STOCKHOLDERS' EQUITY

9 Months Ended

Sep. 30, 2012

Stockholders' Equity Note [Abstract]

STOCKHOLDERS' EQUITY

STOCKHOLDERS’ EQUITY

Stock-Based Compensation

The following table summarizes stock-based compensation included in operating results for the three and nine months ended September 30, 2012 and 2011:

	Three Months Ended						Nine Months Ended
	September 30, 2012			September 30, 2011			September 30, 2012			September 30, 2011
	(in thousands)
Cost of revenue	$	2,154		$	1,143		$	6,723		$	5,783
Research and development	4,925			5,557			17,568			16,325
Selling, general and administrative	11,150			9,758			31,747			27,496
Total stock-based compensation expense, before income taxes	18,229			16,458			56,038			49,604
Tax benefit	(2,403		)	(2,776		)	(6,624		)	(7,853		)
Total stock-based compensation expense, net of income taxes	$	15,826		$	13,682		$	49,414		$	41,751

Stock Options, Restricted Stock Units and Employee Stock Purchase Plan

In May 2005, Atmel’s stockholders initially approved Atmel’s 2005 Stock Plan (as amended, the “2005 Stock Plan”). As of September 30, 2012, 133.0 million shares were authorized for issuance under the 2005 Stock Plan. Under the 2005 Stock Plan, Atmel may issue common stock directly, grant options to purchase common stock or grant restricted stock units payable in common stock to employees, consultants and directors of Atmel. Options, which generally vest over four years, are granted at fair market value on the date of the grant and generally expire ten years from that date.

Activity under Atmel’s 2005 Stock Plan is set forth below:

			Outstanding Options			Weighted-
					Exercise	Average
	Available for Grant		Number of Options		Price per Share	Exercise Price per Share
	(in thousands, except per share data)
Balances, December 31, 2011	16,523		8,217		$1.68-$10.01	$	4.26
Restricted stock units issued	(210	)	—		—	—
Plan adjustment for restricted stock units issued	(128	)	—		—	—
Performance-based restricted stock units issued	(200	)	—		—	—
Plan adjustment for performance-based restricted stock units issued	(122	)	—		—	—
Restricted stock units cancelled	405		—		—	—
Plan adjustment for restricted stock units cancelled	301		—		—	—
Performance-based restricted stock units cancelled	75		—		—	—
Plan adjustment for performance-based restricted stock units cancelled	46		—		—	—
Options cancelled/expired/forfeited	78		(78	)	$2.11-$8.89	4.36
Options exercised	—		(495	)	$1.80-$8.89	4.58
Balances, March 31, 2012	16,768		7,644		$1.68-$10.01	$	4.24
Restricted stock units issued	(632	)	—		—	—
Plan adjustment for restricted stock units issued	(386	)	—		—	—
Performance-based restricted stock units issued	(98	)	—		—	—
Plan adjustment for performance-based restricted stock units issued	(60	)	—		—	—
Restricted stock units cancelled	228		—		—	—
Plan adjustment for restricted stock units cancelled	171		—		—	—
Performance-based restricted stock units cancelled	70		—		—	—
Plan adjustment for performance-based restricted stock units cancelled	43		—		—	—
Options cancelled/expired/forfeited	26		(26	)	$2.11-$7.76	5.12
Options exercised	—		(130	)	$1.77-$6.28	4.05
Balances, June 30, 2012	16,130		7,488		$1.68-$10.01	$	4.24
Restricted stock units issued	(6,283	)	—		—	—
Plan adjustment for restricted stock units issued	(3,833	)	—		—	—
Restricted stock units cancelled	456		—		—	—
Plan adjustment for restricted stock units cancelled	328		—		—	—
Performance-based restricted stock units cancelled	75		—		—	—
Plan adjustment for performance-based restricted stock units cancelled	46		—		—	—
Options cancelled/expired/forfeited	21		(21	)	$2.11-$6.28	4.71
Options exercised	—		(258	)	$1.68-$5.75	3.31
Balances, September 30, 2012	6,940		7,209		$1.68-$10.01	$	4.27

Restricted stock units are granted from the pool of options available for grant. As the result of an amendment and restatement of the 2005 Stock Plan in May 2011, every share underlying restricted stock, restricted stock units (including performance based restricted stock units), or stock purchase rights issued on or after May 18, 2011 (the date on which the amendment and restatement became effective) is counted against the numerical limit for options available for grant as 1.61 shares in the table above, as reflected in the line items for "Plan adjustments", except that restricted stock units (including performance based restricted stock units), and stock purchase rights issued prior to May 18, 2011, continue to be governed by an earlier amendment to the 2005 Stock Plan that provided for a numerical limit of 1.78 shares. If shares issued pursuant to any restricted stock, restricted stock unit, and stock purchase right agreements granted on or after May 18, 2011 are cancelled, forfeited or repurchased by the Company or would otherwise return to the 2005 Stock Plan, 1.61 times the number of those shares will return to the 2005 Stock Plan and will again become available for issuance. The Company issued 14.2 million shares of restricted stock units from May 18, 2011 to September 30, 2012 (net of cancellations) resulting in a reduction, based on a 1.61 to 1.0 ratio, of 22.7 million shares available for grant under the 2005 Stock Plan from May 18, 2011 to September 30, 2012. As of September 30, 2012, there were 6.9 million shares available for issuance under the 2005 Stock Plan, or 4.3 million shares after giving effect to the 1.61 to 1.0 ratio applicable under the 2005 Stock Plan for issuances of restricted stock units made on or after May 18, 2011.

Restricted Stock Units

Activity related to restricted stock units is set forth below:

	Number of Units		Weighted-Average Grant Date Fair Value
	(in thousands, except per share data)
Balance, December 31, 2011	23,471		$	8.99
Restricted stock units issued	210		10.20
Restricted stock units vested	(1,225	)	6.99
Restricted stock units cancelled	(405	)	8.11
Performance-based restricted stock units issued	200		10.73
Performance-based restricted stock units cancelled	(75	)	14.00
Balance, March 31, 2012	22,176		$	9.12
Restricted stock units issued	632		7.43
Restricted stock units vested	(2,378	)	6.31
Restricted stock units cancelled	(228	)	8.06
Performance-based restricted stock units issued	98		7.48
Performance-based restricted stock units cancelled	(70	)	14.00
Balance, June 30, 2012	20,230		$	9.39
Restricted stock units issued	6,283		5.95
Restricted stock units vested	(1,926	)	5.78
Restricted stock units cancelled	(456	)	8.28
Performance-based restricted stock units cancelled	(75	)	13.90
Balance, September 30, 2012	24,056		$	8.78

In the three and nine months ended September 30, 2012, 1.9 millionand 5.5 million restricted stock units vested, respectively, including 0.7 million and 2.0 million units withheld for taxes, respectively. These vested restricted stock units had a weighted-average grant date fair value of $5.78 and $6.28 per share for the three and nine months ended September 30, 2012, respectively. As of September 30, 2012, total unearned stock-based compensation related to unvested restricted stock units previously granted (including performance-based restricted stock units) was approximately $161.0 million, excluding forfeitures, and is expected to be recognized over a weighted-average period of 2.57 years.

In the three and nine months ended September 30, 2011, 1.9 million and 3.8 million restricted stock units vested, respectively, including 0.8 million and 1.5 million units withheld for taxes, respectively. These vested restricted stock units had a weighted-average grant date fair value of $4.93 and $4.84 per share for the three and nine months ended September 30, 2011, respectively.

Until restricted stock units are vested, they do not have the voting rights of common stock and the shares underlying such restricted stock units are not considered issued and outstanding. Upon vesting of restricted stock units, shares withheld by the Company to pay taxes are retired.

Performance-Based Restricted Stock Units

In May 2011, the Company adopted the 2011 Long-Term Performance Based Incentive Plan (the “2011 Plan”), which provides for the grant of restricted stock units to eligible employees. Vesting of restricted stock units granted under the 2011 Plan is subject to the satisfaction of performance metrics tied to revenue growth and operating margin over the designated performance periods. The performance periods for the 2011 Plan run from January 1, 2011 through December 31, 2013 and consist of threeone-year performance periods (calendar years 2011, 2012 and 2013) and a three year cumulative performance period. The Company did not issue any performance-based restricted stock units in the three months ended September 30, 2012. The Company issued 0.3 million performance-based restricted stock units in the nine months ended September 30, 2012. The Company recorded total stock-based compensation expense related to performance-based restricted stock units of $3.3 million and $11.0 million under the 2011 Plan in the three and nine months ended September 30, 2012, respectively. The Company issued 3.4 million performance-based restricted stock units in May 2011. The Company recorded total stock-based compensation expense related to performance-based restricted units of $3.7 million and $4.3 million in the three and nine months ended September 30, 2011, respectively.

The 2011 Plan performance metrics include revenue growth rankings for the Company relative to a semiconductor peer group or a microcontroller peer group, as determined by the Compensation Committee. In addition, in order for a participant to receive credit for a performance period the Company must achieve a minimum operating margin during such performance period, measured on a non-GAAP basis as defined in the 2011 Plan, subject to adjustment by the Compensation Committee. Management evaluates, on a quarterly basis, the likelihood of the Company meeting its performance metrics in determining stock-based compensation expense for performance share plans.

Stock Option Awards

No options were granted in the three and nine months ended September 30, 2012 or 2011.

As of September 30, 2012, total unearned compensation expense related to unvested stock options was approximately $2.2 million, excluding forfeitures, and is expected to be recognized over a weighted-average period of 1.32 years .

Employee Stock Purchase Plan

Under the 1991 Employee Stock Purchase Plan (“1991 ESPP”) and 2010 Employee Stock Purchase Plan (“2010 ESPP” and, together with the 1991 ESPP, the “Company’s ESPPs”), qualified employees are entitled to purchase shares of Atmel’s common stock at the lower of 85% of the fair market value of the common stock at the date of commencement of the six month offering period or 85% of the fair market value on the last day of the offering period. Purchases are limited to 10% of an employee’s eligible compensation. There were 1.1 million and 1.8 million shares purchased under the 2010 ESPP for the three and nine months ended September 30, 2012, respectively, at an average price per share of $4.94 and $6.64, respectively. There were 0.7 million shares purchased under the 2010 ESPP for the three months ended September 30, 2011 at an average price per share of $8.56. There were 0.8 million shares purchased under the 1991 ESPP for the nine months ended September 30, 2011 at an average price per share of $4.85. The 1991 ESPP was superseded by the 2010 ESPP in the three months ended March 31, 2011. Of the 25.0 million shares authorized for issuance under the 2010 ESPP, 22.5 million shares were available for issuance at September 30, 2012.

The fair value of each purchase under the Company’s ESPPs is estimated on the date of the beginning of the offering period using the Black-Scholes option-pricing model. The following assumptions were utilized to determine the fair value of the Company’s ESPPs shares:

	Three Months Ended				Nine Months Ended
	September 30, 2012		September 30, 2011		September 30, 2012		September 30, 2011
Risk-free interest rate	0.15	%	0.07	%	0.15	%	0.12	%
Expected life (years)	0.50		0.50		0.50		0.50
Expected volatility	50	%	51	%	53	%	46	%
Expected dividend yield	—		—		—		—

The weighted-average fair value of the rights to purchase shares under the Company’s ESPPs for purchase periods beginning in the nine months ended September 30, 2012 and 2011 was $1.77 and $2.70, respectively. Cash proceeds from the issuance of shares under the Company’s ESPPs were $10.9 million and $6.2 million for the nine months ended September 30, 2012 and 2011, respectively.

Common Stock Repurchase Program

Over the past several years, Atmel’s Board of Directors authorized an aggregate of $700.0 million of funding for the Company’s stock repurchase program. The repurchase program does not have an expiration date, and the number of shares repurchased and the timing of repurchases are based on the level of the Company’s cash balances, general business and market conditions, regulatory requirements, and other factors, including alternative investment opportunities. As of September 30, 2012, $143.4 million remained available for repurchasing common stock under this program.

During the three and nine months ended September 30, 2012, Atmel repurchased 3.8 million and 19.4 million shares, respectively, of its common stock on the open market at an average repurchase price of $5.98 and $8.44 per share, respectively, excluding commission, and subsequently retired those shares. Common stock and additional paid-in capital were reduced by $22.8 million and $163.4 million, excluding commission, for the three and nine months ended September 30, 2012, respectively, as a result of the stock repurchases.