STOCKHOLDERS' EQUITY

3 Months Ended

Mar. 31, 2013

Stockholders' Equity Note [Abstract]

STOCKHOLDERS' EQUITY

STOCKHOLDERS’ EQUITY

Share-Based Compensation

The following table summarizes share-based compensation, net of amount capitalized in inventory, included in operating results for the three months ended March 31, 2013 and 2012:

	Three Months Ended
	March 31, 2013			March 31, 2012
	(In thousands)
Cost of revenue	$	1,844		$	2,255
Research and development	4,608			6,763
Selling, general and administrative	8,310			10,309
Total share-based compensation expense, before income taxes	14,762			19,327
Tax benefit	(2,606		)	(2,790		)
Total share-based compensation expense, net of income taxes	$	12,156		$	16,537

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 March 31, 2013, 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, 2012	6,148		6,675		$1.68-$10.01	$	4.33
Restricted stock units issued	(1,182	)	—		—	—
Plan adjustment for restricted stock units issued	(721	)	—		—	—
Restricted stock units cancelled	319		—		—	—
Plan adjustment for restricted stock units cancelled	219		—		—	—
Performance-based restricted stock units cancelled	59		—		—	—
Plan adjustment for performance-based restricted stock units cancelled	36		—		—	—
Options cancelled/expired/forfeited	15		(15	)	$3.67-$7.12	4.97
Options exercised	—		(402	)	$1.68-$6.28	4.37
Balances, March 31, 2013	4,893		6,258		$1.77-$10.01	$	4.33

In connection with the Company's acquisition of Ozmo in December 2012 , the Company assumed Ozmo's equity incentive plan. Excluded from the table above are 0.4 million shares assumed as part of the Ozmo acquisition. This amount is comprised of 0.3 million restricted stock units, with a weighted-average grant date fair value of $6.17, and 0.1 million options, with a weighted-average grant date fair value of $0.81. These stock options and restricted stock units remain governed by the terms and conditions of the Ozmo plan. No additional equity will be granted under the Ozmo plan.

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, as reflected in the table above in the line items for "Plan adjustments", except that restricted stock units (including performance-based restricted stock units), or 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, or 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 15.6 million shares of restricted stock units from May 18, 2011 to March 31, 2013 (net of cancellations) resulting in a reduction, based on a 1.61 to 1.0 ratio, of 25.1 million shares available for grant under the 2005 Stock Plan from May 18, 2011 to March 31, 2013. As of March 31, 2013, there were 4.9 million shares available for issuance under the 2005 Stock Plan, or 3.0 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. The restricted stock units and stock options assumed as part of the Ozmo acquisition were not issued under the 2005 Stock Plan.

On March 29, 2013, the Company filed a proxy statement with the Securities and Exchange Commission related to its 2013 Annual Meeting. The Company's Board of Directors has recommended that stockholders approve a 25.0 million share increase in the number of shares allocated to the 2005 Stock Plan. If approved by the Company's stockholders, every share underlying restricted stock, restricted stock units (including performance-based restricted stock units), or stock purchase rights issued on or after the date on which the amendment becomes effective, will be counted against the numerical limit for options available for grant as 1.57 shares.

Restricted Stock Units

Activity related to restricted stock units is set forth below:

	Number of Units Outstanding		Weighted-Average Grant Date Fair Value
	(In thousands, except per share data)
Balances, December 31, 2012	21,944		$	8.71
Restricted stock units issued	1,182		6.85
Restricted stock units vested	(1,553	)	6.72
Restricted stock units cancelled	(319	)	8.32
Performance-based restricted stock units cancelled	(59	)	14.00
Balances, March 31, 2013	21,195		$	8.75

Excluded from the table above are 0.3 million restricted stock units, with a weighted average grant date fair value of $6.17, assumed as part of the acquisition of Ozmo completed in December 2012.

During the three months ended March 31, 2013, 1.6 million restricted stock units vested, including 0.6 million units withheld for taxes. These vested restricted stock units had a weighted-average grant date fair value of $6.72 per share for the three months ended March 31, 2013. As of March 31, 2013, total unearned share-based compensation related to unvested restricted stock units previously granted (including performance-based restricted stock units) was approximately $115.9 million, excluding forfeitures, and is expected to be recognized over a weighted-average period of 2.33 years.

For the three months ended March 31, 2012, 1.2 million restricted stock units vested, including 0.5 million units withheld for taxes. These vested restricted stock units had a weighted-average grant date fair value of $6.99 per share for the three months ended March 31, 2012.

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 March 31, 2013. The Company issued 0.2 million performance-based restricted stock units in the three months ended March 31, 2012. The Company recorded total share-based compensation expense related to performance-based restricted stock units of $0.4 million and $4.3 million under the 2011 Plan in the three months ended March 31, 2013 and 2012, respectively. The expense recorded for the three months ended March 31, 2013 decreased from the three months ended March 31, 2012 as a result of the Company reducing its estimates regarding the probability of achieving all performance criteria and an increase in the estimated forfeiture rate for these performance-based restricted stock units resulting in a total credit of $2.4 million. The Company is required to reassess the probability of vesting at each reporting date, and any change in its forecasts may result in an increase or decrease to the expense recognized. As a result, the expense recognition for performance-based restricted stock units could change over time, requiring adjustments to the financial statements to reflect changes in management's judgment regarding the probability of achieving the performance goals.

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 pro forma basis as defined in the 2011 Plan, subject to adjustment by the Compensation Committee. The Compensation Committee is required by the terms of the 2011 Plan to adjust downward the pro forma operating margin threshold if an industry-wide decline in adjusted revenue for the Company's semiconductor peer companies occurs, and, if that occurs, any downward adjustment must be implemented in a manner consistent with the absolute decline in pro forma operating margin for peer companies as a group, as reviewed by the Compensation Committee. Management evaluates, on a quarterly basis, the likelihood of the Company meeting its performance metrics in determining share-based compensation expense for performance share plans.

Stock Option Awards

No options were granted in the three months ended March 31, 2013 or 2012.

As of March 31, 2013, total unearned compensation expense related to unvested stock options was approximately $1.1 million, excluding forfeitures, and is expected to be recognized over a weighted-average period of 1.40 years. 

Employee Stock Purchase Plan

     Under the 2010 Employee Stock Purchase Plan (“2010 ESPP”), 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 1.0 million and 0.7 million shares purchased under the 2010 ESPP for the three months ended March 31, 2013 and 2012, respectively, at an average price per share of $5.00 and $8.33, respectively. Of the 25.0 million shares authorized for issuance under the 2010 ESPP, 21.5 million shares were available for issuance at March 31, 2013.

The fair value of each purchase under the 2010 ESPP 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 2010 ESPP shares:

	Three Months Ended
	March 31, 2013		March 31, 2012
Risk-free interest rate	0.13	%	0.15	%
Expected life (years)	0.50		0.50
Expected volatility	50	%	56	%
Expected dividend yield	—		—

The weighted-average fair value purchase price per share under the 2010 ESPP for purchase periods beginning in the three months ended March 31, 2013 and 2012 was $1.29 and $2.27, respectively. Cash proceeds from the issuance of shares under the 2010 ESPP were $5.1 million and $5.4 million for the three months ended March 31, 2013 and 2012, respectively.

Common Stock Repurchase Program

Atmel’s Board of Directors has authorized an aggregate of $700.0 million of funding for the Company’s stock repurchase program since 2010. 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 March 31, 2013, $111.8 million remained available for repurchasing common stock under this program.

During the three months ended March 31, 2013 and 2012, Atmel repurchased 2.4 million and 9.5 million shares, respectively, of its common stock in the open market at an average repurchase price of $6.52 and $10.18 per share, respectively, excluding commission, and subsequently retired those shares. Common stock and additional paid-in capital were reduced by $15.4 million and $96.2 million for the three months ended March 31, 2013 and 2012, respectively, as a result of the stock repurchases.