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Equity Incentive Plans and Stock-Based Compensation
 3 Months Ended
Mar. 31, 2012
Equity Incentive Plans and Stock-Based Compensation  
Equity Incentive Plans and Stock-Based Compensation

5. Equity Incentive Plans and Stock-Based Compensation

 

Stock Option Plans

 

As of March 31, 2012, 359,315 shares of the 14,900,000 shares approved under the 2006 Equity Incentive Plan (the “2006 Plan”) remain available for grant. The 2006 Plan is now the Company’s only plan for providing stock-based incentive awards to eligible employees, executive officers, non-employee directors and consultants; however, the 1997 Stock Option Plan (the “1997 Plan”) and the 1999 Non-statutory Stock Option Plan (the “1999 Plan”) will continue to govern awards previously granted under those plans.

 

A summary of shares available for grant under the Company’s plans is as follows:

 

 

 

Shares Available
for Grant

 

Shares available as of December 31, 2011

 

2,812,876

 

Stock options granted

 

(1,937,002

)

Stock options forfeited

 

136,993

 

Stock options expired under former plans

 

(21,837

)

Nonvested equity stock and stock units granted (1)

 

(635,057

)

Nonvested equity stock and stock units forfeited (1)

 

3,342

 

Total available for grant as of March 31, 2012

 

359,315

 

 

(1)      For purposes of determining the number of shares available for grant under the 2006 Plan against the maximum number of shares authorized, each restricted stock granted reduces the number of shares available for grant by 1.5 shares and each restricted stock forfeited increases shares available for grant by 1.5 shares.

 

General Stock Option Information

 

The following table summarizes stock option activity under the 1997 Plan, 1999 Plan and 2006 Plan for the three months ended March 31, 2012 and information regarding stock options outstanding, exercisable, and vested and expected to vest as of March 31, 2012.

 

 

 

Options Outstanding

 

Weighted

 

 

 

 

 

 

 

Weighted

 

Average

 

 

 

 

 

 

 

Average

 

Remaining

 

Aggregate

 

 

 

Number of

 

Exercise Price

 

Contractual

 

Intrinsic

 

 

 

Shares

 

Per Share

 

Term (years)

 

Value

 

 

 

(Dollars in thousands, except per share amounts)

 

Outstanding as of December 31, 2011

 

14,587,596

 

$

19.73

 

 

 

 

 

Options granted

 

1,937,002

 

7.30

 

 

 

 

 

Options exercised

 

(11,467

)

4.67

 

 

 

 

 

Options forfeited

 

(136,993

)

17.86

 

 

 

 

 

Outstanding as of March 31, 2012

 

16,376,138

 

18.28

 

5.77

 

$

497

 

Vested or expected to vest at March 31, 2012

 

15,699,805

 

18.46

 

5.63

 

497

 

Options exercisable at March 31, 2012

 

10,806,897

 

20.18

 

4.23

 

497

 

 

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value for in-the-money options at March 31, 2012, based on the $6.45 closing stock price of Rambus’ Common Stock on March 30, 2012 on the NASDAQ Global Select Market, which would have been received by the option holders had all option holders exercised their options as of that date. The total number of in-the-money options outstanding and exercisable as of March 31, 2012 was 250,967 and 250,967, respectively.

 

Employee Stock Purchase Plan

 

No purchases were made under the 2006 Employee Stock Purchase Plans (“ESPP”) during the three months ended March 31, 2012 and 2011 respectively. As of March 31, 2012, 313,964 shares under the ESPP remain available for issuance.

 

Stock-Based Compensation

 

For the three months ended March 31, 2012 and 2011, the Company maintained stock plans covering a broad range of potential equity grants including stock options, nonvested equity stock and equity stock units and performance based instruments. In addition, the Company sponsors an ESPP, whereby eligible employees are entitled to purchase Common Stock semi-annually, by means of limited payroll deductions, at a 15% discount from the fair market value of the Common Stock as of specific dates.

 

Stock Options

 

During the three months ended March 31, 2012 and 2011, Rambus granted 1,937,002 and 1,633,701 stock options, respectively, with an estimated total grant-date fair value of $7.5 million and $17.7 million, respectively. During the three months ended March 31, 2012 and 2011, Rambus recorded stock-based compensation related to stock options of $4.3 million and $5.2 million, respectively.

 

As of March 31, 2012, there was $38.1 million of total unrecognized compensation cost, net of expected forfeitures, related to unvested stock-based compensation arrangements granted under the stock option plans. That cost is expected to be recognized over a weighted-average period of 3.4 years. The total fair value of shares vested as of March 31, 2012 was $148.8 million.

 

The total intrinsic value of options exercised was $39 thousand and $2.1 million for the three months ended March 31, 2012 and 2011, respectively. Intrinsic value is the total value of exercised shares based on the price of the Company’s common stock at the time of exercise less the cash received from the employees to exercise the options.

 

During the three months ended March 31, 2012, net proceeds from employee stock option exercises totaled approximately $54 thousand.

 

Employee Stock Purchase Plan

 

For the three months ended March 31, 2012 and 2011, the Company recorded compensation expense related to the ESPP of $0.7 million and $0.4 million, respectively. As of March 31, 2012 there was $0.2 million of total unrecognized compensation cost related to share-based compensation arrangements granted under the ESPP. This cost is expected to be recognized over one month.

 

There were no tax benefits realized as a result of employee stock option exercises, stock purchase plan purchases, and vesting of equity stock and stock units for the three months ended March 31, 2012 and 2011 calculated in accordance with accounting for share-based payments.

 

Valuation Assumptions

 

The fair value of stock awards is estimated as of the grant date using the Black-Scholes-Merton (“BSM”) option-pricing model assuming a dividend yield of 0% and the additional weighted-average assumptions as listed in the following tables:

 

 

 

Three Months Ended
March 31,

 

 

 

2012

 

2011

 

Stock Option Plans

 

 

 

 

 

Expected stock price volatility

 

60

%

52

%

Risk free interest rate

 

0.7

%

2.8

%

Expected term (in years)

 

5.6

 

6.0

 

Weighted-average fair value of stock options granted

 

$

3.88

 

$

10.81

 

 

No grants were made under the ESPP during the three months ended March 31, 2012 and 2011.

 

Nonvested Equity Stock and Stock Units

 

The Company grants nonvested equity stock units to officers, employees and directors. During the three months ended March 31, 2012, the Company granted nonvested equity stock units totaling 423,371 shares under the 2006 Plan. These awards have a service condition, generally a service period of four years, except in the case of grants to directors, for which the service period is one year. The nonvested equity stock units were valued at the date of grant giving them a fair value of approximately $3.1 million. The Company occasionally grants nonvested equity stock units to its employees with vesting subject to the achievement of certain performance conditions. During the three months ended March 31, 2012 and 2011, the achievement of certain performance conditions for certain performance equity stock units was considered probable, and as a result, the Company recognized stock-based compensation expense related to these performance stock units for both periods; the aggregate amounts were not significant.

 

For the three months ended March 31, 2012 and 2011, the Company recorded stock-based compensation expense of approximately $1.8 million and $1.7 million, respectively, related to all outstanding nonvested equity stock grants. Unrecognized stock-based compensation related to all nonvested equity stock grants, net of estimated forfeitures, was approximately $9.5 million at March 31, 2012. This is expected to be recognized over a weighted average of 2.5 years.

 

The following table reflects the activity related to nonvested equity stock and stock units for the three months ended March 31, 2012:

 

Nonvested Equity Stock and Stock Units

 

Shares

 

Weighted-
Average
Grant-Date
Fair Value

 

Nonvested at December 31, 2011

 

763,510

 

$

18.02

 

Granted

 

423,371

 

7.28

 

Vested

 

(181,099

)

18.75

 

Forfeited

 

(2,228

)

7.31

 

Nonvested at March 31, 2012

 

1,003,554

 

13.38