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STOCKHOLDERS EQUITY AND SHARE-BASED COMPENSATION
 12 Months Ended
Dec. 31, 2011
Stockholders Equity And Share Based Compensation Abstract  
STOCKHOLDERS EQUITY AND SHARE-BASED COMPENSATION
NOTE 14—STOCKHOLDERS' EQUITY AND SHARE-BASED COMPENSATION EXPENSE
 
Convertible Preferred Stock
 
The Company's Board of Directors has authorized 5.0 million shares of convertible redeemable preferred stock, $0.01 par value. At December 31, 2011 and 2010, there were no such shares issued or outstanding.
 
Share-based Compensation Plans
 
The Company has a share-based compensation program that provides the Board of Directors broad discretion in creating equity incentives for employees, officers, directors and consultants. This program includes incentive and non-qualified stock options and RSAs, granted under various stock plans. Stock options are issued at a price of at least 100% of the fair value of the Company's common stock on the date of grant (110% in certain circumstances), as determined by the Board of Directors. Options generally expire 7 to 10 years from the grant date and may be granted with different vesting terms from time to time as determined by the Board of Directors, usually over a period of four years on each anniversary of the grant date. In general, RSAs vest on an annual basis over a period of four years on each anniversary of the grant date, are subject to the employees' continued employment and are paid upon vesting in shares of the Company's common stock on a one-for-one basis. As of December 31, 2011, the Company had approximately 4.9 million shares of common stock reserved for future issuance under its share-based compensation plans. New shares are issued as a result of stock option exercises, restricted stock units vesting and restricted stock award grants. A more detailed description of the Company's current share-based compensation plans follows below.
 
In 1998, the Board of Directors adopted the Affymetrix 1998 Stock Incentive Plan (the "1998 Stock Plan") under which nonqualified stock options and restricted stock may be granted to employees and outside consultants, except that members of the Board of Directors and individuals who are considered officers of the Company under the rules of the National Association of Securities Dealers shall not be eligible. Options granted under the 1998 Stock Plan expire no later than ten years from the date of grant. A total of 3.6 million shares of common stock are authorized for issuance under the 1998 Stock Plan.
 
In 2000, the Board of Directors adopted the Amended and Restated 2000 Equity Incentive Plan (the "2000 Stock Plan"), which was amended and restated in 2001, under which RSAs, stock options, performance-based shares and stock appreciation rights may be granted to employees, outside directors and consultants. In the second quarter of 2010, 4.5 million shares of common stock were added under the 2000 Stock Plan bringing the total shares of common stock authorized for issuance under the 2000 Stock Plan to 16.2 million.
 
The following table sets forth the total share-based compensation expense resulting from stock options and RSAs included in the Company's Consolidated Statements of Operations (in thousands):
 
   
Year Ended December 31,
 
   
2011
   
2010
   
2009
 
Costs of sales
 
$
1,143
   
$
994
   
$
1,677
 
Research and development
   
1,850
     
2,136
     
2,207
 
Selling, general and administrative
   
5,778
     
6,780
     
7,264
 
Total share-based compensation expense
 
$
8,771
   
$
9,910
   
$
11,148
 
 
As of December 31, 2011, $16.0 million of total unrecognized share-based compensation expense related to non-vested awards is expected to be recognized over the respective vesting terms of each award through 2015. The weighted-average term of the unrecognized share-based compensation expense is 2.7 years.
 
Stock Options
 
The fair value of options was estimated at the date of grant using the BSM option pricing model with the following weighted-average assumptions:
 
   
Year Ended December 31,
 
   
2011
   
2010
   
2009
 
Risk free interest rate
   
1.5
%
   
1.1
%
   
1.7
%
Expected dividend yield
   
0.0
%
   
0.0
%
   
0.0
%
Expected volatility
   
67
%
   
76
%
   
70
%
Expected option term (in years)
   
4.5
     
4.1
     
4.1
 
 
The risk free interest rate for periods within the contractual life of the Company's stock options is based on the U.S. Treasury yield curve in effect at the time of grant. The expected term is derived from an analysis of the Company's historical exercise trends over ten years. The expected volatility for the years ended December 31, 2011 and 2010 is based on a blend of historical and market-based implied volatility. Using the assumptions above, the weighted-average grant date fair value of options granted during the years ended December 31, 2011, 2010 and 2009 was $2.86, $2.66 and $3.03, respectively.
 
Activity under the Company's stock plans for the year ended December 31, 2011 is as follows (in thousands, except per share amounts):
 
        
Weighted-Average
   
Weighted-Average
   
Aggregate
 
        
Exercise Price
   
Remaining
   
Intrinsic
 
   
Shares
   
Per Share
   
Contractual Terms
   
Value
 
             
(in years)
      
Outstanding at December 31, 2010
   
6,636
   
$
12.44
           
Grants
   
1,952
     
5.31
           
Exercises
   
(180
)
   
3.29
           
Forfeitures or expirations
   
(2,132
)
   
15.63
           
Outstanding at December 31, 2011
   
6,276
   
$
9.41
     
4.69
   
$
520,725
 
                                 
Exercisable at December 31, 2011
   
2,722
   
$
14.32
     
3.31
   
$
253,898
 
                                 
Vested and expected to vest at December 31, 2011
   
5,548
   
$
9.95
     
4.51
   
$
490,116
 
 
The following table summarizes information concerning currently outstanding and exercisable options at December 31, 2011:
 
    
Options Outstanding
   
Options Exercisable
 
         
Weighted-Average
   
Weighted-Average
        
Weighted-Average
 
         
Remaining
   
Exercise Price
        
Exercise Price
 
Range of Exercise Prices
   
Number
   
Contractual Life
   
Per Share
   
Number
   
Per Share
 
    
(in thousands)
   
(in years)
        
(in thousands)
      
$
1.32 - 4.09
     
593
     
4.62
   
$
3.21
     
236
   
$
3.02
 
$
4.22 - 4.22
     
975
     
5.50
   
$
4.22
     
253
   
$
4.22
 
$
4.26 - 4.85
     
820
     
6.54
   
$
4.75
     
46
   
$
4.61
 
$
4.88 - 5.74
     
941
     
5.59
   
$
5.39
     
231
   
$
5.50
 
$
5.78 - 8.29
     
1,120
     
5.37
   
$
7.40
     
362
   
$
7.83
 
$
8.71 - 11.30
     
844
     
3.14
   
$
10.33
     
664
   
$
10.35
 
$
12.11 - 25.67
     
459
     
2.71
   
$
20.15
     
406
   
$
20.31
 
$
25.68 - 57.08
     
524
     
1.54
   
$
33.92
     
524
   
$
33.92
 
Total
     
6,276
     
4.69
   
$
9.41
     
2,722
   
$
14.32
 
 
The aggregate intrinsic value in the table above represents the total pretax intrinsic value (i.e., the difference between the Company's closing stock price on the last trading day of its fourth quarter of 2011 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 December 31, 2011. The amount changes based on the fair market value of the Company's common stock. For the years ended December 31, 2011, 2010 and 2009, total intrinsic value of options exercised was $0.4 million, $0.2 million and less than $0.1 million, respectively.
 
Reserved Shares
 
At December 31, 2011, the Company has shares reserved for future issuance as follows (in thousands):
 
Options outstanding
   
6,276
 
Options available for future grants
   
4,878
 
Convertible subordinated notes
   
3,169
 
     
14,323
 
 
Restricted Stock
 
The following table summarizes the Company's RSAs activity for the year ended December 31, 2011 (in thousands, except per share amounts):
 
   
Number
   
Weighted-Average
 
   
of Shares
   
Grant Date Fair Value
 
Restricted stock awards
         
Non-vested stock outstanding at December 31, 2010
   
1,248
   
$
8.14
 
Granted
   
-
   
$
-
 
Vested
   
(467
)
 
$
9.63
 
Forfeited
   
(241
)
 
$
7.09
 
Non-vested stock outstanding at December 31, 2011
   
540
   
$
7.32
 
                 
Restricted stock units
               
Non-vested stock outstanding at December 31, 2010
   
705
   
$
4.47
 
Granted
   
1,688
   
$
5.39
 
Vested
   
(169
)
 
$
4.79
 
Forfeited
   
(167
)
 
$
4.48
 
Non-vested stock outstanding at December 31, 2011
   
2,057
   
$
5.20
 
 
For the years ended December 31, 2011 and 2010, total fair value of RSAs vested was $14.6 million and $13.3 million, respectively.
 
Performance-Based Awards
 
In 2011, the Compensation Committee approved a grant of performance-based restricted stock units ("PRSUs") under the Plan to an executive officer that is earned annually in four equal tranches (the "Performance Period"). The PRSUs entitle the executive to receive a certain number of shares of the Company's common stock based on the Company's satisfaction of certain financial and strategic performance goals as set and approved by the Board of Directors annually during the first quarter of the specific performance period. Based on the achievement of the performance conditions during the Performance Period, the final settlement of the PRSU award will vest twelve months following the end of the Performance Period. The PRSU award will be forfeited if the performance goals are not met or if the executive officer is no longer employed at the vest date.
 
The number of shares underlying the PRSUs that were granted to the executive officer during the year ended December 31, 2011 totaled 240,000 shares and had a grant date fair value of $6.71 per share. As of December 31, 2011, the Company expects that 60,000 shares of the PRSUs will vest and the fair value of such shares is being amortized on a straight-line basis over the remaining service period. The total compensation cost related to PRSUs granted but not yet recognized was approximately $1.5 million as of December 31, 2011.
 
Employee Stock Purchase Plan
 
In August 2011, the Company's Board of Directors adopted the 2011 Employee Stock Purchase Plan ("ESPP") that is subject to approval by the stockholders at the next annual meeting. The ESPP reserved a total of 7.0 million shares of the Company's common stock for issuance under the plan and permits eligible employees to purchase common stock at a discount through payroll deductions.
 
The price at which stock is purchased under the ESPP is equal to 85% of the fair market value of the common stock on the first day of the offering period or the last day of the purchase period, whichever is lower. The offering periods are twelve months and include two six month purchase periods that result in a look-back for determining the purchase price of up to 12 months. Employees can invest up to 15% of their gross compensation through payroll deductions. In no event would an employee be permitted to purchase more than 750 shares of common stock during any six-month purchase period. The initial offering period commenced in November 2011. As of the year ended December 31, 2011, there were 245 participants in the plan and no shares were issued under the ESPP.