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Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2016
Stock-Based Compensation |
Stock-Based Compensation | 12. 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"). In fiscal 2014, the stockholders of the Company approved amendments to both the 2009 Plan and the 2009 Purchase Plan. The amendments authorized additional shares of common stock for issuance, to comply with changes in applicable law, improve the Company's corporate governance and to implement other best practices. The amended plans are currently effective. 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"). The amendment of the shares of common stock reserved for issuance in the 2009 Plan created two share pools—Prior Pool and New Pool. 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 under the Prior Pool. Awards of stock options, stock appreciation rights, and full value awards each deduct one share from the 2009 Plan shares available for issuance for each share granted under the New Pool. 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 1.3 million, 0.9 million and 0.8 million shares of full value awards and 0.2 million, 0.0 million, and 0.0 million stock options from the 2009 Plan during fiscal 2016, 2015 and 2014, respectively. The Company recorded $0.9 million and $2.3 million in selling, general and administrative expense during fiscal 2016 and 2015, respectively, in connection with the modifications of certain equity awards. The modifications were pursuant to three employee terminations in fiscal 2016 and two employee terminations in fiscal 2015. There were no other significant modifications made to any stock grants during fiscal 2016, 2015 or 2014. Included in the full value awards granted under the 2009 Plan in fiscal 2016, 2015 and 2014 were a total of 65 thousand, 89 thousand and 76 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. Also included in the full value awards granted under the 2009 Plan during fiscal 2016 were 65 thousand performance-based stock awards. The awards, also known as PSUs, provide for the rights to acquire a number of shares of common stock for no cash consideration based upon the achievement of specified revenue objectives during the year. The requisite service period for these PSUs is approximately three years from the date of grant. 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 2016, 2015 and 2014, the Company issued 224 thousand, 210 thousand and 204 thousand shares, respectively, under the 2009 Purchase Plan to its employees. The weighted-average fair value for purchase rights granted in fiscal 2016 under the 2009 Purchase Plan was $13.43 per share. Accounting for Stock-Based Compensation Stock-based compensation costs are based on the fair values on the date of grant for stock awards and stock options and on the date of enrollment for the employee stock purchase plans. The fair values of stock awards (such as RSUs, PSUs and RSAs) are estimated based on their intrinsic values. The fair values of MSUs are estimated using a Monte Carlo simulation. The fair values of stock options and employee stock purchase plans are estimated using the Black-Scholes option-pricing model. 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. The fair values of PSUs are amortized as compensation expense on a straight-line basis over the performance period when the performance is probable of achievement, and over the remaining service periods thereafter. 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 for ESPP and stock options granted were calculated using the following assumptions:
|  | Year Ended |
--- | --- | --- | ---
Employee Stock Purchase Plan |  | December 31, 2016 |  | January 2, 2016 |  | January 3, 2015 |
Expected volatility |  |  | 30 | % |  | 31 | % |  | 28 | %
Risk-free interest rate % |  |  | 0.6 | % |  | 0.2 | % |  | 0.2 | %
Expected term (in months) |  |  | 15 |  |  | 8 |  |  | 15 |
Dividend yield |  |  | — |  |  | — |  |  | — |
|  | Year Ended |
--- | --- | --- | ---
Stock Options |  | December 31, 2016 |  | January 2, 2016 |  | January 3, 2015 |
Expected volatility |  |  | 32 | % |  | — |  |  | — |
Risk-free interest rate % |  |  | 1.3 | % |  | — |  |  | — |
Expected term (in years) |  |  | 5.4 |  |  | — |  |  | — |
Dividend yield |  |  | — |  |  | — |  |  | — |
The fair values estimated from Monte Carlo simulation for MSUs were calculated using the following assumptions:
|  | Year Ended |
--- | --- | --- | ---
MSUs |  | December 31, 2016 |  | January 2, 2016 |  | January 3, 2015 |
Expected volatility |  |  | 30 | % |  | 31 | % |  | 33 | %
Risk-free interest rate % |  |  | 0.9 | % |  | 1.0 | % |  | 0.7 | %
Expected term (in years) |  |  | 2.9 |  |  | 2.9 |  |  | 2.8 |
Dividend yield |  |  | — |  |  | — |  |  | — |
A summary of stock-based compensation activity with respect to fiscal 2016 follows:
Stock Options |  | Shares (000s) |  | Weighted- Average Exercise Price |  | Weighted-Average Remaining Contractual Term (In Years) |  | Aggregate Intrinsic Value (000s) |
--- | --- | --- | --- | --- | --- | --- | --- | --- | ---
Outstanding at January 2, 2016 |  |  | 212 |  | $ | 34.64 |  |  |  |  |  |  |
Granted |  |  | 173 |  | $ | 40.39 |  |  |  |  |  |  |
Exercised |  |  | (137 | ) | $ | 33.08 |  |  |  |  |  |  |
Cancelled or expired |  |  | (20 | ) | $ | 57.26 |  |  |  |  |  |  |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Outstanding at December 31, 2016 |  |  | 228 |  | $ | 37.95 |  |  | 7.14 |  | $ | 6,165 |
Vested at December 31, 2016 and expected to vest |  |  | 209 |  | $ | 37.74 |  |  | 6.97 |  | $ | 5,708 |
Exercisable at December 31, 2016 |  |  | 55 |  | $ | 30.31 |  |  | 0.96 |  | $ | 1,908 |
RSAs and RSUs |  | Shares (000s) |  | Weighted- Average Purchase Price |  | Weighted-Average Remaining Vesting Term (In Years) |  | Aggregate Intrinsic Value (000s) |
--- | --- | --- | --- | --- | --- | --- | --- | --- | ---
Outstanding at January 2, 2016 |  |  | 1,554 |  | $ | — |  |  |  |  |  |  |
Granted |  |  | 1,169 |  | $ | — |  |  |  |  |  |  |
Vested or issued |  |  | (871 | ) | $ | — |  |  |  |  |  |  |
Cancelled or forfeited |  |  | (163 | ) | $ | — |  |  |  |  |  |  |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Outstanding at December 31, 2016 |  |  | 1,689 |  | $ | — |  |  | 1.05 |  | $ | 109,807 |
Outstanding at December 31, 2016 and expected to vest |  |  | 1,568 |  | $ | — |  |  | 1.05 |  | $ | 101,940 |
PSUs and MSUs |  | Shares (000s) |  | Weighted- Average Purchase Price |  | Weighted-Average Remaining Vesting Term (In Years) |  | Aggregate Intrinsic Value (000s) |
--- | --- | --- | --- | --- | --- | --- | --- | --- | ---
Outstanding at January 2, 2016 |  |  | 250 |  | $ | — |  |  |  |  |  |  |
Granted |  |  | 131 |  | $ | — |  |  |  |  |  |  |
Cancelled or forfeited |  |  | (152 | ) | $ | — |  |  |  |  |  |  |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
Outstanding at December 31, 2016 |  |  | 229 |  | $ | — |  |  | 1.41 |  | $ | 14,855 |
Outstanding at December 31, 2016 and expected to vest |  |  | 184 |  | $ | — |  |  | 1.41 |  | $ | 11,928 |
The following summarizes the Company's weighted average fair value at the date of grant:
|  | Year Ended |
--- | --- | --- | ---
|  | December 31, 2016 |  | January 2, 2016 |  | January 3, 2015 |
Per grant of RSAs and RSUs |  | $ | 40.55 |  | $ | 49.14 |  | $ | 47.93 |
Per grant of PSUs and MSUs |  | $ | 32.23 |  | $ | 48.36 |  | $ | 60.08 |
The following summarizes the Company's stock-based payment and stock option values (in thousands):
|  | Year Ended |
--- | --- | --- | ---
|  | December 31, 2016 |  | January 2, 2016 |  | January 3, 2015 |
Intrinsic value of stock options exercised |  | $ | 2,560 |  | $ | 6,612 |  | $ | 5,674 |
Intrinsic value of RSAs and RSUs that vested |  | $ | 36,502 |  | $ | 45,298 |  | $ | 32,138 |
Grant date fair value of RSAs and RSUs that vested |  | $ | 39,853 |  | $ | 41,072 |  | $ | 29,668 |
The Company received cash of $2.2 million for the issuance of common stock, net of shares withheld for taxes, during fiscal 2016. 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 31, 2016 |  | January 2, 2016 |  | January 3, 2015 |
Cost of revenues |  | $ | 1,070 |  | $ | 960 |  | $ | 775 |
Research and development |  |  | 19,573 |  |  | 19,451 |  |  | 18,521 |
Selling, general and administrative |  |  | 18,985 |  |  | 22,380 |  |  | 19,771 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
|  |  | 39,628 |  |  | 42,791 |  |  | 39,067 |
Income tax benefit |  |  | 8,496 |  |  | 9,264 |  |  | 4,024 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
|  | $ | 31,132 |  | $ | 33,527 |  | $ | 35,043 |
​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
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​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​ | ​
The Company had approximately $52.1 million of total unrecognized compensation costs related to granted stock options and awards as of December 31, 2016 that are expected to be recognized over a weighted-average period of approximately 2.2 years. There were no significant stock-based compensation costs capitalized into assets in any of the periods presented. As of December 31, 2016, the Company had reserved shares of common stock for future issuance as follows (in thousands):
2000 Stock Incentive Plan |  |  | 55 |
2009 Stock Incentive Plan |  |  | 1,935 |
2009 Employee Stock Purchase Plan |  |  | 447 |
​ | ​ | ​ | ​ | ​
Total shares reserved |  |  | 2,437 |
​ | ​ | ​ | ​ | ​
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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 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 2: 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=51659978&loc=d3e25284-112666 Reference 3: 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 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 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 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 + Details
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