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Employee Benefit Plans and Stock-based Compensation | 9 Months Ended
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Sep. 30, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] |
Employee Benefit Plans and Stock-based compensation | EMPLOYEE BENEFIT PLANS AND STOCK-BASED COMPENSATION The Company’s stock benefit plans include the employee stock purchase plan and current active stock plans adopted in 1995 and 2002 as well as one stock plan in connection with an acquisition in 2010. See Note 13, “Employee Benefit Plans and Stock-based Compensation” of Notes to Consolidated Financial Statements in the 2015 Form 10-K for details pertaining to each plan. The Company also assumed two existing TVN’s employee equity benefit plans in connection with the TVN acquisition. Stock Options, RSUs and PSUs In connection with the Company’s acquisition of TVN, the Company agreed to make grants of restricted stock units (“RSUs”) with respect to a total of up to 1,750,000 shares (taking into account the share count provision for RSUs in the Company’s 1995 Stock Plan). The Company’s stockholders approved an amendment to the 1995 Stock Plan at the Company’s 2016 annual meeting of stockholders (“2016 Annual Meeting”) which increased the number of shares of common stock reserved for issuance under the 1995 Stock Plan by 2,000,000 shares. In August 2016, the Company granted 898,533 shares of performance-based restricted stock units (“PSUs”) under the 1995 Stock Plan to fund a portion of its 2016 incentive bonus payment obligations to its key executives and other eligible employees. The vesting of the PSUs is based on the achievement of certain financial and non-financial operating goals of the Company. The Company’s Compensation Committee has the discretion to amend the performance goals and the vesting of the PSUs. The vesting of the PSUs is anticipated to occur within the next three to six months. The following table summarizes the Company’s stock option, RSU and PSU activities during the nine months ended September 30, 2016 (in thousands, except per share amounts):
|  |  | Stock Options Outstanding |  | Restricted Stock Units Outstanding*
| Shares Available for Grant |  | Number of Shares |  | Weighted Average Exercise Price |  | Number of Units |  | Weighted Average Grant Date Fair Value
Balance at December 31, 2015 | 6,150 |  |  | 5,674 |  |  | $ | 6.56 |  |  | 2,182 |  |  | $ | 6.99 |
Authorized | 2,000 |  |  | — |  |  | — |  |  | — |  |  | — |
Granted | (5,046 | ) |  | 916 |  |  | 3.14 |  |  | 3,053 |  |  | 3.55 |
Options exercised | — |  |  | (148 | ) |  | 4.80 |  |  | — |  |  | — |
Shares released | — |  |  | — |  |  | — |  |  | (1,269 | ) |  | 6.82 |
Forfeited or cancelled | 1,833 |  |  | (1,388 | ) |  | 6.44 |  |  | (304 | ) |  | 5.73 |
Balance at September 30, 2016 | 4,937 |  |  | 5,054 |  |  | $ | 6.03 |  |  | 3,662 |  |  | $ | 4.18 |
* The preceding table includes PSUs activities during the nine months ended September 30, 2016. The following table summarizes information about stock options outstanding as of September 30, 2016 (in thousands, except per share amounts):
| Number of Shares |  | Weighted Average Exercise Price |  | Weighted Average Remaining Contractual Term (Years) |  | Aggregate Intrinsic Value
Vested and expected to vest | 4,826 |  |  | $ | 6.08 |  |  | 4.0 |  | $ | 3,015 |
Exercisable | 3,063 |  |  | 6.63 |  |  | 3.0 |  | 750 |
The intrinsic value of options vested and expected to vest and exercisable as of September 30, 2016 is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of September 30, 2016. The intrinsic value of options exercised is calculated based on the difference between the exercise price and the fair value of the Company’s common stock as of the exercise date. The intrinsic value of options exercised during the three and nine month periods ended October 2, 2015 was $28,000 and $1.7 million, respectively. The intrinsic value of options exercised during both the three and nine month periods ended September 30, 2016 was $0.1 million. The following table summarizes information about RSUs and PSUs outstanding as of September 30, 2016 (in thousands, except per share amounts):
| Number of Shares Underlying Restricted Stock Units |  | Weighted Average Remaining Vesting Period (Years) |  | Aggregate Fair Value
Vested and expected to vest | 2,740 |  |  | 0.9 |  | $ | 16,250 |
The fair value of RSUs and PSUs vested and expected to vest as of September 30, 2016 is calculated based on the fair value of the Company’s common stock as of September 30, 2016. Employee Stock Purchase Plan The Company’s stockholders approved an amendment to the 2002 Employee Stock Purchase Plan (the “ESPP”) at the 2016 Annual Meeting which increased the number of shares of common stock reserved for issuance under the ESPP by 1,500,000 shares. As of September 30, 2016, the number of shares of common stock available for issuance under the “ESPP” was 906,390. In the event that there are insufficient shares in the plan to fully fund the issuance, the available shares will be allocated across all participants based on their contributions relative to the total contributions received for the offering period. TVN Employee Equity Benefit Plan TVN’s existing employee equity benefit plans consist of the French Employee Incentive plan and the Overseas Long Term Incentive plan. The Company’s acquisition of TVN gave rise to a change-in-control event which causes both plans to become fully vested and the settlement of both plans have to be made in cash according to the agreements. The payment was made in full in the second quarter of 2016 in the amount of approximately $2.9 million upon finalizing the closing adjustments to the TVN purchase price. TVN Retirement Benefit Plan As part of the TVN acquisition the Company assumed obligations under defined benefit pension plans which were unfunded as of the acquisition date. Under French law, the TVN French Subsidiary is required to make certain payments to employees upon their retirement from the Company. These payments are based on the retiring employee’s salary for a number of months that varies according to the employee’s period of service and position. Salary used in the calculation is the employee’s average monthly salary for the twelve months prior to retirement. The payments are made in one lump-sum at the time of retirement. The present value of the company’s obligation for these lump-sum payments is determined on an actuarial basis and the actuarial valuation takes into account the employees’ age and period of service with the company; projected mortality rates, mobility rates and increases in salaries; and a discount rate of 2% per annum. The present value of the Company’s defined benefit pension plan obligations as of September 30, 2016 and changes to the Company’s defined benefit pension plan obligations are shown below (in thousands):
| September 30, 2016
Projected benefit obligation: |
Acquired from TVN acquisition | $ | 5,907 |
Service cost | 164 |
Interest cost | 68 |
Foreign currency translation adjustment | 102 |
As of September 30, 2016 | $ | 6,241 |
Presented on the Condensed Consolidated Balance Sheets under: |
Current portion (presented under “Accrued liabilities”) | $ | 248 |
Long-term portion (presented under “Other non-current liabilities”) | $ | 5,993 |
The plan was unfunded as of September 30, 2016. There were no amounts recognized in accumulated other comprehensive loss as of September 30, 2016. There are no contributions to the plan required by any laws or funding regulations, discretionary contributions or non-cash contributions expected to be made. Net periodic costs for the three and nine months ended September 30, 2016 were $99,000 and $233,000, respectively. The accumulated benefit obligation as of September 30, 2016 was $5.0 million. The following assumptions were used in determining the Company’s pension obligation:
| September 30, 2016
Discount rate | 2.0 | %
Mobility rate | 2.2 | %
Salary progression rate | 2.0 | %
The Company evaluates the discount rate assumption annually. The discount rate used for the Company’s valuation study was based on the rate of long-term Euro zone AA rated 10 years corporate bonds as of December 31, 2015, which yielded 2.0%. The Company also evaluates other assumptions related to demographic factors, such as retirement age, mortality rates and turnover periodically, updating them to reflect experience and expectations for the future. The mortality assumption related to the Company’s defined benefit pension plan used mortality tables published in January 2016 by the French National Institute of Statistics and Economic Studies. Future benefits expected to be paid in each of the next five years, and in the aggregate for the five year period thereafter are as follows (in thousands):
Years ending December 31, |
2016 (remaining three months) | $ | 24 |
2017 | 117 |
2018 | 227 |
2019 | 366 |
2020 | 433 |
2021 - 2025 | 2,310 |
| $ | 3,477 |
As indicated in Note 10, “Restructuring and Related Charges”, the Company finalized the terms of the TVN VDP for TVN employees in the third quarter of 2016. Employee applications are subject to approval by the Company, and the termination benefits are subject to final acceptance by the employees, which is expected to be fully completed by December 31, 2016. Upon such approval and acceptance, the Company will also settle its retirement obligations under the TVN defined benefit pension plan for the terminating employees through payment of these obligations and/or voluntary termination benefits. The Company accounts for these settlements in accordance with ASC 715, “Compensation - Retirement Benefits”, which requires that the settlement be accounted for when an employee accepts the offer of voluntary termination. The Company anticipates that approximately $1.6 million of its retirement obligations for the employees who applied under the TVN VDP and the TVN defined benefit pension plan as of September 30, 2016 will be settled by December 31, 2016. 401(k) Plan The Company has a retirement/savings plan for the U.S. employees which qualifies as a thrift plan under Section 401(k) of the Internal Revenue Code. This plan allows participants to contribute up to the applicable Internal Revenue Code limitations under the plan. The Company has made discretionary contributions to the plan of 25% of the first 4% contributed by eligible participants, up to a maximum contribution per participant of $1,000 per year. The contributions for the nine months ended September 30, 2016 and October 2, 2015 were $316,000 and $342,000, respectively. Stock-based Compensation The following table summarizes stock-based compensation expense for all plans (in thousands):
| Three months ended |  | Nine months ended
| September 30, 2016 |  | October 2, 2015 |  | September 30, 2016 |  | October 2, 2015
Stock-based compensation in: |  |  |  |  |  |  |
Cost of revenue | $ | 360 |  |  | $ | 433 |  |  | $ | 1,011 |  |  | $ | 1,383 |
Research and development expense | 771 |  |  | 1,074 |  |  | 2,581 |  |  | 3,249 |
Selling, general and administrative expense | 1,549 |  |  | 2,320 |  |  | 4,950 |  |  | 7,213 |
Total stock-based compensation in operating expense | 2,320 |  |  | 3,394 |  |  | 7,531 |  |  | 10,462 |
Total stock-based compensation | $ | 2,680 |  |  | $ | 3,827 |  |  | $ | 8,542 |  |  | $ | 11,845 |
As of September 30, 2016, the Company had approximately $11.7 million of unrecognized stock-based compensation expense related to the unvested portion of its stock options, RSUs and PSUs that is expected to be recognized over a weighted-average period of approximately 1.8 years. As part of its equity incentive program, the Company grants PSUs, the vesting of which depends on the achievement of certain financial and non-financial goals of the Company. The Company assesses the expected achievement levels of the performance goals at the end of each reporting period. The grant date fair value of the PSUs expected to vest based on the Company’s best estimate of its performance against the performance goals is recognized as compensation expense. As of September 30, 2016, the Company believes it is probable that certain performance conditions will be met and has recognized compensation expense accordingly. Valuation Assumptions The Company estimates the fair value of employee stock options and stock purchase rights under the ESPP using a Black-Scholes option valuation model. The value of the stock purchase rights under the ESPP consists of: (1) the 15% discount on the purchase of the stock; (2) 85% of the fair value of the call option; and (3) 15% of the fair value of the put option. The call option and put option were valued using the Black-Scholes option pricing model. At the date of grant, the Company estimated the fair value of each stock option grant and stock purchase right granted under the ESPP using the following weighted average assumptions:
| Employee Stock Options
| Three months ended |  | Nine months ended
| September 30, 2016 |  | October 2, 2015 |  | September 30, 2016 |  | October 2, 2015
Expected term (years) | 4.30 |  |  | 4.60 |  |  | 4.30 |  |  | 4.70 |
Volatility | 39 | % |  | 37 | % |  | 36 | % |  | 38 | %
Risk-free interest rate | 1.0 | % |  | 1.5 | % |  | 1.4 | % |  | 1.6 | %
Expected dividends | 0.0 | % |  | 0.0 | % |  | 0.0 | % |  | 0.0 | %
| ESPP Purchase Period Ending
| December 31, 2016 |  | July 1, 2016 |  | December 31, 2015 |  | June 30, 2015
Expected term (years) | 0.50 |  |  | 0.50 |  |  | 0.50 |  |  | 0.50 |
Volatility | 62 | % |  | 54 | % |  | 32 | % |  | 35 | %
Risk-free interest rate | 0.4 | % |  | 0.4 | % |  | 0.1 | % |  | 0.1 | %
Expected dividends | 0.0 | % |  | 0.0 | % |  | 0.0 | % |  | 0.0 | %
Estimated weighted average fair value per share at purchase date | $0.98 |  | $1.19 |  | $1.64 |  | $1.75
The expected term of the employee stock options represents the weighted-average period that the stock options are expected to remain outstanding. The computation of 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 the stock purchase rights under the ESPP represents the period of time from the beginning of the offering period to the purchase date. The Company uses its historical volatility for a period equivalent to the expected term of the options to estimate the expected volatility. The risk-free interest rate that the Company uses in the Black-Scholes option valuation model is based on U.S. Treasury zero-coupon issues with remaining terms similar to the expected term. The Company has never declared or paid any cash dividends and does not plan to pay cash dividends in the foreseeable future, and, therefore, used an expected dividend yield of zero in the valuation model. The Company is required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. The Company uses historical data to estimate pre-vesting option forfeitures and records stock-based compensation expense only for those awards that are expected to vest. All stock-based payment awards are amortized on a straight-line basis over the requisite service periods of the awards, which are generally the vesting periods. The weighted-average fair value per share of options granted was $1.00 and $2.01 for the three months ended September 30, 2016 and October 2, 2015, respectively. The weighted-average fair value per share of options granted was $0.97 and $2.63 for the nine months ended September 30, 2016 and October 2, 2015, respectively. The fair value of all stock options vested during the three months ended September 30, 2016 and October 2, 2015 was $0.4 million and $0.6 million, respectively. The fair value of all stock options vested during the nine months ended September 30, 2016 and October 2, 2015 was $1.8 million and $2.5 million, respectively. There were no realized tax benefits attributable to stock options exercised in jurisdictions where this expense is deductible for tax purposes for the three and nine months ended September 30, 2016 and October 2, 2015, respectively. The aggregate fair value of all RSUs issued during the three months ended September 30, 2016 and October 2, 2015 was $1.6 million and $2.2 million, respectively. The aggregate fair value of all RSUs issued during the nine months ended September 30, 2016 and October 2, 2015 was $8.6 million and $9.9 million, respectively.

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- Definition The entire disclosure for an entity's employee compensation and benefit plans, including, but not limited to, postemployment and postretirement benefit plans, defined benefit pension plans, defined contribution plans, non-qualified and supplemental benefit plans, deferred compensation, share-based compensation, life insurance, severance, health care, unemployment and other benefit plans. + References No definition available. + Details
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