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Share-Based Compensation
 9 Months Ended
Sep. 29, 2012
Share-Based Compensation

9. Share-Based Compensation

On August 7, 2007, in connection with the Company’s initial public offering, the 2007 Stock Incentive Plan, or the 2007 Plan, became effective. Under the 2007 Plan, 3.0 million shares of common stock were initially reserved for future issuance, plus shares available under the prior year equity incentive plans and shares that become available under the 2007 Plan due to forfeitures at prices not less than the fair market value of the Company’s common stock on the date the option is granted. The options generally vest annually over five years using the straight-line method, unless otherwise provided, and expire ten years from the date of grant. Options forfeited under any of the Company’s stock incentive plans are automatically added to the share reserve of the 2007 Plan. Pursuant to the “evergreen” provision contained in the 2007 Plan, an additional 1.7 million shares of common stock were added to the share reserve of the 2007 Plan on January 1, 2012, which represented 3% of the Company’s total shares outstanding as of December 31, 2011. Subject to applicable laws, the Company may terminate the 2007 Plan at any time. If not terminated sooner, the 2007 Plan will automatically terminate on August 7, 2017.

During the fiscal year ended December 31, 2011, the Company issued 629,000 shares of common stock as a result of stock option exercises. The number and weighted average exercise price of options issued and outstanding under all stock option plans are as follows (in thousands, except for exercise prices):

 

     Nine Months Ended
September 29, 2012		  
     Shares     Average
Exercise  Price		  

Options outstanding, beginning of period

      8,277      $ 22.68   

Granted

      543      $ 22.36   

Canceled

      (310 )    $ 27.08   

Exercised

      (140 )    $ 7.39   
  

 

 

    

Options outstanding, end of period

      8,370      $ 22.76   
  

 

 

    

Options exercisable, end of period

      4,442      $ 21.14   

Options available for grant, end of period

      5,008     

The Black-Scholes option pricing model is used to estimate the fair value of options granted under the Company’s share-based compensation plans. The range of assumptions used and the resulting weighted-average fair value of options granted at the date of grant were as follows:

 

     Three Months Ended   Nine Months Ended
     September 29,
2012		   October 1,
2011		   September 29,
2012		   October 1,
2011

Risk-free interest rate

    0.7% to 1.0%   1.0% to 1.9%   0.7% to 1.3%   1.0% to 2.5%

Expected term

    5.5 years   5.3 years   5.5 years   5.3 years

Estimated volatility

    36.8% to 37.8%   36.7% to 41.8%   36.8% to 42.6%   36.7% to 41.8%

Expected dividends

    0%   0%   0%   0%

Weighted-average fair value of options granted

    $8.41   $10.34   $8.10   $11.50

The total share-based compensation expense for the three and nine months ended September 29, 2012 was $3.2 million and $11.0 million, respectively. The total share-based compensation expense for the three and nine months ended October 1, 2011 was $2.6 million and $10.2 million, respectively. The aggregate intrinsic value of options outstanding, with an exercise price less than the closing price of the Company’s common stock, as of September 29, 2012 was $32.7 million. The aggregate intrinsic value of options exercisable, with an exercise price less than the closing price of the Company’s common stock, as of September 29, 2012 was $26.3 million. The aggregate intrinsic value of options exercised during the three and nine months ended September 29, 2012, was $1.2 million and $2.1 million, respectively. The aggregate intrinsic value is calculated as the difference between the market value of the Company’s common stock on the date of exercise or the respective period end, as appropriate, and the exercise price of the options. The unrecognized share-based compensation as of September 29, 2012 was $31.2 million related to unvested options granted after January 1, 2006. The weighted average remaining contractual term of options outstanding as of September 29, 2012 was 6.5 years. The weighted average remaining contractual term of options exercisable as of September 29, 2012 was 4.1 years.