 time-based restricted stock units with a fair value of $35 to employees during the three months ended March 31, 2012. During the three months ended March 31, 2012, 2,600 restricted stock units vested with a grant date fair value of $16 and intrinsic value of $20.

As of March 31, 2013, the unrecognized compensation expense related to the unvested portion of the Company’s restricted stock units was approximately $35, 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 three months ended March 31, 2013:

				Weighted
				Average
				Grant Date
	Shares			Fair Value
Unvested Restricted Stock Units - December 31, 2012		11,925		$	6.61
Units vested		(3,850	)		6.56
Units cancelled		(1,125	)		6.77
Unvested Restricted Stock Units - March 31, 2013		6,950		$	6.62

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 61,230 shares under the ESPP in February 2013 and received proceeds of $0.3 million from the issuance of 48,032 shares under the ESPP in February 2012.

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:

	March 31,
	2013			2012
Dividend yield		1.9	%		1.8	%
Risk-free interest rate		0.2	%		0.2	%
Expected volatility		52	%		51	%
Expected life (in years)		0.5			0.5

The dividend yield rate was calculated by dividing the Company’s annual dividend by the closing price on the grant date. 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.

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 $0.9 million and $1.2 million for withholding taxes related to stock awards during the three months ended March 31, 2013 and 2012, respectively.

Stock Repurchases

All share repurchase programs are authorized by the Company’s Board of Directors and are announced publicly. On March 18, 2013, the Company’s Board of Directors approved a share repurchase program of $5.0 million. During the three months ended March 31, 2013, no shares were repurchased of the Company’s common stock.