Share-based compensation | 3 Months Ended |
Sep. 27, 2013 |
Share-based compensation | ' |
10 | | Share-based compensation | | | | | | | | | | | | | | |
Share-based compensation |
In determining the grant date fair value of equity awards, the Company is required to make estimates of the fair value of Fabrinet’s ordinary shares, expected dividends to be issued, expected volatility of Fabrinet’s shares, expected forfeitures of the awards, risk free interest rates for the expected term of the awards, expected terms of the awards, and the vesting period of the respective awards. Forfeitures are estimated at the time of grant and revised if necessary in subsequent periods if actual forfeitures differ from those estimates. |
The effect of recording share-based compensation expense for the three months ended September 27, 2013 and September 28, 2012 was as follows: |
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| | Three Months Ended | | | | | | | | | |
| | September 27, | | | September 28, | | | | | | | | | |
2013 | 2012 | | | | | | | | |
Share-based compensation expense by type of award: | | | | | | | | | | | | | | | | |
Share options | | $ | 298 | | | $ | 643 | | | | | | | | | |
Restricted share units | | | 1,265 | | | | 611 | | | | | | | | | |
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Total share-based compensation expense | | | 1,563 | | | | 1,254 | | | | | | | | | |
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Tax effect on share-based compensation expense | | | — | | | | — | | | | | | | | | |
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Net effect on share-based compensation expense | | $ | 1,563 | | | $ | 1,254 | | | | | | | | | |
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Share-based compensation expense was recorded in the condensed consolidated statements of operations as follows: cost of revenues of $307 and $345 for the three months ended September 27, 2013 and September 28, 2012, respectively; and SG&A expenses of $1,256 and $909 for the three months ended September 27, 2013 and September 28, 2012, respectively. The Company did not capitalize any share-based compensation expense as part of any asset costs during the three months ended September 27, 2013 and September 28, 2012. |
Share-based award activity |
Share options have been granted to directors and employees. As of September 27, 2013, there were 93,807 share options outstanding under the Amended and Restated 1999 Share Option Plan (the “1999 Plan”). Additional option grants may not be made under the 1999 Plan. |
On March 12, 2010, Fabrinet’s shareholders adopted the 2010 Performance Incentive Plan (the “2010 Plan”). On December 20, 2010 and December 20, 2012, Fabrinet’s shareholders adopted amendments to the 2010 Plan to increase the number of ordinary shares authorized for issuance under the 2010 Plan by 500,000 and 3,700,000 shares, respectively. A total of 5,700,000 ordinary shares are authorized for issuance under the 2010 Plan, plus any shares subject to share options under the 1999 Plan outstanding as of June 24, 2010, that expire, are canceled or terminate after such date. As of September 27, 2013, there were an aggregate of 1,149,286 share options outstanding, 853,784 restricted share units outstanding, and 3,478,859 ordinary shares available for future grant under the 2010 Plan. |
Share options |
Fabrinet’s board of directors has the authority to determine the type of option and the number of shares subject to an option. Options generally vest and become exercisable over four years and expire, if not exercised, within 7 years of the grant date. In the case of a grantee’s first grant, 25 percent of the underlying shares subject to an option vest 12 months after the vesting commencement date and 1/48 of the underlying shares vest monthly over each of the subsequent 36 months. In the case of any additional grants to a grantee, 1/48 of the underlying shares subject to an option vest monthly over four years, commencing one month after the vesting commencement date. |
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The following summarizes share option activity under the 1999 Plan: |
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| | Number of Shares Underlying | | | Weighted-Average Exercise | |
Options | Price Per Share |
| | Three Months Ended | | | Three Months Ended | |
| | September 27, | | | September 28, | | | September 27, | | | September 28, | |
2013 | 2012 | 2013 | 2012 |
Shares underlying options outstanding at beginning of the period | | | 104,078 | | | | 189,540 | | | $ | 5.38 | | | $ | 5.18 | |
Granted | | | — | | | | — | | | | — | | | | — | |
Exercised | | | (8,871 | )* | | | (25,408 | ) | | | 5.02 | | | | 4.9 | |
Forfeited | | | — | | | | — | | | | — | | | | — | |
Expired | | | (1,400 | ) | | | — | | | | 5.5 | | | | — | |
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Shares underlying options outstanding at end of the period | | | 93,807 | | | | 164,132 | | | $ | 5.41 | | | $ | 5.23 | |
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Shares underlying options exercisable at end of the period | | | 87,087 | | | | 120,270 | | | $ | 5.38 | | | $ | 5.03 | |
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* | Included in the exercised number are 308 shares options exercised on September 26, 2013, but not settled as of September 27, 2013. | | | | | | | | | | | | | | | |
The following summarizes information for share options outstanding as of September 27, 2013 under the 1999 Plan: |
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| | Number of | | | Exercise | | | Weighted | | | Aggregate | |
Shares | Price Per | Average | Intrinsic |
Underlying | Share | Remaining | Value |
Options | | Contractual Life | |
| | (years) | |
| | | 10,120 | | | $ | 3.5 | | | | 0.26 | | | | | |
| | | 1,125 | | | | 4.25 | | | | 0.92 | | | | | |
| | | 1,101 | | | | 4.75 | | | | 1.17 | | | | | |
| | | 6,624 | | | | 5 | | | | 1.38 | | | | | |
| | | 2,280 | | | | 5.25 | | | | 1.61 | | | | | |
| | | 2,050 | | | | 5.5 | | | | 1.92 | | | | | |
| | | 69,907 | | | | 5.75 | | | | 3.12 | | | | | |
| | | 600 | | | | 6.25 | | | | 3.61 | | | | | |
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Options outstanding | | | 93,807 | | | | | | | | 2.58 | | | $ | 999 | |
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Options exercisable | | | 87,087 | | | | | | | | 2.53 | | | $ | 930 | |
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As of September 27, 2013, $1 of estimated share-based compensation expense related to share options under the 1999 Plan remains to be recorded. That cost is expected to be recorded over an estimated amortization period of 0.27 years. |
The following summarizes share option activity under the 2010 Plan: |
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| | Number of Shares Underlying | | | Weighted-Average Exercise | |
Options | Price Per Share |
| | Three Months Ended | | | Three Months Ended | |
| | September 27, | | | September 28, | | | September 27, | | | September 28, | |
2013 | 2012 | 2013 | 2012 |
Shares underlying options outstanding at beginning of the period | | | 1,173,233 | | | | 1,280,750 | | | $ | 16.25 | | | $ | 16.32 | |
Granted | | | — | | | | — | | | | — | | | | — | |
Exercised | | | — | | | | — | | | | — | | | | — | |
Forfeited | | | (1,902 | ) | | | (5,983 | ) | | | 16.16 | | | | 16.39 | |
Expired | | | (22,045 | ) | | | (36,890 | ) | | | 17.44 | | | | 16.63 | |
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Shares underlying options outstanding at end of the period | | | 1,149,286 | | | | 1,237,877 | | | $ | 16.23 | | | $ | 16.31 | |
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Shares underlying options exercisable at end of the period | | | 713,515 | | | | 456,477 | | | $ | 16.4 | | | $ | 16.53 | |
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The following summarizes information for share options outstanding as of September 27, 2013 under the 2010 Plan: |
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| | Number of | | | Exercise | | | Weighted | | | Aggregate | |
Shares | Price Per | Average | Intrinsic Value |
Underlying | Share | Remaining | |
Options | | Contractual Life | |
| | (years) | |
| | | 40,000 | | | $ | 13.77 | | | | 3.9 | | | | | |
| | | 576,677 | | | | 16.83 | | | | 4.05 | | | | | |
| | | 30,000 | | | | 15.05 | | | | 4.1 | | | | | |
| | | 28,344 | | | | 25.5 | | | | 4.3 | | | | | |
| | | 7,400 | | | | 26.16 | | | | 4.35 | | | | | |
| | | 10,400 | | | | 23.62 | | | | 4.6 | | | | | |
| | | 168,824 | | | | 15.16 | | | | 4.89 | | | | | |
| | | 251,231 | | | | 14.12 | | | | 5.12 | | | | | |
| | | 27,560 | | | | 19.36 | | | | 5.37 | | | | | |
| | | 5,550 | | | | 18.6 | | | | 5.42 | | | | | |
| | | 3,300 | | | | 12.83 | | | | 5.62 | | | | | |
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Options outstanding | | | 1,149,286 | | | | | | | | 4.46 | | | $ | 772 | |
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Options exercisable | | | 713,515 | | | | | | | | 4.36 | | | $ | 395 | |
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As of September 27, 2013, $613 of estimated share-based compensation expense related to share options under the 2010 Plan remains to be recorded. That cost is expected to be recorded over an estimated amortization period of 1.69 years. |
Restricted share units |
Restricted share units are one type of share-based award that may be granted under the 2010 Plan. Restricted share units granted to non-employee directors generally cliff vest 100% on the first of January, following the next annual meeting of shareholders, approximately 1 year from the grant date, provided the director continues to serve through such date. Restricted share units granted to employees generally vest in 4 equal installments over 4 years on each anniversary of the vesting commencement date. |
The following summarizes restricted share unit activity under the 2010 Plan: |
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| | Number of Shares Underlying | | | Weighted-Average Grant Date | |
Restricted Share Units | Fair Value Per Share |
| | Three Months Ended | | | Three Months Ended | |
| | September 27, | | | September 28, | | | September 27, | | | September 28, | |
2013 | 2012 | 2013 | 2012 |
Unvested balance at beginning of the period | | | 545,668 | | | | 168,275 | | | $ | 12.81 | | | $ | 14.44 | |
Granted | | | 407,698 | | | | 239,881 | | | | 14.76 | | | | 12.53 | |
Issued | | | (96,077 | ) | | | — | | | | 12.26 | | | | — | |
Forfeited | | | (3,505 | ) | | | — | | | | 14.04 | | | | — | |
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Unvested balance at end of the period | | | 853,784 | | | | 408,156 | | | $ | 13.8 | | | $ | 13.32 | |
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As of September 27, 2013, $7,598 of estimated share-based compensation expense related to restricted share units under the 2010 Plan remains to be recorded. That cost is expected to be recorded over an estimated amortization period of 3.44 years. |
For the three months ended September 27, 2013, the Company withheld an aggregate of 5,916 shares upon the vesting of restricted share units, based upon the closing share price on the vesting date to settle the employees’ minimum statutory obligation for the applicable income and other employment taxes. The Company then remitted cash of $90 to the appropriate taxing authorities, and presented it in a financing activity within the condensed consolidated statements of cash flows. The payment had the effect on shares issued by the Company as it reduced the number of shares that would have been issued on the vesting date and was recorded as a reduction of additional paid-in capital. |