Stock-Based Compensation

12 Months Ended

Apr. 01, 2012

Stock-Based Compensation [Abstract]

Stock-Based Compensation

Note 11. Stock-Based Compensation

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan (the ESPP) that operates in accordance with Section 423 of the Internal Revenue Code. The ESPP is administered by the Compensation Committee of the Board of Directors. Under the ESPP, employees of the Company who elect to participate are granted options to purchase common stock at a 15% discount from the lower of the market value of the common stock at the beginning or end of each three-month offering period. The ESPP permits an enrolled employee to make contributions to purchase shares of common stock by having withheld from their salary an amount between 1% and 10% of compensation. The total number of shares issued under the ESPP was 556,000, 449,000 and 560,000 during fiscal 2012, 2011 and 2010, respectively.

Stock Incentive Compensation Plans

The Company may grant stock-based awards to employees and directors under the QLogic 2005 Performance Incentive Plan (the 2005 Plan). Prior to the adoption of the 2005 Plan in August 2005, the Company granted options to purchase shares of the Company’s common stock to employees and directors under certain predecessor stock plans. Additionally, the Company has assumed stock options as part of acquisitions.

The 2005 Plan provides for the issuance of incentive and non-qualified stock options, restricted stock units and other stock-based incentive awards for employees. The 2005 Plan permits the Compensation Committee of the Board of Directors to select eligible employees to receive awards and to determine the terms and conditions of awards. In general, stock options granted to employees have ten-year terms and vest over four years from the date of grant. Restricted stock units represent a right to receive a share of stock at a future vesting date with no cash payment from the holder. In general, restricted stock units granted to employees vest over four years from the date of grant.

Under the terms of the 2005 Plan, as amended, non-employee directors receive grants of stock-based awards upon initial election or appointment to the Board of Directors and upon annual reelection to the Board. The target fair value of such grants are determined by reference to the equity compensation for non-employee directors of the Company’s peer group of companies. The target value is then allocated 100% to a non-qualified stock option grant in the case of the initial grant and allocated 35% to a restricted stock unit award and 65% to a non-qualified stock option grant in the case of the annual grant. All stock options and restricted stock units granted to non-employee directors have ten-year terms and vest from one to three years from the date of grant.

The Company also entered into a stock-based performance plan in connection with a business acquisition in fiscal 2007. During fiscal 2011 and 2010 the Company issued 28,000 shares of common stock valued at $0.6 million and 112,000 shares of common stock valued at $1.3 million, respectively, under this performance plan.

As of April 1, 2012, options to purchase 19.0 million shares of common stock and 2.7 million restricted stock units were held by employees and non-employee directors. Shares available for future grant were 10.6 million under the 2005 Plan as of April 1, 2012. No further awards can be granted under any other plans.

A summary of stock option activity is as follows:

	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value
	(In thousands)							(In thousands)
Outstanding at March 29, 2009		25,940		$	20.58
Granted		3,853			14.06
Exercised		(1,878	)		14.89
Forfeited (cancelled pre-vesting)		(499	)		15.54
Expired (cancelled post-vesting)		(3,160	)		25.06
Outstanding at March 28, 2010		24,256			19.50
Granted		2,829			17.74
Exercised		(2,091	)		14.18
Forfeited (cancelled pre-vesting)		(708	)		15.42
Expired (cancelled post-vesting)		(2,430	)		32.13
Outstanding at April 3, 2011		21,856			18.51
Granted		1,630			15.73
Exercised		(1,544	)		14.83
Forfeited (cancelled pre-vesting)		(686	)		15.86
Expired (cancelled post-vesting)		(2,245	)		24.93
Outstanding at April 1, 2012		19,011		$	17.91		4.8	$	24,634
Vested and expected to vest at April 1, 2012		18,683		$	17.93		4.8	$	24,196
Exercisable at April 1, 2012		15,161		$	18.40		3.9	$	17,591

A summary of restricted stock unit activity is as follows:

	Number of Shares			Weighted- Average Grant Date Fair Value
	(In thousands)
Outstanding and unvested at March 29, 2009		1,693		$	16.18
Granted		1,488			13.85
Vested		(533	)		16.65
Forfeited		(134	)		15.85
Outstanding and unvested at March 28, 2010		2,514			14.78
Granted		965			17.79
Vested		(959	)		15.31
Forfeited		(249	)		15.11
Outstanding and unvested at April 3, 2011		2,271			15.80
Granted		1,656			15.63
Vested		(879	)		15.58
Forfeited		(362	)		15.82
Outstanding and unvested at April 1, 2012		2,686		$	15.77

During fiscal 2012, 2011 and 2010, the Company issued 546,000, 581,000 and 334,000 shares of common stock, respectively, in connection with the vesting of restricted stock units. The difference between the number of restricted stock units vested and the shares of common stock issued is the result of restricted stock units withheld in satisfaction of minimum tax withholding obligations associated with the vesting.

During fiscal 2012, the Company granted 0.2 million restricted stock units with performance and service conditions to certain senior executives, which are not included in the above table. The evaluation of the performance criteria, and accordingly the determination of the ultimate number of shares earned under these restricted stock units, will be completed in the first quarter of fiscal 2013. The shares that are earned will vest over four years from the initial date of grant.

Stock-Based Compensation Expense

A summary of stock-based compensation expense, by functional line item in the consolidated statements of income, is as follows:

	2012		2011		2010
	(In thousands)
Cost of revenues	$	2,506	$	2,247	$	2,276
Engineering and development		14,199		14,222		14,094
Sales and marketing		6,667		6,768		6,182
General and administrative		8,316		8,398		7,910
Total continuing operations		31,688		31,635		30,462
Discontinued operations		904		3,372		5,232
	$	32,592	$	35,007	$	35,694

In fiscal 2010, the Company granted 464,000 restricted stock units to employees that joined QLogic in connection with the acquisition of NetXen and recognized $1.3 million, $2.4 million and $1.6 million of stock-based compensation related to these awards during fiscal 2012, 2011 and 2010, respectively, which is included in the table above.

The fair value of stock options granted and shares to be purchased under the ESPP have been estimated at the date of grant using a Black-Scholes option-pricing model. The weighted-average fair values and underlying assumptions are as follows:

	2012						2011						2010
	Stock Options			Employee Stock Purchase Plan			Stock Options			Employee Stock Purchase Plan			Stock Options			Employee Stock Purchase Plan
Fair value	$	5.73		$	3.49		$	6.62		$	3.95		$	5.31		$	3.50
Expected volatility		36	%		36	%		38	%		36	%		38	%		42	%
Risk-free interest rate		1.8	%		0.1	%		2.1	%		0.2	%		2.2	%		0.1	%
Expected life (years)		5.5			0.25			5.3			0.25			5.0			0.25
Dividend yield		—			—			—			—			—			—

Restricted stock units granted were valued based on the closing market price on the date of grant.

The Company recognized tax benefits related to stock-based compensation expense for fiscal 2012, 2011 and 2010 of $7.7 million, $7.1 million and $5.3 million, respectively. Stock-based compensation costs capitalized as part of the cost of assets for fiscal 2012, 2011 and 2010 were not material.

As of April 1, 2012, there was $51.7 million of total unrecognized compensation costs related to outstanding stock-based awards. These costs are expected to be recognized over a weighted-average period of 2.3 years.

During fiscal 2012, 2011 and 2010, the grant date fair value of options vested totaled $16.5 million, $18.5 million and $20.0 million, respectively. The intrinsic value of options exercised during fiscal 2012, 2011 and 2010 totaled $3.8 million, $8.4 million and $6.8 million, respectively. Intrinsic value of options exercised is calculated as the difference between the market price on the date of exercise and the exercise price multiplied by the number of options exercised.

The fair value of restricted stock units vested during fiscal 2012, 2011 and 2010 totaled $14.4 million, $17.1 million and $7.7 million, respectively.

The Company currently issues new shares to deliver common stock under its stock-based award plans.