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Share-Based Compensation (Text Block)
 12 Months Ended
Dec. 31, 2013
Share-Based Compensation [Abstract]  
Share-Based Compensation [Text Block]

NOTE 13 - SHARE-BASED COMPENSATION

 

The following table shows the total compensation cost charged as an expense for share-based compensation plans, including stock options and share grants, recognized in the statements of income for the years ended December 31, 2013, 2012 and 2011:

         
  2013  2012  2011
Cost of goods sold$ 522 $ 458 $ 394
Selling, general and administrative expense 11,645  12,715  12,266
Research and development expense 1,384  1,225  1,043
         
Total share-based compensation expense$ 13,551 $ 14,398 $ 13,703

Stock Options – Stock options under the Company's 2001 Omnibus Equity Incentive Plan (“2001 Plan”) generally vest in equal annual installments over a four-year period and expire ten years after the grant date.

 

In May 2013, the Company's stockholders approved the Company's 2013 Equity Incentive Plan (“2013 Plan”). Since the approval of the 2013 Plan, all stock options have been granted under the 2013 Plan, and the Company will not grant any further stock options under its 2001 Plan. Stock options under the 2013 Plan generally vest in equal annual installments over a four-year period and expire eight years after the grant date. For additional information on the 2013 Plan, see the Company's definitive Proxy Statement filed with the SEC on April 19, 2013.

 

Share-based compensation expense for stock options granted during 2013, 2012 and 2011 was calculated on the date of grant using the Black-Scholes-Merton option-pricing model with the following weighted-average assumptions:

 2013 2012 2011
      
Expected volatility53.36% 53.86% 52.53%
Expected term (years)7.2 7.5 7.5
Risk free interest rate1.49% 1.16% 2.37%
Forfeiture rate0.78% 0.76% 0.47%

Expected volatility – The Company estimates expected volatility using historical volatility. Public trading volume on options in the Company's stock is not material. As a result, the Company determined that utilizing an implied volatility factor would not be appropriate. The Company calculates historical volatility for the period that is commensurate with the option's expected term assumption. For 2013, the expected volatility for grants to officers and the Board is 53.36%, while the expected volatility for grants to all other employees is 56.91%.

 

Expected term – The Company has evaluated expected term based on history and exercise patterns across its demographic population. The Company believes that this historical data is the best estimate of the expected term of a new option. For 2013, the expected term for grants to officers and the Board is 7 years, while the expected term for grants to all other employees is 5 years.

 

Risk free interest rate – The Company estimate the risk-free interest rate based on zero-coupon U.S. treasury securities for a period that is commensurate with the expected term assumption.

 

Forfeiture rate - The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest as forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The term “forfeitures” is distinguished from “cancellations” or “expirations” and represents only the unvested portion of the surrendered option. This analysis will be re-evaluated at least annually, and the forfeiture rate for all grants will be adjusted as necessary.

 

Dividend yield – The Company historically has not paid a cash dividend on its common stock; therefore this input is zero.

 

The weighted-average grant-date fair value of options granted during 2013, 2012 and 2011 was $12.88, $10.60, and $16.55, respectively. The total cash received from option exercises was $3 million, $1 million and $4 million during 2013, 2012 and 2011, respectively.

 

For the years ended December 31, 2013, 2012 and 2011, stock option expense was $4 million, $5 million and $5, respectively.

 

At December 31, 2013, unamortized compensation expense related to unvested options, net of estimated forfeitures, was approximately $6 million. The weighted average period over which share-based compensation expense related to these options will be recognized is approximately 2 years.

A summary of the Company's stock option plans is as follows:

Stock Options  Shares  Weighted Average Exercise Price  Weighted Average Remaining Contractual Term (years)  Aggregate Intrinsic Value
Outstanding at January 1, 2011   3,707 $14.14  5.2 $ 47,891
Granted   385  29.07      
Exercised   (496)  7.17      11,120
Forfeited or expired   (9)  20.80      
Outstanding at January 1, 2011   3,587  16.69  5.1   22,299
Exercisable at December 31, 2011   2,622  14.51  3.9   20,201
             
Outstanding at January 1, 2012   3,587  16.69      
Granted   402  19.31      
Exercised   (274)  4.81      4,249
Forfeited or expired   (2)  20.10      
Outstanding at December 31, 2012   3,713  17.85  5.0   9,744
Exercisable at December 31, 2012   2,715  16.48  3.7   9,472
             
Outstanding at January 1, 2013   3,713  17.85      
Granted   186  23.35      
Exercised   (341)  7.70      5,722
Forfeited or expired (1)   (432)  20.34      
Outstanding at December 31, 2013   3,126  18.93  4.2   17,461
Exercisable at December 31, 2013   2,509  18.01  3.3   16,144

_________________

 

  • The Compensation Committee of the Board of Directors reviewed the grants of stock options to the Company's Chief Executive Officer in 2009, 2010, 2011 and 2012 (each such annual grant, an “Option Grant”), and approved a Confirmation Agreement, dated April 1, 2013, in which the Company and the Company's Chief Executive Officer agreed and confirmed that the Company's Chief Executive Officer will assert no claim that any Option Grant in 2009, 2010, 2011 or 2012 provided for the purchase of more than 100,000 shares of the Company's Common Stock, and that each Option Grant document be deemed amended to reflect the foregoing 100,000 share limitation.

 

              The following table summarizes information about stock options outstanding at December 31, 2013:

Plan  Range of exercise prices Number outstanding Weighted average remaining contractual life (years)   Weighted average exercise price
2001 Plan $8.14-29.21  2,944 4.0  $ 18.67
2013 Plan $23.35  182 7.4  $ 23.35

The following summarizes information about stock options exercisable at December 31, 2013:

Plan Range of exercise prices Number exercisable Weighted average remaining contractual life (years)  Weighted average exercise price
2001 Plan$8.14-29.21  2,509 3.3 $ 18.03
2013 Plan$23.35  - 7.4 $ 23.35

Share Grants - Restricted stock awards and restricted stock units generally vest in equal annual installments over a four-year period.

 

Since the approval of the 2013 Plan, all share grants have been granted under the 2013 Plan, and the Company will not grant any further share grants under its 2001 Plan.

 

A summary of the Company's non-vested share grants in 2013, 2012 and 2011 are presented below:

Restricted Stock GrantsShares  Weighted Average Grant Date Fair Value  Aggregate Intrinsic Value
        
Nonvested at January 1, 2011871 $18.66   
Granted472  25.78   
Vested (274)  20.23   
Forfeited (45)  19.68   
Nonvested at December 31, 20111024 $21.48 $ -
        
Nonvested at January 1, 20121024 $21.48   
Granted482  18.95   
Vested (305)  21.48   
Forfeited (37)  21.67   
Nonvested at December 31, 2012 1,164 $20.42 $ -
        
Nonvested at January 1, 2013 1,164 $20.42   
Granted453  24.66   
Vested (428)  19.9 $ 8,512
Forfeited (58)  21.66   
Nonvested at December 31, 2013 1,131 $22.35 $ 26,656

For each of the years ended December 31 of 2013, 2012 and 2011, there was approximately $9 million of total recognized share-based compensation expense related to restricted stock arrangements granted under the plans. The total unrecognized share-based compensation expense as of December 31, 2013 was approximately $20 million, which is expected to be recognized over a weighted average period of approximately 2 years.

 

On September 22, 2009, the Company entered into an employment agreement (the “Agreement”) with Dr. Keh-Shew Lu, President and Chief Executive Officer of the Company (the “Employee”), pursuant to which he will continue to be employed by the Company in such positions for an additional six-year term. As part of the Agreement, the Company and the Employee entered into a Stock Award Agreement that provides that: (i) the Company shall grant to the Employee 100,000 shares of Common Stock in the form of restricted stock awards on each of April 14, 2010, 2011, 2012, 2013, 2014 and 2015; (ii) each such installment would vest only if the Company achieved $1 billion net sales; (iii) upon the termination of the Employee's employment, the Company's obligation to grant any subsequent installment would terminate; and (iv) any granted shares would be automatically forfeited and returned to the Company if the Employee's employment with the Company is terminated before the Company achieves the specified target amount of net sales, except in the case of death or disability (as defined) in which case the granted shares would become fully vested on the date of death or disability. The estimated fair value of this grant is approximately $12 million and is being expensed on a straight line basis through April 14, 2015. As of December 31, 2013, four annual installments have been granted and are included in the above table as granted but not vested. As of December 31, 2013, no installments have vested.