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Equity Incentive Plans and Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2013
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] |
Equity Incentive Plans and Stock-Based Compensation | Equity Incentive Plans and Stock-Based Compensation Stock Option Plans The Company has three stock option plans under which grants are currently outstanding: the 1997 Stock Option Plan (the “1997 Plan”), the 1999 Non-statutory Stock Option Plan (the “1999 Plan”) and the 2006 Equity Incentive Plan (the “2006 Plan”). Grants under all plans typically have a requisite service period of 60 months or 48 months, have straight-line or graded vesting schedules (the 1997 and 1999 plans only) and expire not more than 10 years from date of grant. Effective with stockholder approval of the 2006 Plan in May 2006, no further awards are being made under the 1997 Plan and the 1999 Plan but the plans will continue to govern awards previously granted under those plans. The 2006 Plan was approved by the stockholders in May 2006. The 2006 Plan, as amended, provides for the issuance of the following types of incentive awards: (i) stock options; (ii) stock appreciation rights; (iii) restricted stock; (iv) restricted stock units; (v) performance shares and performance units; and (vi) other stock or cash awards. This plan provides for the granting of awards at less than fair market value of the common stock on the date of grant, but such grants would be counted against the numerical limits of available shares at a ratio of 1.5 to 1.0. The Board of Directors reserved 8,400,000 and shares in March 2006 for issuance under this plan, subject to stockholder approval. Upon stockholder approval of this Plan on May 10, 2006, the 1997 Plan was replaced and the 1999 Plan was terminated. On April 30, 2009 and April 26, 2012, stockholders approved an additional 6,500,000 shares on each date for issuance under the 2006 Plan. Those who will be eligible for awards under the 2006 Plan include employees, directors and consultants who provide services to the Company and its affiliates. These options typically have a requisite service period of 60 months or 48 months, have straight-line vesting schedules, and expire ten years from date of grant. The Board will periodically review actual share consumption under the 2006 Plan and may make a request for additional shares as needed. As of December 31, 2013, 2,527,428 shares of the 21,400,000 shares approved under the 2006 Plan remain available for grant. The 2006 Plan is now the Company’s only plan for providing stock-based incentive compensation to eligible employees, directors and consultants. 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, 2010 | 5,348,162
Stock options granted | (2,357,001)
Stock options forfeited | 865,097
Stock options expired under former plans | (503,526)
Nonvested equity stock and stock units granted (1) | (562,257)
Nonvested equity stock and stock units forfeited (1) | 22,401
Total shares available for grant as of December 31, 2011 | 2,812,876
Increase in shares approved for issuance | 6,500,000
Stock options granted (2) | (7,789,220)
Stock options forfeited (3) | 2,610,812
Stock options expired under former plans | (576,763)
Nonvested equity stock and stock units granted (1) | (1,113,014)
Nonvested equity stock and stock units forfeited (1) | 284,468
Total shares available for grant as of December 31, 2012 | 2,729,159
Stock options granted | (2,084,276)
Stock options forfeited | 3,318,022
Stock options expired under former plans | (1,157,419)
Nonvested equity stock and stock units granted (1) | (709,611)
Nonvested equity stock and stock units forfeited (1) | 431,553
Total shares available for grant as of December 31, 2013 | 2,527,428
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(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.
(2) | Amount includes 2,840,986 shares that were granted from the stock option exchange program (discussed below).
(3) | Amount excludes 6,449,255 shares that were surrendered from the stock option exchange program (discussed below) as the shares are no longer available for grant.
Stock Option Exchange Program On April 26, 2012, the Company launched a one-time stock option exchange program ("option exchange”) pursuant to which eligible employees were able to exchange certain outstanding stock options for a fewer number of shares having an exercise price equal to the fair market value of the Company’s common stock on June 22, 2012. The Company's named executive officers, senior vice presidents and members of its Board of Directors were not eligible to participate in the Program. Pursuant to the terms and conditions of the option exchange, the Company accepted for exchange, 6,449,255 options. All surrendered options were canceled effective as of the expiration of the option exchange, and immediately thereafter, in exchange thereof, the Company granted new options with an exercise price of $5.63 per share (representing the closing price of its common stock on June 22, 2012, as reported on the NASDAQ Global Select Market) to purchase an aggregate of 2,840,986 shares of common stock under the 2006 Plan. New options have a new contractual term of the longer of the original remaining contractual term of the surrendered options or five years, and generally will vest over a three-year period from the date of grant, with one-third of the shares vesting on the first year anniversary of the grant date and the remaining shares vesting monthly thereafter. As a result of the option exchange, the total incremental compensation cost of the new options was approximately $1.0 million. The total remaining unrecognized compensation cost related to the original options of $19.9 million and the incremental compensation cost of the new options granted of $1.0 million will be recognized over the three years requisite service period. General Stock Option Information The following table summarizes stock option activity under the 1997, 1999 and 2006 Plans for the years ended December 31, 2013, 2012 and 2011 and information regarding stock options outstanding, exercisable, and vested and expected to vest as of December 31, 2013.
| Options Outstanding |  | Weighted Average Remaining Contractual Term |  |
| Number of Shares |  | Weighted Average Exercise Price per Share |  |  | Aggregate Intrinsic Value
| (Dollars in thousands, except per share amounts)
Outstanding as of December 31, 2010 | 13,969,383 |  | $ | 18.85 |  |  |  |  |
Options granted | 2,357,001 |  | $ | 18.83 |  |  |  |  |
Options exercised | (873,691) |  | $ | 8.46 |  |  |  |  |
Options forfeited | (865,097) |  | $ | 14.53 |  |  |  |  |
Outstanding as of December 31, 2011 | 14,587,596 |  | $ | 19.73 |  |  |  |  |
Options granted | 7,789,220 |  | $ | 5.81 |  |  |  |  |
Options exercised | (221,934) |  | $ | 4.44 |  |  |  |  |
Options forfeited | (2,610,812) |  | $ | 10.91 |  |  |  |  |
Options surrendered in stock option exchange program | (6,449,255) |  | $ | 21.11 |  |  |  |  |
Outstanding as of December 31, 2012 | 13,094,815 |  | $ | 12.79 |  |  |  |  |
Options granted | 2,084,276 |  | $ | 6.09 |  |  |  |  |
Options exercised | (483,923) |  | $ | 6.72 |  |  |  |  |
Options forfeited | (3,318,022) |  | $ | 14.51 |  |  |  |  |
Outstanding as of December 31, 2013 | 11,377,146 |  | $ | 11.32 |  |  | 5.7 |  | $ | 24,540 |
Vested or expected to vest at December 31, 2013 | 10,685,898 |  | $ | 11.64 |  |  | 5.5 |  | $ | 22,113 |
Options exercisable at December 31, 2013 | 6,242,733 |  | $ | 15.35 |  |  | 3.7 |  | $ | 6,779 |
During the years ended December 31, 2013 and 2011, no stock options that contain a market condition were granted. During the year ended December 31, 2012, 1,795,000 stock options that contain a market condition were granted. These options vest in three years if specified stock prices are achieved. The fair values of the options granted with a market condition were calculated using a binomial valuation model, which estimates the potential outcome of reaching the market condition based on simulated future stock prices. As of December 31, 2013 and 2012, there were 1,315,000 and 1,535,000 stock options outstanding, respectively, that require the Company to achieve minimum market conditions in order for the options to become exercisable. The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value for in-the-money options at December 31, 2013, based on the $9.47 closing stock price of Rambus’ Common Stock on December 31, 2013 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 December 31, 2013 was 7,167,696 and 2,453,877, respectively. The following table summarizes the information about stock options outstanding and exercisable as of December 31, 2013:
| Options Outstanding |  | Options Exercisable
Range of Exercise Prices | Number Outstanding |  | Weighted Average Remaining Contractual Life (in years) |  | Weighted Average Exercise Price |  | Number Exercisable |  | Weighted Average Exercise Price
$4.13 – $5.39 | 1,087,176 |  | 8.6 |  | $ | 4.45 |  |  | 93,470 |  | $ | 4.80 |
$5.46 – $5.46 | 1,306,654 |  | 9.0 |  | $ | 5.46 |  |  | 240,292 |  |  | $ | 5.46 |
$5.49 – $5.49 | 36,918 |  | 9.1 |  | $ | 5.49 |  |  | 5,734 |  | $ | 5.49 |
$5.63 – $5.63 | 1,511,307 |  | 5.3 |  | $ | 5.63 |  |  | 724,285 |  | $ | 5.63 |
$5.76– $5.76 | 1,246,839 |  | 8.5 |  | $ | 5.76 |  |  | 219,246 |  | $ | 5.76 |
$6.39– $7.97 | 1,138,049 |  | 7.3 |  | $ | 7.27 |  |  | 531,824 |  | $ | 7.27 |
$8.11 – $13.30 | 1,177,647 |  | 5.7 |  | $ | 9.21 |  |  | 784,077 |  | $ | 9.15 |
$13.31 – $18.69 | 1,250,463 |  | 2.8 |  | $ | 16.92 |  |  | 1,138,570 |  | $ | 17.15 |
$19.13 – $21.51 | 1,318,182 |  | 2.5 |  | $ | 20.15 |  |  | 1,237,247 |  | $ | 20.10 |
$21.95 – $40.80 | 1,303,911 |  | 2.0 |  | $ | 26.12 |  |  | 1,267,988 |  | $ | 26.21 |
$4.13 – $40.80 | 11,377,146 |  | 5.7 |  | $ | 11.32 |  |  | 6,242,733 |  | $ | 15.35 |
Employee Stock Purchase Plans During the three year period ended December 31, 2013, the Company had one employee stock purchase plan, the 2006 Employee Stock Purchase Plan. In March 2006, the Company adopted the 2006 Employee Stock Purchase Plan, as amended (the “2006 Purchase Plan” or "ESPP") and reserved 1,600,000 shares, subject to stockholder approval which was received on May 10, 2006. On April 26, 2012, an additional 1,500,000 shares were approved by stockholders. On September 27, 2013, the Company filed a Registration Statement on Form S-8, registering 1,500,000 additional shares under the ESPP in connection with the commencement of the next subscription period under the ESPP. Issuance of these additional shares will be subject to shareholder approval amending the ESPP to increase the number of shares reserved for issuance by 1,500,000 shares at the Company’s next annual meeting of shareholders in April 2014. Employees generally will be eligible to participate in this plan if they are employed by Rambus for more than 20 hours per week and more than five months in a fiscal year. The 2006 Purchase Plan provides for six month offering periods, with a new offering period commencing on the first trading day on or after May 1 and November 1 of each year. Under this plan, employees may purchase stock at the lower of 85% of the beginning of the offering period (the enrollment date), or the end of each offering period (the purchase date). Employees generally may not purchase more than the number of shares having a value greater than $25,000 in any calendar year, as measured at the purchase date. The Company issued 1,063,283 shares at a weighted average price of $4.87 per share during the year ended December 31, 2013. The Company issued 731,449 shares at a weighted average price of $4.21 per share during the year ended December 31, 2012. The Company issued 271,804 shares at a weighted average price of $15.62 per share during the year ended December 31, 2011. As of December 31, 2013, 19,232 shares under the ESPP remain available for issuance. Stock-Based Compensation Stock Options During the years ended December 31, 2013, 2012 and 2011, Rambus granted 2,084,276, 7,789,220(including options granted in the stock option exchange program and options granted that contain a market condition) and 2,357,001 stock options, respectively, with an estimated total grant-date fair value of $5.4 million, $32.7 million and $24.2 million, respectively. During the years ended December 31, 2013, 2012 and 2011, Rambus recorded stock-based compensation related to stock options of $10.4 million, $15.0 million and $19.6 million, respectively. As of December 31, 2013, there was $16.9 million of total unrecognized compensation cost, net of expected forfeitures, related to unvested stock-based compensation arrangements granted under the stock option plans. This cost is expected to be recognized over a weighted-average period of 2.3 years. The total fair value of options vested for the years ended December 31, 2013, 2012 and 2011 was $64.3 million, $80.0 million and $144.8 million, respectively. The total intrinsic value of options exercised was $1.3 million, $0.2 million and $6.2 million for the years ended December 31, 2013, 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 proceeds received from the employees to exercise the options. During the years ended December 31, 2013, 2012 and 2011, proceeds from employee stock option exercises totaled approximately $3.3 million, $1.0 million and $7.4 million, respectively. Employee Stock Purchase Plans During the years ended December 31, 2013, 2012 and 2011, Rambus recorded stock-based compensation related to the ESPP of $1.5 million, $2.2 million and $1.7 million, respectively. As of December 31, 2013, there was an immaterial amount of unrecognized compensation cost related to share-based compensation arrangements granted under the ESPP. That cost is expected to be recognized over four months. 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 years ended December 31, 2013, 2012 and 2011. Valuation Assumptions Rambus estimates the fair value of stock options using the Black-Scholes-Merton model (“BSM”). The BSM model determines the fair value of stock-based compensation and is affected by Rambus’ stock price on the date of the grant as well as assumptions regarding a number of highly complex and subjective variables. These variables include expected volatility, expected life of the award, expected dividend rate, and expected risk-free rate of return. The assumptions for expected volatility and expected life are the two assumptions that significantly affect the grant date fair value. If actual results differ significantly from these estimates, stock-based compensation expense and Rambus’ results of operations could be materially impacted. The fair value of stock awards is estimated as of the grant date using the BSM option-pricing model assuming a dividend yield of 0% and the additional weighted-average assumptions as listed in the following tables: The following table presents the weighted-average assumptions used to estimate the fair value of stock options granted that contain only service conditions in the periods presented. The assumptions used to estimate the fair value of stock options granted under the stock option exchange program are excluded from the following:
| Stock Option Plans for Years Ended December 31,
| 2013 |  | 2012 |  | 2011
Stock Option Plans |  |  |  |  |
Expected stock price volatility | 45%-47% |  | 57%-68% |  | 50%-75%
Risk free interest rate | 0.8%-1.5% |  | 0.6%-0.9% |  | 1.4%-2.8%
Expected term (in years) | 5.4-5.5 |  | 5.5-5.7 |  | 6.0-6.1
Weighted-average fair value of stock options granted | $2.60 |  | $3.57 |  | $10.27
During the year ended December 31, 2012, the Company granted 1,795,000 stock options that contain a market condition. The fair values of the options granted with a market condition were calculated using a binomial valuation model, which estimates the potential outcome of reaching the market condition based on simulated future stock prices. The weighted average fair value associated with these market condition options was immaterial.
| Employee Stock Purchase Plan for Years Ended December 31,
| 2013 |  | 2012 |  | 2011
Employee Stock Purchase Plan |  |  |  |  |
Expected stock price volatility | 44%-48% |  | 56%-63% |  | 56%-78%
Risk free interest rate | 0.1% |  | 0.2% |  | 0.1%
Expected term (in years) | 0.5 |  | 0.5 |  | 0.5
Weighted-average fair value of purchase rights granted under the purchase plan | $1.96 |  | $1.58 |  | $6.16
Expected Stock Price Volatility: Given the volume of market activity in its market traded options, Rambus determined that it would use the implied volatility of its nearest-to-the-money traded options. The Company believes that the use of implied volatility is more reflective of market conditions and a better indicator of expected volatility than historical volatility. If there is not sufficient volume in its market traded options, the Company will use an equally weighted blend of historical and implied volatility. Risk-free Interest Rate: Rambus bases the risk-free interest rate used in the BSM valuation method on implied yield currently available on the U.S. Treasury zero-coupon issues with an equivalent term. Where the expected terms of Rambus’ stock-based awards do not correspond with the terms for which interest rates are quoted, Rambus uses an approximation based on rates on the closest term currently available. Expected Term: The expected term of options granted represents the period of time that options granted are expected to be outstanding. The expected term was determined based on historical experience of similar awards, giving consideration to the contractual terms of the stock-based awards, vesting schedules and expectations of future employee behavior. The expected term of ESPP grants is based upon the length of each respective purchase period. Nonvested Equity Stock and Stock Units The Company grants nonvested equity stock units to officers, directors and employees. For the year ended December 31, 2013, 2012 and 2011, the Company granted nonvested equity stock units totaling 473,074, 742,009 and 374,838 shares, respectively, 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 $3.3 million, $4.8 million and $6.7 million, respectively. The Company occasionally grants nonvested equity stock units to its employees with vesting subject to the achievement of certain performance conditions. During the years ended December 31, 2013, 2012 and 2011, the achievement of certain performance conditions was considered probable, and as a result, the Company recognized an immaterial amount of stock-based compensation expense related to these performance stock units for all three years. For the years ended December 31, 2013, 2012 and 2011, the Company recorded stock-based compensation expense of approximately $3.1 million, $5.3 million and $6.7 million, respectively, related to all outstanding equity stock grants. Unrecognized stock-based compensation related to all nonvested equity stock grants, net of an estimate of forfeitures, was approximately $3.7 million at December 31, 2013. This cost is expected to be recognized over a weighted average period of 2.3 years. The following table reflects the activity related to nonvested equity stock and stock units for the three years ended December 31, 2013:
Nonvested Equity Stock and Stock Units | Shares |  | Weighted-Average Grant-Date Fair Value
Nonvested at December 31, 2010 | 718,007 |  | $ | 18.23 |
Granted | 374,838 |  | $ | 17.86 |
Vested | (314,401) |  | $ | 18.15 |
Forfeited | (14,934) |  | $ | 21.76 |
Nonvested at December 31, 2011 | 763,510 |  | $ | 18.02 |
Granted | 742,009 |  | $ | 6.43 |
Vested | (393,383) |  | $ | 17.38 |
Forfeited | (189,645) |  | $ | 11.77 |
Nonvested at December 31, 2012 | 922,491 |  | $ | 10.24 |
Granted | 473,074 |  | $ | 6.92 |
Vested | (478,214) |  | $ | 9.81 |
Forfeited | (287,702) |  | $ | 9.18 |
Nonvested at December 31, 2013 | 629,649 |  | $ | 8.56 |

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Statement of Financial Accounting Standard (FAS) -Number 123R -Paragraph 64, 65, A240 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 7: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 Reference 8: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Statement of Position (SOP) -Number 93-6 -Paragraph 53 -LegacyDoc This reference is SUPERSEDED by the Accounting Standards Codification effective for interim and annual periods ending after September 15, 2009. This reference is included to help users transition from the previous accounting hierarchy and will be removed from future versions of this taxonomy. + Details
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