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Stockholders' Equity
12 Months Ended
Jan. 03, 2015
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stockholders' Equity
Stockholders' Equity

Employee and Director Stock Options, Restricted Stock and ESPP

We have four equity incentive plans (the "1996 Stock Incentive Plan," the "2001 Stock Plan," the "2013 Incentive Plan" and the "2011 Non-Employee Director Equity Incentive Plan"). Awards granted under the 1996 Stock Incentive Plan and the 2001 Stock Plan remain outstanding, but no shares are available for future awards under these plans. Shares remain available for grants to employees and non-employee directors only under the 2013 Incentive Plan and the 2011 Non-Employee Director Equity Incentive Plan. "Incentive stock options" under Section 422 of the U.S. Internal Revenue Code and restricted stock unit ("RSU") grants are part of our equity compensation practices for employees who receive equity grants. Options and RSUs generally vest quarterly over a four-year period beginning on the grant date. The contractual terms of options granted do not exceed ten years.

At January 3, 2015, a total of 9.6 million shares of our common stock were available for future grants under the Plans. Shares subject to stock option grants that expire or are canceled, without delivery of such shares, generally become available for re-issuance under the Plans.

In May 2012, the Company's stockholders approved the 2012 Employee Stock Purchase Plan ("2012 ESPP"). The Plan authorizes the issuance of 3,000,000 shares of common stock to eligible employees to purchase shares of common stock through payroll deductions, which cannot exceed 10% of an employee's compensation. The purchase price of the shares is the lower of 85% of the fair market value of the stock at the beginning of each six-month offering period or 85% of the fair market value at the end of such period. Employees are required to hold purchased shares for six months. We have treated the 2012 ESPP as a compensatory plan, and recorded related compensation expense of $0.3 million, $0.2 million and less than $0.1 million for the fiscal years 2014, 2013 and 2012, respectively. At January 3, 2015, a total of 2.5 million shares of our common stock were available for future purchases under the 2012 ESPP.
The Company's ESPP, which was amended and approved by our stockholders in May 2007 ("2007 ESPP"), permits eligible employees to purchase shares of common stock through payroll deductions, not to exceed 10% of an employee's compensation. The purchase price of the shares is the lower of 85% of the fair market value of the stock at the beginning of each six-month offering period or 85% of the fair market value at the end of such period, but in no event less than the book value per share at the mid-point of each offering period. An aggregate of 5,500,000 shares of common stock have been authorized for issuance under the plan. We have treated the 2007 ESPP as a compensatory plan and recorded compensation expense related to the 2007 ESPP of $0.1 million for fiscal 2012. The 2007 ESPP was replaced with the 2012 ESPP in May 2012.

Stock-Based Compensation

Total stock-based compensation expense included in our Consolidated Statements of Operations was as follows: 
 
 
Year Ended
(In thousands)
 
January 3,
2015
 
December 28,
2013
 
December 29,
2012
Line item:
 
 
 
 
 
 
Cost of products sold
 
$
819

 
$
627

 
$
525

Research and development
 
5,176

 
3,916

 
3,009

Selling, general and administrative
 
6,807

 
4,979

 
3,976

Total stock-based compensation
 
$
12,802

 
$
9,522

 
$
7,510



ASC 718, “Compensation-Stock Compensation (“ASC 718”),” requires that we recognize compensation expense for only the portion of employee and director options and ESPP rights that are expected to vest.

The fair value of each option award is estimated on the date of grant using the Black-Scholes valuation model and the assumptions noted in the following table. Beginning January 1, 2006, in connection with the adoption of ASC 718, the Company examined the historical pattern of option exercises in an effort to determine if there were any discernible activity patterns based on certain employee populations. From this analysis, the Company identified two employee populations. Prior to January 3, 2009, the Company used the simplified method as prescribed by the SEC's Staff Accounting Bulletin No. 107. The Company now believes that it has sufficient internal historical data to refine the expected term assumption. As such, the expected term computation is based on historical vested option exercises and includes an estimate of the expected term for options that were fully vested and outstanding at January 3, 2009 for each of the two populations identified. The expected volatility of both stock options and ESPP shares is based on the daily historical volatility of our stock price, measured over the expected term of the option or the ESPP purchase period. The risk-free interest rate is based on the implied yield on a U.S. Treasury zero-coupon issue with a remaining term closest to the expected term of the option. The dividend yield reflects that we have not paid any cash dividends since inception and do not intend to pay any cash dividends in the foreseeable future.
 
Year Ended
 
January 3,
2015
 
December 28,
2013
 
December 29,
2012
Employee and Director Stock Options
 
 
 
 
 
Expected volatility
45.4% to 50.4%
 
51.4% to 54.3%
 
58.1% to 59.5%
Risk-free interest rate
1.5%-1.7%
 
0.7% to 1.0%
 
0.6% to 1.0%
Expected term
4.1 to 4.7 years
 
4.1 to 4.5 years
 
4.1 to 4.5 years
Dividend yield
—%
 
—%
 
—%
Employee Stock Purchase Plan
 
 
 
 
 
Weighted average expected volatility
38.7%
 
48.0%
 
50.0%
Weighted average risk-free interest rate
0.08%
 
0.11%
 
0.12%
Expected term
6 months
 
6 months
 
6 months
Dividend yield
—%
 
—%
 
—%


At January 3, 2015, there was $10.0 million of total unrecognized compensation cost related to unvested employee and director stock options, which is expected to be recognized over a weighted average period of 4.6 years. Our current practice is to issue new shares to satisfy option exercises. Compensation expense for all stock-based compensation awards is recognized using the straight-line method.

The following table summarizes our stock option activity and related information for the year ended January 3, 2015:
(Shares and aggregate intrinsic value in thousands)
Shares
 
Weighted
average
exercise price
 
Weighted average
remaining
contractual term (years)
 
Aggregate
Intrinsic Value
Balance, December 28, 2013
10,441

 
$
4.88

 
 
 
 
Granted
1,932

 
7.16

 
 
 
 
Exercised
(2,486
)
 
4.41

 
 
 
 
Forfeited or expired
(512
)
 
5.41

 
 
 
 
Balance, January 3, 2015
9,375

 
$
5.45

 
 
 
 
Vested and expected to vest at January 3, 2015
9,375

 
$
5.45

 
4.56
 
$
14,427

Exercisable, January 3, 2015
5,114

 
$
5.01

 
3.66
 
$
9,827



The aggregate intrinsic value in the table above represents the total pretax intrinsic value (the difference between the Company's closing stock price on the last trading day of the fiscal year and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on that day. This amount changes based on the fair market value of the Company's stock. Total intrinsic value of options exercised for fiscal 2014, 2013 and 2012, and was $7.8 million, $2.5 million and $3.4 million, respectively. The total fair value of options and RSUs vested and expensed in fiscal 2014, 2013 and 2012 and was $12.8 million, $9.3 million and $7.4 million, respectively.

The resultant grant date weighted-average fair values calculated using the Black-Scholes option pricing model and the noted assumptions for stock options granted were $2.93, $2.10 and $2.74 for fiscal years 2014, 2013 and 2012, respectively. The weighted average fair values calculated using the Black-Scholes option pricing model for the ESPP were $1.73, $1.29 and $1.35 for fiscal years 2014, 2013 and 2012, respectively.

The following table summarizes our RSU activity for the year ended January 3, 2015:
(Shares in thousands)
Shares
 
Weighted average grant date fair value
Balance at December 28, 2013
2,190

 
$
5.49

Granted
1,316

 
7.50

Vested
(1,302
)
 
5.61

Forfeited
(183
)
 
6.18

Balance at January 3, 2015
2,021

 
$
6.66



At January 3, 2015, there was $11.1 million of total unrecognized compensation cost related to unvested RSUs. Our current practice is to issue new shares when RSUs vest. Compensation expense for RSUs is recognized using the straight-line method over the related vesting period.

At January 3, 2015, a total of 9.6 million shares of our common stock were available for future grants under our stock option plans. Shares subject to stock option grants that expire or are canceled without delivery of such shares generally become available for re-issuance under these plans. At January 3, 2015, a total of 2.5 million shares of our common stock were available for future purchases under our ESPP.

During the fiscal year ended January 3, 2015, we granted 98,592 market-based, restricted stock units in two equal tranches, each of which vest upon achievement of certain market-based conditions. The fair values of the market-based restricted stock units were determined and fixed on the date of grant using a lattice-based option-pricing valuation model, which incorporates a Monte-Carlo simulation, and considered the likelihood that we would achieve the market-based conditions. During the first quarter of fiscal 2014, the first tranche of 49,296 restricted stock units vested and we incurred stock compensation expense related to performance based awards of $0.5 million. During the second quarter of fiscal 2014, the second tranche of 49,296 restricted stock units vested and we incurred stock compensation expense related to performance based awards of $0.2 million, amounting to a total stock compensation expense related to performance based awards of $0.7 million for the fiscal year ended January 3, 2015.