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Stock-Based Compensation | 12 Months Ended
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Dec. 29, 2012
Stock-Based Compensation |
Stock-Based Compensation | 13. Stock-Based Compensation In fiscal 2009, the stockholders of the Company approved the 2009 Stock Incentive Plan (the "2009 Plan") and the 2009 Employee Stock Purchase Plan (the "2009 Purchase Plan"). The 2009 Plan is currently effective, and has a term of 10 years from the shareholders' approval date. The 2009 Purchase Plan became effective upon the termination of the previous Employee Stock Purchase Plan, on April 30, 2010. 2009 Stock Incentive Plan Under the 2009 Plan, the following may be granted: stock options, stock appreciation rights, performance shares, performance stock units, restricted stock units (RSUs), restricted stock awards (RSAs), performance-based awards and other awards (collectively, all such grants are referred to as "awards"). Awards of stock options and stock appreciation rights each deduct one share from the 2009 Plan shares available for issuance for each share granted, and full value awards (awards other than for which the participant is required to pay at least the fair market value of the underlying shares on the date of grant) deduct 1.55 shares from the 2009 Plan shares available for issuance for each share granted. Awards granted under the 2009 Plan generally contain vesting provisions ranging from three to four years. The exercise price of stock options offered under the 2009 Plan may not be less than 100% of the fair market value of a share of our common stock on the date of grant. To the extent awards granted under the 2009 Plan terminate, expire or lapse for any reason, or are settled in cash, shares subject to such awards will again be available for grant. 2000 Stock Incentive Plan In fiscal 2000, the Company's Board of Directors and stockholders approved the 2000 Plan. The 2000 Plan contains programs for (i) the discretionary granting of stock options to employees, non-employee board members and consultants for the purchase of shares of the Company's common stock, (ii) the discretionary issuance of common stock directly (as granted under direct issuance shares in RSAs and RSUs), (iii) the granting of special below-market stock options to executive officers and other highly compensated employees of the Company for which the exercise price can be paid using payroll deductions and (iv) the automatic issuance of stock options to non-employee board members. The discretionary issuance of common stock, RSUs and stock options generally contain vesting provisions ranging from three to eight years. If permitted by the Company, stock options can be exercised immediately and, similar to the direct issuance shares, are subject to repurchase rights which generally lapse in accordance with the vesting schedule. The repurchase rights provide that upon certain defined events, the Company can repurchase unvested shares at the price paid per share. The term of each stock option is no more than ten years from the date of grant. Stock Grants and Modifications The Company granted to its employees 0.8 million shares of full value awards and no stock options from the 2009 Plan during fiscal 2012, 2011 and 2010. The Company recorded $1.9 million in selling, general and administrative expense during fiscal 2012 in connection with modifications to certain stock awards. The Company accelerated the vesting of certain RSUs and Market Stock Units (MSUs) and extended the exercise period of stock options pursuant to a separation agreement between the Company and its former Chief Executive Officer (CEO). This arrangement is discussed further in Note 16, Separation Agreement. There were no other significant modifications made to any stock grants during fiscal 2012, 2011 or 2010. Included in the full value awards granted under the 2009 Plan in fiscal 2012 and fiscal 2011 were a total of 110 thousand and 55 thousand market-based stock awards, respectively. The awards, also known as MSUs, provide the rights to acquire a number of shares of common stock for no cash consideration based upon achievement of specified levels of market conditions. The requisite service period for these MSUs is also the vesting period, which is generally three years. The performance criteria of the MSUs measure the difference between the total stockholders' return of the Company against that of the Philadelphia Semiconductor Sector Total Return Index. 2009 Employee Stock Purchase Plan The rights to purchase common stock granted under the 2009 Purchase Plan are intended to be treated as either (i) purchase rights granted under an "employee stock purchase plan," as that term is defined in Section 423(b) of the Internal Revenue Code (the "423(b) Plan"), or (ii) purchase rights granted under an employee stock purchase plan that is not subject to the terms and conditions of Section 423(b) of the Internal Revenue Code (the "Non-423(b) Plan"). The Company will retain the discretion to grant purchase rights under either the 423(b) Plan or the Non-423(b) Plan. Eligible employees may purchase a limited number of shares of the Company's common stock at no less than 85% of the fair market value of a share of common stock at prescribed purchase intervals during an offering period. Each offering period will be comprised of a series of one or more successive and/or overlapping purchase intervals and has a maximum term of 24 months. During fiscal 2012, 2011 and 2010, the Company issued 181 thousand, 169 thousand and 75 thousand shares, respectively, under the 2009 Purchase Plan to its employees. The weighted-average fair value for purchase rights granted under the 2009 Purchase Plan for fiscal 2012 was $11.02 per share. Employee Stock Purchase Plan The Purchase Plan was adopted by the Company's Board of Directors in fiscal 2000. Eligible employees could purchase a limited number of shares of the Company's common stock at 85% of the market value during a series of offering periods. Each offering period is divided into semi-annual purchase intervals and has a maximum term of 24 months. During fiscal 2012, 2011 and 2010, the Company issued zero, zero and 79 thousand shares, respectively, under the Purchase Plan to its employees. There were no purchase rights granted under the Purchase Plan for fiscal 2012. Accounting for Stock-Based Compensation Stock-based compensation costs are based on the fair values on the date of grant for stock options and on the date of enrollment for the employee stock purchase plans, estimated by using the Black-Scholes option-pricing model. The fair values of stock awards and RSUs equal their intrinsic value on the date of grant. The fair values of market-based performance awards generally are estimated using a Monte Carlo simulation based on the date of grant. The Black-Scholes valuation calculation requires the Company to estimate key assumptions such as future stock price volatility, expected terms, risk-free rates and dividend yield. Expected stock price volatility is based upon a combination of both historical volatility and implied volatility derived from traded options on the Company's stock in the marketplace. Expected term is derived from an analysis of historical exercises and remaining contractual life of options. The risk-free rate is based on the U.S. Treasury yield curve in effect at the time of grant. The Company has never paid cash dividends and does not currently intend to pay cash dividends, thus it has assumed a 0% dividend yield. The Monte Carlo simulation used to calculate the fair value of the MSUs simulates the present value of the potential outcomes of future stock prices of the Company and the Philadelphia Semiconductor Sector Total Return Index over the requisite service period. The projection of stock prices are based on the risk-free rate of return, the volatilities of the stock price of the Company and the Index, and the correlation of the stock price of the Company with the Index. The Company must estimate potential forfeitures of stock grants and adjust compensation cost recorded accordingly. The estimate of forfeitures will be adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures are recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of stock-based compensation expense to be recognized in future periods. The fair values of stock options and RSUs are amortized as compensation expense on a straight-line basis over the vesting period of the grants. The fair values of RSAs are fully expensed in the period of grant, when shares are immediately issued with no vesting restrictions. The fair values of MSUs are amortized as compensation expense on a straight-line basis over the performance and service periods of the grants. Compensation expense recognized is shown in the operating activities section of the Consolidated Statements of Cash Flows. The fair values estimated from the Black-Scholes option-pricing model were calculated using the following assumptions:
|  | Year Ended |
--- | --- | --- | ---
|  | December 29, 2012 |  | December 31, 2011 |  | January 1, 2011 |
2009 Employee Stock Purchase Plan: |  |  |  |  |  |  |  |  |  |
Expected volatility |  |  | 38 | % |  | 27 | % |  | 32 | %
Risk-free interest rate % |  |  | 0.2 | % |  | 0.2 | % |  | 0.4 | %
Expected term (in months) |  |  | 15 |  |  | 11 |  |  | 15 |
Dividend yield |  |  | — |  |  | — |  |  | — |
A summary of stock-based compensation activity with respect to fiscal 2012 follows:
Stock Options |  | Shares (000s) |  | Weighted- Average Exercise Price |  | Weighted-Average Remaining Contractual Term (In Years) |  | Aggregate Intrinsic Value (000s) |
--- | --- | --- | --- | --- | --- | --- | --- | --- | ---
Outstanding at December 31, 2011 |  |  | 2,485 |  | $ | 34.44 |  |  |  |  |  |  |
Granted |  |  | — |  | $ | — |  |  |  |  |  |  |
Exercised |  |  | (726 | ) | $ | 29.96 |  |  |  |  |  |  |
Cancelled or expired |  |  | (63 | ) | $ | 47.78 |  |  |  |  |  |  |
Outstanding at December 29, 2012 |  |  | 1,696 |  | $ | 35.86 |  |  | 2.6 |  | $ | 12,206 |
Vested at December 29, 2012 and expected to vest |  |  | 1,696 |  | $ | 35.86 |  |  | 2.6 |  | $ | 12,206 |
Exercisable at December 29, 2012 |  |  | 1,696 |  | $ | 35.86 |  |  | 2.6 |  | $ | 12,206 |
RSAs, RSUs and MSUs |  | Shares (000s) |  | Weighted- Average Purchase Price |  | Weighted-Average Remaining Vesting Term (In Years) |  | Aggregate Intrinsic Value (000s) |
--- | --- | --- | --- | --- | --- | --- | --- | --- | ---
Outstanding at December 31, 2011 |  |  | 1,989 |  | $ | — |  |  |  |  |  |  |
Granted |  |  | 778 |  | $ | — |  |  |  |  |  |  |
Issued |  |  | (934 | ) | $ | — |  |  |  |  |  |  |
Cancelled or expired |  |  | (125 | ) | $ | — |  |  |  |  |  |  |
Outstanding at December 29, 2012 |  |  | 1,708 |  | $ | — |  |  | 2.1 |  | $ | 70,640 |
Outstanding at December 29, 2012 and expected to vest |  |  | 1,708 |  | $ | — |  |  | 2.1 |  | $ | 70,640 |
The following summarizes the Company's weighted average fair value at the date of grant:
|  | Year Ended |
--- | --- | --- | ---
|  | December 29, 2012 |  | December 31, 2011 |  | January 1, 2011 |
Per grant of RSAs, RSUs and MSUs |  | $ | 43.82 |  | $ | 44.73 |  | $ | 44.88 |
The following summarizes the Company's stock-based payment and stock option values (in thousands):
|  | Year Ended |
--- | --- | --- | ---
|  | December 29, 2012 |  | December 31, 2011 |  | January 1, 2011 |
Intrinsic value of stock options exercised |  | $ | 9,064 |  | $ | 8,622 |  | $ | 14,087 |
Intrinsic value of RSAs and RSUs that vested |  | $ | 40,105 |  | $ | 38,769 |  | $ | 32,109 |
Grant date fair value of RSAs and RSUs that vested |  | $ | 31,215 |  | $ | 29,488 |  | $ | 25,398 |
The Company had approximately $41.4 million of total unrecognized compensation costs related to stock options and stock awards at December 29, 2012 that are expected to be recognized over a weighted-average period of 2.1 years. There were no significant stock-based compensation costs capitalized into assets in any of the periods presented. The Company received cash of $15.1 million for the issuance of common stock, net of shares withheld for taxes, during fiscal 2012. The Company issues shares from the shares reserved under its stock plans upon the exercise of stock options, issuance of RSAs, vesting of RSUs and MSUs, and purchases through employee stock purchase plans. The Company does not currently expect to repurchase shares from any source to satisfy such obligation. The following table presents details of stock-based compensation costs recognized in the Consolidated Statements of Income (in thousands):
|  | Year Ended |
--- | --- | --- | ---
|  | December 29, 2012 |  | December 31, 2011 |  | January 1, 2011 |
Cost of revenues |  | $ | 1,206 |  | $ | 1,319 |  | $ | 1,435 |
Research and development |  |  | 12,602 |  |  | 14,872 |  |  | 17,017 |
Selling, general and administrative |  |  | 17,368 |  |  | 19,924 |  |  | 21,872 |
|  |  | 31,176 |  |  | 36,115 |  |  | 40,324 |
Income tax benefit |  |  | 4,911 |  |  | 3,957 |  |  | 5,462 |
|  | $ | 26,265 |  | $ | 32,158 |  | $ | 34,862 |
As of December 29, 2012, the Company had reserved shares of common stock for future issuance as follows (in thousands):
2000 Stock Incentive Plan |  |  | 1,696 |
2009 Stock Incentive Plan |  |  | 5,773 |
2009 Employee Stock Purchase Plan |  |  | 826 |
Total shares reserved |  |  | 8,295 |

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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 SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 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 Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 5: 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. Reference 6: 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 7: 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 8: 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 + Details
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