Stockholders Equity

12 Months Ended

Sep. 30, 2011

Stockholders' Equity [Abstract]

Stockholders' Equity

6. Stockholders’ Equity

The Company has stock-based compensation plans under which it grants stock options, restricted stock awards and performance share awards. Accounting guidance requires all share-based payments to be recognized as an operating expense, based on their fair values, over the requisite service period. The Company’s stock-based compensation expenses for the years ended September 30 were allocated to the following expense categories (in thousands):

	2011		2010		2009
Product	$	213	$	139	$	87
Customer research and development		372		772		815
Other research and development		983		2,399		2,806
Selling, general and administrative		2,684		2,565		3,145
Total	$	4,252	$	5,875	$	6,853

As of September 30, 2011, approximately $4.3 million of total unrecognized compensation costs related to non-vested awards is expected to be recognized over a weighted average period of approximately 2.5 years. The unrecognized compensation costs above exclude $1.0 million associated with performance share awards that are currently not anticipated to be fully expensed because the performance conditions are not expected to be met.

Stock Option Plans

The Company uses the Black-Scholes option pricing model to determine the weighted average grant date fair value of stock options granted. The weighted average per share fair value of stock options granted during fiscal 2011, 2010 and 2009 was $3.96, $6.78, and $8.95, respectively. The assumptions used as inputs in the model for the years ended September 30 were as follows:

	2011			2010			2009
Risk-free interest rates		1.45	%		1.95	%		2.30	%
Expected life		4.8 years			4.8 years			4.8 years
Expected volatility		45	%		41	%		40	%
Dividend yield		0	%		0	%		0	%

The risk-free interest rate assumption was based on the U.S. Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award. The expected life of options granted is determined based on the Company’s experience. Expected volatility is based on the Company’s stock price movement over a period approximating the expected term. Based on management’s judgment, dividend rates are expected to be zero for the expected life of the options. The Company also estimates forfeitures of options granted, which are based on historical experience.

The Company’s Incentive Stock Options (“ISO”) are granted at a price of at least 100% of the fair market value of the common stock of the Company on the date of the grant or 110% with respect to optionees who own more than 10% of the total combined voting power of all classes of stock. ISOs generally expire in seven years or upon termination of employment and generally are exercisable at a rate of 20% per year commencing one year after the date of grant. Non-qualified stock options are granted at fair market value on the date of grant. Non-qualified stock options expire in seven to ten years or upon termination of employment or service as a Board member. Non-qualified stock options granted prior to May 2008 generally become exercisable with respect to 20% of the shares on each of the first five anniversaries following the grant date, and nonqualified stock options granted subsequent to April 2008 generally become exercisable with respect to 25% of the shares on each of the first four anniversaries following the grant date. Shareholders approved the 2009 Equity Incentive Plan (“2009 Plan”) at the February 8, 2010 Annual Meeting of Shareholders. The 2009 Plan has 1,500,000 shares authorized, plus the number of shares that have not yet been awarded under the 2003 Equity Incentive Plan, or were awarded and subsequently returned to the pool of available shares under the 2003 Equity Incentive Plan pursuant to its terms. At September 30, 2011, there were 1,433,000 shares available for future awards. As of September 30, 2011, the aggregate intrinsic value of the option shares outstanding and option shares exercisable was not meaningful, as the Company’s stock price of $9.10 per share on September 30, 2011 was below the value of option shares outstanding and exercisable. At September 30, 2011, the average remaining contractual life of options outstanding and options exercisable was 4.1 and 2.8 years, respectively. There were no stock options exercised in fiscal 2011. There was no intrinsic value associated with options exercised during fiscal 2010 as the Company’s stock price of $11.92 per share on September 30, 2010 was below the value of options exercised. The intrinsic value of options exercised during fiscal 2009 was $0.2 million.

	Number of Shares			Weighted Average Exercise Price
Outstanding at September 30, 2008		1,522,790		$	34.26
Granted		268,700			24.06
Exercised		(17,600	)		8.82
Forfeited		(104,320	)		35.33
Outstanding at September 30, 2009		1,669,570		$	32.82
Granted		388,635			22.88
Exercised		(20,350	)		20.74
Forfeited		(545,534	)		30.58
Outstanding at September 30, 2010		1,492,321		$	31.22
Granted		551,773			9.96
Exercised		—			—
Forfeited		(528,906	)		25.15
Outstanding at September 30, 2011		1,515,188		$	25.59
Exercisable at September 30, 2011		838,160		$	32.91

Restricted Stock Awards

The Company has entered into restricted stock agreements with certain key employees, covering the issuance of common stock (Restricted Stock). Under accounting guidance these shares are considered to be non-vested shares. The Restricted Stock will be released to the key employees if they are employed by the Company at the end of the vesting period. Compensation has been recognized for the estimated fair value of the 72,627 common shares and is being charged to income over the vesting term. The stock-based compensation table includes the Restricted Stock expenses recognized related to these awards, which totaled $0.9 million, $1.0 million and $1.8 million during fiscal 2011, 2010 and 2009, respectively.

	Number of Shares			Weighted Average Grant Price
Balance at September 30, 2008		157,129		$	36.06
Granted		7,700			23.93
Vested		(59,047	)		34.44
Forfeited		(4,887	)		41.91
Balance at September 30, 2009		100,895		$	35.80
Granted		30,440			18.49
Vested		(83,195	)		36.32
Forfeited		(7,068	)		33.39
Balance at September 30, 2010		41,072		$	22.33
Granted		66,533			10.01
Vested		(23,978	)		19.38
Forfeited		(11,000	)		20.79
Balance at September 30, 2011		72,627		$	12.25

Performance Share Awards

The Company has entered into Performance Share agreements with certain key employees, covering the issuance of common stock (“Performance Shares”). The Performance Shares vest upon the achievement of all or a portion of certain performance objectives, which must be achieved during the performance period. Compensation is recognized in each period based on management’s best estimate of the achievement level of the grants’ specified performance objectives and the resulting vesting amounts. In fiscal 2011, the Company recognized expense of $0.2 million related to 80,695 three-year Performance Shares awarded in November and December 2010 and 591 Performance Shares that vested for a certain individual that met specific performance objectives. In fiscal 2010, the Company recognized expense of less than $0.1 million related to specific performance objectives achieved by certain individuals. In fiscal 2009, the Company reversed expenses previously recognized of $0.2 million relating to three-year Performance Shares awarded in May 2008 and one-year Performance Shares awarded in September 2008, which was partially offset by an expense of $0.2 million related to the estimated value of Performance Shares awarded to individuals based on likely achievement of specific performance objectives. The stock-based compensation table includes the Performance Shares expenses.

1999 Employee Stock Purchase Plan

Under the 1999 Employee Stock Purchase Plan (“Stock Purchase Plan”), the Company is authorized to issue up to 400,000 shares of common stock. The number of authorized shares was increased by 200,000 effective with shareholder approval at the February 8, 2010 Annual Meeting. All full-time and part-time employees can choose to have up to 10% of their annual compensation withheld, with a limit of $25,000, to purchase the Company’s common stock at purchase prices defined within the provision of the Stock Purchase Plan. As of September 30, 2011 and 2010, there were less than $0.1 million and $0.3 million of employee contributions, respectively, included in accrued liabilities in the accompanying consolidated balance sheets. Stock compensation expense recognized related to the Stock Purchase Plan totaled $0.2 million, $0.3 million and $0.3 million, during fiscal 2011, 2010 and 2009, respectively. The stock-based compensation table includes the Stock Purchase Plan expenses.