(11) Stockholders’ Equity:

Treasury Stock

During fiscal 2013, our board of directors authorized the repurchase of up to $35.0 million of our common stock, subject to certain conditions, in the open market or privately negotiated transactions on or prior to June 30, 2013. We repurchased 2,099,603 shares of our common stock during fiscal 2013 for $20.0 million utilizing cash on hand leaving $15.0 million of our common stock authorized to be repurchased. During the three months ended July 31, 2013, our board of directors authorized the repurchase of up to $100.0 million of our common stock, of which up to $75.0 million was authorized for purchase in a tender offer and the remainder of which may be repurchased in the open market or in privately negotiated transactions. This $100.0 million authorization replaces the stock repurchase program authorized in fiscal 2013 and is set to expire on or about June 17, 2014. We repurchased 1,417,233 shares of our common stock pursuant to the tender offer that expired on July 23, 2013 for $15.6 million utilizing cash on hand leaving $84.4 million of our common stock authorized to be purchased in the open market or privately negotiated transactions. Fees and expenses incurred related to the tender offer were $404,000 and were recorded in treasury stock. From August 7, 2013 to September 4, 2013, we repurchased 1,821,756 shares of our common stock for $20.0 million in the open market utilizing cash on hand in accordance with our $100.0 million stock repurchase program leaving $64.4 million of our common stock authorized to be repurchased.

Earnings per Share

The following table provides a reconciliation of the income amounts and weighted average number of common and common equivalent shares used to determine basic and diluted earnings per share for the three months ended July 31, 2013 and 2012 (in thousands, except per share data):


	For the Three Months Ended July 31,
	2013			2012
Net income/(loss)
Income from continuing operations	$	26,526		$	18,870
Loss from discontinued operations, net of tax		(49	)		(1,083	)

Net income	$	26,477		$	17,787

Weighted average shares outstanding - Basic		64,235			65,352
Dilutive effect of stock option and award plans		1,387			1,446

Diluted shares outstanding		65,622			66,798

Earnings per share - Basic
Income from continuing operations	$	0.41		$	0.29
Loss from discontinued operations	$	(0.00	)	$	(0.02	)
Net income	$	0.41		$	0.27
Earnings per share - Diluted (a)
Income from continuing operations	$	0.40		$	0.28
Loss from discontinued operations	$	(0.00	)	$	(0.02	)
Net income	$	0.40		$	0.27

(a)	Net income per share may not equal earnings per share from continuing plus discontinued operations due to rounding.

For the three months ended July 31, 2013 and 2012, 162,448 and 384,764 shares of common stock, respectively, issuable upon the exercise of stock options were excluded from the computation of diluted earnings per share because the effect would be antidilutive.

Stock Option and Employee Stock Purchase Plans

We have two stock option plans (the “SOPs”): the 2001 Stock Option Plan and the 2004 Incentive Stock Plan. New grants under the 2001 Stock Option Plan have not been made since the approval of the 2004 Incentive Stock Plan at our September 13, 2004 annual meeting of stockholders. All new grants covering all participants are issued under the 2004 Incentive Stock Plan.

The 2004 Incentive Stock Plan authorizes the issuance of the lesser of (1) 15% of the shares of our common stock outstanding from time to time, or (2) 10,000,000 shares of our common stock. The plan permits the grant of options to acquire common stock, restricted common stock and deferred stock, restricted stock units (“RSUs”), stock appreciation rights, and dividend equivalents. Our board of directors, or a committee established by our board, administers the SOPs, selects recipients to whom awards are granted, and determines the grants to be awarded. Options granted under the SOPs are exercisable at a price determined by our board or committee at the time of grant, but in no event less than fair market value of our common stock on the date granted. Grants of options may be made to employees and directors without regard to any performance measures. All options issued pursuant to the SOPs are nontransferable and subject to forfeiture.

Except in specific circumstances, awards vest over a period of three years and are exercisable for a period of 10 years. The plan also permits the grant of awards to non-employees, which the board has granted in the past. A separate option grant, outside of the 2004 Incentive Stock Plan, for 500,000 shares was made, at an exercise price of $1.47 per share, in connection with the hiring of our former President and Chief Executive Officer during the fiscal year ended April 30, 2005. Our former President and Chief Executive Officer resigned on September 26, 2011 and continues his service as a member of our board of directors and was appointed co-vice chairman of the board. As of April 30, 2013, there were 250,000 options outstanding relating to this grant, which expire on December 6, 2014.

The number of shares and weighted average exercise prices of (i) options granted under the SOPs and (ii) the separate option grant to our former President and Chief Executive Officer outside of the SOPs for the three months ended July 31, 2013 and 2012 are as follows:


	For the Three Months Ended July 31,
	2013					2012
				Weighted-					Weighted-
				Average					Average
	Shares			Exercise Price		Shares			Exercise Price
Options outstanding, beginning of year		3,019,127		$	5.31		3,988,164		$	4.67
Exercised during the period		(111,467	)		4.81		(113,336	)		4.67
Canceled/forfeited during period		—			—		(65,164	)		3.98

Options outstanding, end of period		2,907,660		$	5.33		3,809,664		$	4.68

Weighted average remaining contractual life		5.90 years					6.48 years

Options exercisable, end of period		2,109,576		$	5.30		2,273,813		$	4.97

Weighted average remaining contractual life		5.07 years					4.88 years

The aggregate intrinsic value of outstanding options as of July 31, 2013 and 2012 was $19.7 million and $21.9 million, respectively. The aggregate intrinsic value of outstanding options that were exercisable as of July 31, 2013 and 2012 was $14.5 million and $12.9 million, respectively. The aggregate intrinsic value of the options exercised for the three months ended July 31, 2013 and 2012 was $584,000 and $511,000, respectively. At July 31, 2013, the total unamortized fair value of outstanding options was $1.1 million, which will be recognized over the remaining weighted average vesting period of 0.76 years.

On September 26, 2011, our stockholders approved our 2011 Employee Stock Purchase Plan (“ESPP”). All options and rights to participate in our ESPP are nontransferable and subject to forfeiture in accordance with our ESPP guidelines. In the event of certain corporate transactions, each option outstanding under our ESPP will be assumed or an equivalent option will be substituted by the successor corporation or a parent or subsidiary of such successor corporation.

We measure the cost of employee services received in exchange for an award of an equity instrument based on the grant-date fair value of the award. We calculate the fair value of our stock options issued to employees using the Black-Scholes model at the time the options are granted. That amount is then amortized over the vesting period of the option or warrant. With our ESPP, fair value is determined at the beginning of the purchase period and amortized over the term of each exercise period.

We estimate expected volatility using historical volatility for the expected term. The fair value of each stock option or ESPP purchase was estimated on the date of the grant using the Black-Scholes option pricing model (using the risk-free interest rate, expected term, expected volatility, and dividend yield variables). There were no stock options granted during the three months ended July, 31, 2013 and 2012. The total stock-based compensation expense, including stock options, purchases under our ESPP, and RSU and performance-based RSU (“PSU”) awards was $2.2 million and $898,000, which included $45,000 of stock-based compensation expense related to the loss on the sale of our discontinued operations, for the three months ended July 31, 2013 and 2012, respectively. Stock-based compensation expense is included in cost of sales, sales and marketing, research and development, and general and administrative expenses.

We grant service-based RSUs to employees, consultants, and directors. The grants are made at no cost to the recipient. An RSU represents the right to acquire one share of our common stock but does not carry voting or dividend rights. Except in specific circumstances, RSU grants to employees generally vest over a period of three years with one-third of the units vesting on each anniversary date of the grant date. The aggregate fair value of our RSU grants is being amortized to compensation expense over the vesting period.

We grant PSUs with market conditions to our executive officers. We grant PSUs without market conditions to our employees who are not executive officers, including for the successful implementation of our new enterprise resource planning (“ERP”) system. At the time of grant, we calculate the fair value of our market condition PSUs using the Monte-Carlo simulation (using the risk-free interest rate, expected volatility, the correlation coefficient utilizing the same historical price data used to develop the volatility assumptions and dividend yield variables). There were no PSUs granted during the three months ended July 31, 2013 and 2012.

The market-condition PSUs vest, and the fair value of such PSUs will be recognized, over the corresponding three-year performance period. Our market-condition PSUs have a maximum aggregate award equal to 200% of the target amount granted. The number of market-condition PSUs that may be earned depends upon the total stockholder return (“TSR”) of our common stock compared to the TSR of the Russell 2000 Index (the “RUT”) or the NASDAQ Composite Index (the “IXIC”), as applicable, over the three-year performance period. Our stock must outperform the RUT or the IXIC, as applicable, by 10% in order for the target award to be earned.

During the three months ended July 31, 2013, we granted 406,418 service-based RSUs and no PSUs to employees, including 250,000 RSUs to certain of our executive officers and 151,418 RSUs to non-executive officer employees. Compensation expense recognized related to grants of RSUs and PSUs was $1.6 million for the three months ended July 31, 2013.

During the three months ended July 31, 2013, we cancelled 2,887 service-based RSUs as a result of the service period condition not being met and delivered 3,019 shares of common stock to current employees under vested RSUs with a total market value of $32,000.

During the three months ended July 31, 2012, we granted 4,500 service-based RSUs and no PSUs to employees and cancelled 11,665 service-based RSUs due to the service period condition not being met. Compensation expense recognized related to grants of RSUs and PSUs was $150,000 for the three months ended July 31, 2012. During the three months ended July 31, 2012, we delivered 7,000 shares of common stock to consultants under vested RSUs with a total market value of $44,000.

A summary of activity in unvested RSUs and PSUs for the three months ended July 31, 2013 and 2012 are as follows:


	For the Three Months Ended July 31,
	2013					2012
	Total # of			Weighted Average		Total # of			Weighted Average
	Restricted			Grant Date		Restricted			Grant Date
	Stock Units			Fair Value		Stock Units			Fair Value
RSUs and PSUs outstanding, beginning of year		781,586		$	8.42		384,140		$	7.91
Awarded		406,418			10.52		4,500			7.18
Vested		(3,019	)		9.25		(7,000	)		8.12
Forfeited		(2,887	)		7.98		(11,665	)		7.98

RSUs and PSUs outstanding, end of period		1,182,098		$	9.13		369,975		$	7.89

As of July 31, 2013, there was $6.4 million of unrecognized compensation cost related to unvested RSUs and PSUs. This cost is expected to be recognized over a weighted average remaining contractual term of 1.3 years.