Shareholders' Equity and Share-Based Compensation | 3 Months Ended |
Sep. 27, 2014 |
Shareholders' Equity and Share-Based Compensation [Abstract] | ' |
SHAREHOLDERS' EQUITY AND SHARE-BASED COMPENSATION | ' |
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9. SHAREHOLDERS’ EQUITY AND SHARE-BASED COMPENSATION |
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PREFERRED STOCK |
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The Company’s shareholders have authorized the Board of Directors to issue 5,000,000 shares of preferred stock from time to time in one or more series and to fix the rights, privileges and restrictions of each series. As of September 27, 2014, the Company has issued no shares of preferred stock. |
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STOCK OPTION PLANS |
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At September 27, 2014 the Company had two stock incentive plans and an employee stock purchase plan, consisting of the 2001 Stock Option Plan, 2004 Stock Incentive Plan and the 2010 Employee Stock Purchase Plan. |
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Under the 2004 and 2001 stock incentive plans, the Company has reserved an aggregate of 4.2 million shares of common stock as of September 27, 2014 for issuance to employees, officers, directors, independent contractors and consultants of the Company in the form of incentive or nonqualified stock options, or grants of restricted stock. |
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The Company may grant stock options at the fair value on the grant date for incentive stock options and nonqualified stock options. Options vest over periods of generally 48 months as determined by the Board of Directors. Options granted under the Plans expire 10 years from the grant date. |
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The Company estimates the fair value of each employee stock option on the date of grant using the Black-Scholes option valuation model and expenses that value as compensation using a straight-line method over the option’s vesting period, which corresponds to the requisite employee service period. The Company estimates expected stock price volatility based on actual historical volatility for periods that the Company believes represent predictors of future volatility. The Company uses historical data to estimate option exercises, expected option holding periods and option forfeitures. The Company bases the risk-free interest rate for periods within the contractual life of the option on the U.S. Treasury yield corresponding to the expected life of the underlying option. |
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The Company’s did not grant any stock options under its stock incentive plans during the three months ended September 27, 2014. |
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The value of the Company’s stock options granted under its stock incentive plans during the three months ended September 28, 2013 was estimated at the date of grant using the following weighted average assumptions: |
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| | Three Months Ended | | | | | | | | | | | | | | | | | | | | | | | |
| | September 28, | | | | | | | | | | | | | | | | | | | | | | | |
| | 2013 | | | | | | | | | | | | | | | | | | | | | | | |
Expected Life | | | 5.9 years | | | | | | | | | | | | | | | | | | | | | | | | |
Risk-free interest rate | | | 0.81 | % | | | | | | | | | | | | | | | | | | | | | | | |
Volatility | | | 54 | % | | | | | | | | | | | | | | | | | | | | | | | |
Dividend Yield | | | — | | | | | | | | | | | | | | | | | | | | | | | | |
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The weighted average fair value of options granted during the three months ended September 28, 2013 was $3.81. |
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The following table summarizes the Company’s stock option activity for the three months ended September 27, 2014: |
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| | Shares | | Weighted Average Exercise | | Weighted Average Remaining Contractual Term | | Aggregate Intrinsic Value | | | | | | | | | | | |
| | (in thousands) | | Price | | (years) | | (in thousands) | | | | | | | | | | | |
Options outstanding at June 28, 2014 | | | 2,085 | | | $ | 10.25 | | | | 4.54 | | | $ | 1,077 | | | | | | | | | | | | |
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Granted | | | — | | | | — | | | | | | | | | | | | | | | | | | | | |
Exercised | | | (181 | ) | | | 8.29 | | | | | | | | | | | | | | | | | | | | |
Cancelled or expired | | | (36 | ) | | | 13.05 | | | | | | | | | | | | | | | | | | | | |
Options outstanding at September 27, 2014 | | | 1,868 | | | $ | 10.39 | | | | 4.5 | | | $ | 1,700 | | | | | | | | | | | | |
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Options vested and expected to vest at September 27, 2014 | | | 1,847 | | | $ | 10.42 | | | | 4.44 | | | $ | 1,652 | | | | | | | | | | | | |
Options exercisable at September 27, 2014 | | | 1,607 | | | $ | 10.79 | | | | 3.82 | | $ | 1,171 | | | | | | | | | | | | | |
At September 27, 2014, 916,000 shares were available for future grants under the incentive plans. The aggregate intrinsic value of options exercised during the three months ended September 27, 2014 was $190,000. |
At September 27, 2014, expected future compensation expense relating to options outstanding is $843,000, which will be amortized to expense over a weighted average period of 2.5 years. |
Additional information regarding options outstanding and exercisable as of September 27, 2014 is as follows: |
| | | | | Options Outstanding | | | | Exercisable Options |
Range of Exercise | | Number | | Weighted | | Weighted | | Number | | Weighted | |
Prices | Outstanding as | Average | Average | Exercisable as | Average | |
| of September 27, | Remaining | Exercise | of September 27, | Exercise | |
| 2014 | Contractual | Price | 2014 | Price | |
| | Term (years) | | | | |
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$ | 4.89 | | | $ | 7.87 | | | | 387,085 | | | | 6.85 | | | $ | 7.49 | | | | 201,593 | | | $ | 7.42 | | |
| 7.88 | | | | 8.85 | | | | 457,845 | | | | 4.04 | | | | 8.44 | | | | 395,731 | | | | 8.39 | | |
| 8.86 | | | | 10.25 | | | | 379,050 | | | | 4.24 | | | | 9.87 | | | | 365,550 | | | | 9.9 | | |
| 10.26 | | | | 15.45 | | | | 453,007 | | | | 3.74 | | | | 12.76 | | | | 453,007 | | | | 12.76 | | |
| 15.46 | | | | 18.1 | | | | 191,500 | | | | 3.13 | | | | 16.32 | | | | 191,500 | | | | 16.32 | | |
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$ | 4.89 | | | $ | 18.1 | | | | 1,868,487 | | | | 4.5 | | | $ | 10.39 | | | | 1,607,381 | | | $ | 10.79 | | |
Restricted Stock Units and Performance Stock Units |
Restricted stock units (“RSUs”) and performance stock units (“PSUs”) are converted into shares of the Company’s common stock upon vesting on a one-for-one basis. Typically, vesting of RSUs and PSUs is subject to the employee’s continuing service to the Company. RSUs generally vest over a period of 4 years and are expensed ratably on a straight-line basis over their respective vesting period net of estimated forfeitures. PSUs are granted to executives of the Company and will vest in approximately 12 months subject to the achievement of each participant’s performance goals established at the beginning of the fiscal year. The fair value of RSUs and PSUs granted pursuant to the Company’s 2004 Stock Incentive Plan is the product of the number of shares granted and the grant date fair value of the common stock. A summary of activity of RSUs and PSUs for the three months ended September 27, 2014 is presented below: |
Forfeited (8) 8.34 |
| | Shares | | Weighted | | Weighted | | Aggregate | | | | | | | | | | | |
Average | Average | Intrinsic | | | | | | | | | | | |
Award | Remaining | Value | | | | | | | | | | | |
Date Fair | Contractual | | | | | | | | | | | | |
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| | (in thousands) | | Value | | (years) | | (in thousands) | | | | | | | | | | | |
RSUs outstanding at June 28, 2014 | | | 649 | | | $ | 8.23 | | | | 1.58 | | | $ | 5,901 | | | | | | | | | | | | |
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Awarded | | | 114 | | | | 9.55 | | | | | | | | | | | | | | | | | | | | |
Released | | | (65 | ) | | | 8.16 | | | | | | | | | | | | | | | | | | | | |
RSUs and PSUs outstanding at September 27, 2014 | | | 690 | | | $ | 8.45 | | | | 1.39 | | | $ | 6,864 | | | | | | | | | | | | |
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RSUs and PSUs expected to vest after September 27, 2014 | | | 618 | | | $ | 8.46 | | | | 1.32 | | | $ | 6,145 | | | | | | | | | | | | |
Of the 114,000 shares awarded during the three months ended September 27, 2014, 500 shares were RSUs while the remaining shares awarded were PSUs. At September 27, 2014, expected future compensation expense relating to RSUs and PSUs is $3.8 million, which will be amortized to expense over a weighted average remaining recognition period of 2.3 years. |
2010 EMPLOYEE STOCK PURCHASE PLAN |
The Company’s 2010 Employee Stock Purchase Plan (the “Stock Purchase Plan”) allows eligible employees of the Company to purchase shares of Common Stock through payroll deductions. The Company reserved 2.0 million shares of the Company’s Common Stock for issuance under this Plan, of which 1.6 million remain available at September 27, 2014. The Stock Purchase Plan permits eligible employees to purchase Common Stock at a discount through payroll deductions during six-month purchase periods. The six-month periods come to an end on or about May 1 and November 1 and the purchases are then made. Thus there were no purchases under the Stock Purchase Plan for the three months ended September 27, 2014 and September 28, 2013. Participants in the Stock Purchase Plan may purchase stock at 85% of the lower of the stock’s fair market value on the first day and last day of the offering period. The maximum number of shares of Common Stock that any employee may purchase during any offering period under the plan is 1,500 shares, and an employee may not accrue more than $15,000 for share purchases in any offering period. |
The Company estimates the fair value of stock purchase rights granted under the Company’s Stock Purchase Plan on the date of grant using the Black-Scholes option valuation model. ASC Topic 718 states that a “lookback” pricing provision with a share limit should be considered a combination of stock and a call option. The valuation results for these elements have been combined to value the specific features of the stock purchase rights. The Company bases volatility on the expected volatility of the Company’s stock during the offering period. The expected term is determined by the time from enrollment until purchase, and the Company uses the U.S. Treasury yield for the risk-free interest rate for the offering period. |
At September 27, 2014, the Company had $20,000 in unamortized share-based compensation related to its employee stock purchase plan which will be amortized and recognized in the consolidated statement of operations over the next month. |
SHARE-BASED COMPENSATION |
The following table shows total share-based compensation expense classified by Consolidated Statements of Operations reporting caption for the three months ended September 27, 2014 and September 28, 2013 generated from the plans described above: |
| | Three Months Ended | | | | | | | | | | | | | | | | | | | |
| | September 27, | | September 28, | | | | | | | | | | | | | | | | | | | |
(in thousands) | | 2014 | | 2013 | | | | | | | | | | | | | | | | | | | |
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Cost of goods sold | | $ | 33 | | | $ | 36 | | | | | | | | | | | | | | | | | | | | |
Research and development | | | 218 | | | | 297 | | | | | | | | | | | | | | | | | | | | |
Selling, general and administrative | | | 458 | | | | 396 | | | | | | | | | | | | | | | | | | | | |
Pre-tax share-based compensation expense | | | 709 | | | | 729 | | | | | | | | | | | | | | | | | | | | |
Income tax impact | | | 230 | | | | 238 | | | | | | | | | | | | | | | | | | | | |
Net share-based compensation expense | | $ | 479 | | | $ | 491 | | | | | | | | | | | | | | | | | | | | |
Share-based compensation by type of award is as follows: |
| | Three Months Ended | | | | | | | | | | | | | | | | | | | |
| | September 27, | | September 28, | | | | | | | | | | | | | | | | | | | |
(in thousands) | | 2014 | | 2013 | | | | | | | | | | | | | | | | | | | |
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Stock options | | $ | 97 | | | $ | 239 | | | | | | | | | | | | | | | | | | | | |
Restricted stock units | | | 340 | | | | 438 | | | | | | | | | | | | | | | | | | | | |
Performance stock units | | | 217 | | | | — | | | | | | | | | | | | | | | | | | | | |
Stock purchase plan | | | 55 | | | | 52 | | | | | | | | | | | | | | | | | | | | |
Total share-based compensation expense | | $ | 709 | | | $ | 729 | | | | | | | | | | | | | | | | | | | | |
The amount of share-based compensation expense capitalized in inventory at September 27, 2014 and June 28, 2014 is immaterial. |