STOCKHOLDERS’ EQUITY

Share-Based Compensation

The following table summarizes share-based compensation, net of the amount capitalized in inventory, included in operating results:



	Three Months Ended
	March 31, 2015			March 31, 2014
	(in thousands)
Cost of revenue	$	1,115		$	1,316
Research and development	3,578			4,729
Selling, general and administrative	8,994			9,572
Total share-based compensation expense, before income taxes	13,687			15,617
Tax benefit	(2,867		)	(2,924		)
Total share-based compensation expense, net of income taxes	$	10,820		$	12,693

Restricted Stock Units, Employee Stock Purchase Plan and Stock Options

In May 2005, Atmel’s stockholders initially approved Atmel’s 2005 Stock Plan (as amended, the “2005 Stock Plan”). As of March 31, 2015, 158.0 million shares had been cumulatively authorized for issuance under the 2005 Stock Plan, and 13.8 million shares remained available for issuance without giving effect to any adjustment that may be required by the terms of the 2005 Stock Plan in respect of shares underlying restricted stock or restricted stock units. 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. Restricted stock units generally vest on a quarterly basis over a service period of up to four years from the grant date, although restricted stock unit grants to newly-hired employees generally have a one-year cliff vest equal to one-quarter of the total grant. 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 for per share data)
Balances, December 31, 2014	13,611		3,059		$2.13-$10.01		$	4.57
Restricted stock units issued	(479	)	—		—		—
Plan adjustment for restricted stock units issued	(273	)	—		—		—
Restricted stock units cancelled	363		—		—		—
Plan adjustment for restricted stock units cancelled	210		—		—		—
Performance-based restricted stock units cancelled	253		—		—		—
Plan adjustment for performance-based restricted stock units cancelled	144		—		—		—
Options cancelled/expired/forfeited	2		(2	)	$	3.26	$	3.26
Options exercised			(198	)	$2.66-$6.28		$	3.51
Balances, March 31, 2015	13,831		2,859
Options vested and expected to vest at March 31, 2015			2,859

Restricted stock units are granted from the pool of options available for grant. Every share underlying restricted stock, restricted stock units (including performance-based restricted stock units), or stock purchase rights issued on or after May 9, 2013 is counted against the numerical limit for options available for grant as 1.57 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 9, 2013 but on or after May 18, 2011, is counted against the numerical limit for options available for grant as 1.61 shares, and restricted stock units (including performance-based restricted stock units), or stock purchase rights issued prior to May 18, 2011 and on or after May 14, 2008, is counted against the numerical limit for options available for grant as 1.78 shares. If shares issued pursuant to any restricted stock, restricted stock unit, and stock purchase right agreements are cancelled, forfeited or repurchased by the Company, the number of shares returned to the 2005 Stock Plan will be multiplied by the same ratios above under which such shares were issued and will again become available for issuance.

As of March 31, 2015, there were 13.8 million shares available for issuance under the 2005 Stock Plan, or 8.8 million shares after giving effect to the applicable ratios under the 2005 Stock Plan for issuances of restricted stock units, as described above.

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 for per share data)
Balances, December 31, 2014	18,163		$	8.40
Restricted stock units issued	479		8.45
Restricted stock units vested	(1,898	)	8.43
Restricted stock units cancelled	(363	)	7.71
Performance-based restricted stock units cancelled	(253	)	7.35
Balances, March 31, 2015	16,128		$	8.43

As of March 31, 2015, total unearned share-based compensation related to unvested restricted stock units previously granted (including performance-based restricted stock units) was approximately $92.1 million, including estimated forfeitures, and is expected to be recognized over a weighted-average period of 2.54 years.

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

On December 11, 2014, the Company adopted the Atmel 2015 Long-Term Performance-Based Incentive Plan (the “2015 Plan”), which provides for the grant of performance-based restricted stock units to Company participants. The Company issued 2.6 million shares under the 2015 Plan for the year ended December 31, 2014. The Company records performance-based restricted stock units issued under the 2015 Plan based on achievement of the “target” performance metrics, which will result in a participant being credited with 100% of the performance-based shares awarded to that participant under the 2015 Plan. Achievement at the “maximum” performance metrics will result in a participant being credited with 200% of the performance-based shares awarded to that participant under the 2015 Plan.

Performance metrics for the 2015 Plan are based on the Company’s publicly-reported non-GAAP earnings per share growth rate from 2014 to 2015 (calculated for the fiscal years ended 2014 and 2015, respectively) to the adjusted earnings per share growth rates of companies included within the well-established Philadelphia Semiconductor Sector IndexSM (SOX Index) during the same period. The SOX Index is a modified market capitalization-weighted index composed of companies primarily involved in the design, distribution, manufacture, and sale of semiconductors. For purposes of the 2015 Plan, “adjusted earnings per share” for the applicable measurement period for any company included within the SOX Index means that company’s non-GAAP earnings per share, as publicly reported by that company (which, in the case of the Company, will be its non-GAAP earnings per share), adjusted to exclude for the measurement period (to the extent such adjustments are publicly disclosed) each of the following: share-based compensation expense; restructuring and impairment charges (credits); loss (gain) on sale; acquisition and divestiture related expenses; intellectual property related settlement charges; non-cash tax expenses; other non-recurring tax items; to make equivalent comparisons between the Company’s non-GAAP earnings per share and the adjusted earnings per share for other companies included within the SOX Index. The Company recorded total share-based compensation expense related to the 2015 Plan of $1.3 million in the three months ended March 31, 2015.

For participants who are included within the 2015 Plan at any time after January 1, 2015, awards will be pro-rated to reflect the actual time a participant has been an employee of, or a service provider to, the Company.

On December 17, 2013, the Company adopted the Atmel 2014 Long-Term Performance-Based Incentive Plan (the “2014 Plan”), which ended on December 31, 2014. The Company recorded total share-based compensation expense related to the 2014 Plan of $1.0 million and $1.1 million in the three months ended March 31, 2015 and 2014, respectively.

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 subject to a maximum annual employee contribution limit of $25,000 of the market value of the shares (determined at the commencement of the six month offering period) per calendar year. There were 0.8 million shares purchased under the 2010 ESPP for each of the three months ended March 31, 2015 and 2014 at an average price per share of $6.97 and $6.43, respectively. Of the 25.0 million shares authorized for issuance under the 2010 ESPP, 18.2 million shares were available for issuance at March 31, 2015.

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, 2015		March 31, 2014
Risk-free interest rate	0.07	%	0.07	%
Expected life (years)	0.50		0.50
Expected volatility	36	%	32	%
Expected dividend yield	1.91	%	—	%

The weighted-average fair value per share under the 2010 ESPP for purchase periods beginning in the three months ended March 31, 2015 and 2014 were $1.68 and $1.64, respectively. Cash proceeds from the issuance of shares under the Company’s 2010 ESPP were $5.3 million and $5.4 million for the three months ended March 31, 2015 and 2014, respectively.

Common Stock Repurchase Program

Atmel’s Board of Directors has authorized an aggregate of $1.0 billion of funding for the Company’s common stock repurchase program since 2011. 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, 2015, $200.0 million remained available for the repurchase of common stock under this program.

During the three months ended March 31, 2015 and 2014, Atmel repurchased 1.1 million and 6.9 million shares, respectively, of its common stock in the open market at an average repurchase price of $8.24 and $7.97 per share, respectively, excluding commission, and subsequently retired those shares. Common stock and additional paid-in capital were reduced by $9.1 million and $54.9 million, excluding commission, for the three months ended March 31, 2015 and 2014, respectively, as a result of the stock repurchases.

Dividends

On March 26, 2015, the Company paid a cash dividend of $0.04 per common share, the aggregate cost of which was $16.7 million.