Employee Benefit Plans

12 Months Ended

Mar. 31, 2012

Employee Benefit Plans

Employee Benefit Plans

11.Employee Benefit Plans

Stock Incentive Plans

In September 2007, our stockholders approved the 2007 Omnibus Incentive Plan (the “2007 Plan”), which provides that options to purchase shares of our unissued common stock may be granted to our employees, officers, consultants and directors at exercise prices which are equal to or greater than the market value of our common stock on the date of grant. Options expire no more than ten years after the date of grant and generally vest at the rate of 25% on each of the first four anniversaries of the grant date. The 2007 Plan also allows for the issuance of stock appreciation rights, restricted stock, restricted stock units (“RSUs”) and other stock-based awards based on the value of our common stock. New shares are issued to satisfy stock option exercises and share issuances under the 2007 Plan. In September 2009, our stockholders approved an amendment to increase the number of shares of our common stock authorized and reserved for issuance under the 2007 Plan by 800,000 shares to a total of 1,650,000 shares. At March 31, 2012, there were approximately 335,000 shares of common stock available for grant under this plan. As of March 31, 2012, options to purchase approximately 1,022,000 shares of common stock, as well as 235,000 RSUs, were outstanding under the 2007 Plan.

Our 1997 Stock Incentive Plan (the “1997 Plan”) terminated in September 2007; however, all stock options outstanding under the 1997 Plan remain outstanding pursuant to the terms of such stock options. As of March 31, 2012, options to purchase approximately 1,061,000 shares of our common stock were outstanding under the 1997 Plan. No further options or other stock-based awards may be granted under the 1997 Plan.

In connection with our merger with our Iteris, Inc. subsidiary (the “Iteris Subsidiary”) in 2004, we assumed the 1998 Stock Incentive Plan (the “1998 Plan”) of the Iteris Subsidiary and all outstanding options granted thereunder. As of March 31, 2012, options to purchase approximately 410,000 shares of our common stock were outstanding under the 1998 Plan. No further options or other stock-based awards may be granted under the 1998 Plan.

Certain options granted under the 2007 Plan, the 1997 Plan and the 1998 Plan (collectively, the “Plans”) and the RSUs granted under the 2007 Plan provide for accelerated vesting of unvested options in the event of a change in control under certain circumstances.

Stock Options

A summary of activity in the Plans with respect to our stock options for Fiscal 2012 is as follows:

	Options		Weighted Average Exercise Price Per Share		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
	(In thousands)				(Years)	(In thousands)
Options outstanding at March 31, 2011	3,111		$	1.59
Granted	315		1.13
Exercised	(68	)	1.24
Forfeited	(31	)	1.54
Expired	(834	)	1.30
Options outstanding at March 31, 2012	2,493		$	1.64	3.8	$	393
Options exercisable at March 31, 2012	1,986		$	1.73	2.5	$	267
Vested and expected to vest at March 31, 2012	2,431		$	1.65	3.6	$	374
Options exercisable at March 31, 2012 pursuant to a change-in-control	2,493		$	1.64	3.8	$	393

Restricted Stock Units

In August 2010, we began granting RSUs under the 2007 Plan to certain of our employees. RSUs awards are stock-based awards that entitle the holder to receive one share of our common stock for each RSU upon vesting. RSUs vest at the rate of 25% on each of the first four anniversaries of the grant date provided that the holder remains in service (as defined by the 2007 Plan) as of the vesting date. The fair value per RSU is determined based on the closing market price of our common stock on the grant date.

A summary of activity with respect to our RSUs for Fiscal 2012 is as follows:

	# of Shares		Weighted Average Price Per Share		Weighted Average Remaining Life	Aggregate Intrinsic Value
	(In thousands)				(Years)	(In thousands)
RSUs outstanding at March 31, 2011	214		$	1.48
Granted	100		1.10
Vested	(51	)	1.48
Forfeited	(28	)	1.48
RSUs outstanding at March 31, 2012	235		$	1.32	2.8	$	40
Expected to vest at March 31, 2012	198		$	1.32	2.8	$	33
Common stock issuable (for RSUs) at March 31, 2012 upon a change-in-control	235		$	1.32	2.8	$	40

Stock-Based Compensation

The following table presents stock-based compensation expense that is included in each functional line item in our consolidated statements of operations:

	Year Ended March 31,
	2012		2011		2010
	(In thousands)
Cost of net sales	$	16	$	11	$	9
Cost of contract revenues	29		36		39
Selling, general and administrative expense	249		280		288
Research and development expense	31		25		21
Income from discontinued operation, net of tax	6		30		18
Total stock-based compensation	$	331	$	382	$	375

At March 31, 2012, there was approximately $475,000 of unrecognized compensation expense related to unvested stock options and RSUs. This expense is currently expected to be recognized over a weighted average period of approximately 2.5 years. If there are any modifications or cancellations of the underlying unvested awards, we may be required to accelerate, increase or cancel any remaining unearned stock-based compensation expense. Future stock-based compensation expense and unearned stock-based compensation will increase to the extent that we grant additional stock options, RSUs or other stock-based awards.

The grant date fair value of stock options granted was estimated using the following weighted-average assumptions:

	Year Ended March 31,
	2012		2011		2010
Expected life - years	7.0		7.0		7.0
Risk-free interest rate	1.6	%	2.1	%	3.2	%
Expected volatility of common stock	52	%	58	%	74	%
Dividend yield	—	%	—	%	—	%

A summary of certain fair value and intrinsic value information pertaining to our stock options is as follows:

	Year Ended March 31,
	2012		2011		2010
	(In thousands, except per share amounts)
Weighted average grant date fair value per share of options granted	$	0.61	$	0.86	$	1.01
Intrinsic value of options exercised	$	7	$	23	$	28

Employee Incentive Programs

Under the terms of a Profit Sharing Plan, we may contribute to a trust fund such amounts as determined annually by the Board of Directors. No contributions were made during the fiscal years ended March 31, 2012, 2011 and 2010.

We sponsor a defined contribution 401(k) Plan, adopted in 1990, under which eligible associates voluntarily contribute to the plan, up to IRS maximums, through payroll deductions. Under the provisions of the 401(k) Plan, associates have various investment choices, one of which is the purchase of Iteris common stock at market price. We match up to 90% of contributions, based on years of service, up to a stated limit. From July 1, 2009 through March 31, 2010, we temporarily suspended our matching contributions to the 401(k) Plan. Beginning in April 2010, we reinstituted certain limited matching contributions to the 401(k) Plan. Our matching contributions under the 401(k) Plan were approximately $475,000, $491,000 and $220,000 for the fiscal years ended March 31, 2012, 2011 and 2010, respectively.