Stock-Based Compensation

6 Months Ended

Dec. 25, 2011

Stock-Based Compensation [Abstract]

Stock-Based Compensation

10. Stock-Based Compensation

The Company issues new shares to fulfill the obligations under all of its stock-based compensation awards.  Such shares are subject to registration under applicable securities laws, including pursuant to the rules and regulations promulgated by the SEC, unless an applicable exemption applies.

Through November 10, 2011, the Company granted stock options and other equity-based incentives (collectively, “Equity Awards”) under its Amended and Restated 2000 Incentive Plan (the “2000 Plan”).  From and after November 11, 2011, the Company granted Equity Awards under the International Rectifier Corporation 2011 Performance Incentive Plan (the “2011 Plan”), which was adopted by the Board on August 15, 2011 and approved by the shareholders of the Company on November 11, 2011.  Following shareholder approval of the 2011 Plan, no further Equity Awards will be made under the 2000 Plan; however the 2000 Plan remains in effect with respect to pre-existing Equity Awards.

Directors, officers and employees of the Company or any of its subsidiaries, and certain consultants and advisors to the Company or any of its subsidiaries are eligible to receive Equity Awards under the 2011 Plan, and the Board has delegated general administrative authority for the 2011 Plan to the Compensation Committee of the Board.  The administrator of the 2011 Plan has broad authority under the 2011 Plan to, among other things, select participants, determine the type(s), amounts and terms and conditions of Equity Awards, including those granted or denominated in the Company’s common stock (“Common Stock”), as well as certain cash bonus awards that may be granted under the 2011 Plan.  As is customary in incentive plans of this nature, each share limit and the number and kind of shares available under the 2011 Plan and any outstanding awards, as well as the exercise or purchase prices of awards, and performance targets under certain types of performance-based awards, are subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock dividends, or other events that change the number or kind of shares outstanding, as well as extraordinary dividends or distributions of property to the stockholders.

As of December 25, 2011, approximately 10,745,348 shares were available for additional Equity Award grant purposes under the 2011 Plan.  Shares issued in respect of any “full-value award” granted under the 2011 Plan will be counted against the share limit described in the preceding paragraph as 1.50 shares for every one share actually issued in connection with the award.  For this purpose, a “full-value award” means any award granted under the plan other than a stock option or stock appreciation right.

During the six months ended December 25, 2011, the Company granted an aggregate of 19,000 stock options to Company employees under its 2000 Plan and none under the 2011 Plan.  Subject to the terms and conditions of the 2000 Plan and applicable award documentation, such awards generally vest and become exercisable in equal installments over each of the first three anniversaries of the date of grant, with a maximum award term of five years.

The following table summarizes the stock option activities for the six months ended December 25, 2011 (in thousands, except per share price data):

	Stock Option Shares			Weighted Average Option Exercise Price per Share		Weighted Average Grant Date Fair Value per Share		Aggregate Intrinsic Value
Outstanding, June 26, 2011		2,992		$	21.30		—	$	22,154
Granted		19		$	21.38	$	7.49		—
Exercised		(110	)	$	16.00		—	$	629
Expired or forfeited		(505	)	$	34.64		—		—
Outstanding, December 25, 2011		2,396		$	18.74		—	$	8,143

For the six months ended December 25, 2011 and December 26, 2010, the Company received $1.8 million and $7.7 million, respectively, for stock options exercised.  There were no tax benefits realized from the issuance of stock-based awards for the six months ended December 25, 2011.  The tax benefit realized for the tax deductions from stock-based awards exercised was $0.5 million for the six months ended December 26, 2010.

During the six months ended December 25, 2011, the Company granted 38,150 restricted stock units (“RSUs”) to employees, and 46,200 RSUs to members of the Board, in each case under the 2000 Plan, and 25,000 RSUs to employees under the 2011 Plan, and which provided for vesting over a period of service, subject to the terms and conditions of their respective plans and applicable award documentation.   For the awards made to employees, the vesting of awards generally takes place in equal installments over each of the first three anniversaries of the date of grant.  The awards made to members of the Board were made as part of the Board’s annual director compensation program, under which the vesting of awards takes place generally on the first anniversary of the date of grant.

During fiscal year 2011, the Company made RSU awards with performance vesting (non-market-based) criteria to executives and certain key employees pursuant to the 2000 Plan. Any vesting of such awards takes place upon the achievement of certain performance goals, and otherwise subject to the terms and conditions of the 2000 Plan and applicable award documentation.  The performance goals for the awards vary depending on the executive officer or key employee, and must be achieved generally on or before the end of the Company’s fiscal year 2012 for the awards to vest, although some of the awards provide for achievement of performance goals on or before earlier dates. For the six months ended December 25, 2011, the Company recorded a net credit of $1.3 million to stock compensation expense relating to these awards, based on the determination that the achievement of certain of the performance goals that the Company in the prior year had determined were probable within the time established for the awards, were no longer considered probable as of September 25, 2011 and December 25, 2011.

The following table summarizes the RSU activity for the six months ended December 25, 2011 (in thousands, except per share price data):

	Restricted Stock Units			Weighted Average Grant Date Fair Value per Share		Aggregate Intrinsic Value
Outstanding, June 26, 2011		2,051		$	21.22	$	53,501
Granted		84		$	22.00		—
Vested		(228	)	$	18.71	$	6,010
Forfeited		(51	)	$	26.84		—
Outstanding, December 25, 2011		1,856		$	21.58	$	37,206

The Company's stock based compensation plans and award documentation permits the reduction of a grantee's RSUs for purposes of settling a grantee's income tax obligation. During the six months ended December 25, 2011, the Company withheld RSUs representing 70,527 underlying shares to fund grantees’ income tax obligations.

Additional information relating to the Company’s stock based compensation plans, including employee stock options and RSUs (including RSUs with performance-based and market-based vesting criteria) at December 25, 2011 and June 26, 2011 is as follows (in thousands):

	As of
	December  25, 2011		June 26, 2011
Outstanding options exercisable		1,566		1,905
Options and RSUs available for grant		10,745		510
Total reserved common stock shares for stock option plans		14,997		5,553

For the three months and six months ended December 25, 2011 and December 26, 2010, stock-based compensation expense associated with the Company’s stock options and RSUs (including RSUs with performance-based vesting criteria) was as follows (in thousands):

	Three Months Ended				Six Months Ended
	December 25, 2011		December 26, 2010		December 25, 2011		December 26, 2010
Selling, general and administrative expense	$	2,276	$	2,075	$	4,931	$	4,997
Research and development expense		1,172		879		1,899		1,529
Cost of sales		814		706		1,139		1,499
Total stock-based compensation expense	$	4,262	$	3,660	$	7,969	$	8,025

The total unrecognized compensation expense for Equity Awards was $29.3 million as of December 25, 2011.  The unrecognized compensation expense for the Equity Awards will generally be recognized over three years, except for the performance-based RSUs, and one stock option award and one RSU award made to the Chief Executive Officer (the “CEO”) during fiscal year 2008.  The compensation expense for the CEO’s awards made during fiscal year 2008 is being recognized over 5 years.  The unrecognized compensation expense for outstanding performance based RSUs will be recognized when it is determined that it is probable the goals will be achieved or upon achievement of the goals, whichever event occurs first.  The weighted average number of years to recognize the total compensation expense (including that of the CEO) is 1.4 years.

The fair value of the Company stock options issued during the six months ended December 25, 2011 and December 26, 2010, was determined at the grant date using the Black-Scholes option pricing model with the following weighted average assumptions:

	December  25, 2011			December 26, 2010
Expected life	3.5 years			3.5 years
Risk free interest rate		0.37	%		0.7	%
Volatility		48.0	%		40.5	%
Dividend yield		0.0	%		0.0	%