STOCKHOLDERS' EQUITY | 9 Months Ended |
Sep. 30, 2013 |
Stockholders' Equity Note [Abstract] | ' |
STOCKHOLDERS' EQUITY | ' |
STOCKHOLDERS’ EQUITY |
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Share-Based Compensation |
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The following table summarizes share-based compensation, net of amount capitalized in inventory, included in operating results for the three and nine months ended September 30, 2013 and 2012: |
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| Three Months Ended | | Nine Months Ended |
| September 30, | | September 30, | | September 30, | | September 30, |
2013 | 2012 | 2013 | 2012 |
| (In thousands) |
Cost of revenue | $ | 1,136 | | | $ | 2,154 | | | $ | 4,589 | | | $ | 6,723 | |
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Research and development | 3,100 | | | 4,925 | | | 10,724 | | | 17,568 | |
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Selling, general and administrative | 3,858 | | | 11,150 | | | 15,023 | | | 31,747 | |
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Total share-based compensation expense, before income taxes | 8,094 | | | 18,229 | | | 30,336 | | | 56,038 | |
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Tax benefit | (1,581 | ) | | (2,403 | ) | | (4,750 | ) | | (6,624 | ) |
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Total share-based compensation expense, net of income taxes | $ | 6,513 | | | $ | 15,826 | | | $ | 25,586 | | | $ | 49,414 | |
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The expense recorded for the three and nine months ended September 30, 2013 decreased from the three and nine months ended September 30, 2012 as a result of the Company reducing its estimates regarding the probability of achieving certain performance criteria established under the 2011 Long-Term Performance-Based Incentive Plan (the "2011 Incentive Plan") and increasing its forfeiture rate estimates for those performance-based restricted stock units. These changes in estimates resulted in a reversal of share-based compensation expense recognized in the prior periods of $7.3 million and $16.9 million for the three and nine months ended September 30, 2013, respectively. |
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Stock Options, Restricted Stock Units and Employee Stock Purchase Plan |
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In May 2005, Atmel’s stockholders initially approved Atmel’s 2005 Stock Plan (as amended, the “2005 Stock Plan”). On May 9, 2013, Atmel's stockholders approved an amendment to the 2005 Stock Plan to increase the number of shares allocated to the 2005 Stock Plan by 25.0 million shares. As of September 30, 2013, 158.0 million shares had been authorized for issuance under the 2005 Stock Plan, and 23.5 million shares remained available for issuance without giving effect to any adjustment that may be required by the terms of the 2005 Stock Plan in respect of shares underlying restricted stock or restricted stock units. Under the 2005 Stock Plan, Atmel may issue common stock directly, grant options to purchase common stock or grant restricted stock units payable in common stock to employees, consultants and directors of Atmel. Restricted stock units generally vest on a quarterly basis over a service period of up to four years from the grant date, although restricted stock unit grants to newly-hired employees generally have a one-year cliff vest equal to one-quarter of the total grant. Options, which generally vest over four years, are granted at fair market value on the date of the grant and generally expire ten years from that date. |
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Activity under Atmel’s 2005 Stock Plan is set forth below: |
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| | | Outstanding Options | | Weighted- | | | |
| | | | | Exercise | | Average | | | |
| Available | | Number of | | Price | | Exercise Price | | | |
for Grant | Options | per Share | per Share | | | |
| (In thousands, except per share data) | | | |
Balances, December 31, 2012 | 6,148 | | | 6,675 | | | $1.68-$10.01 | | | $ | 4.33 | | | | |
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Restricted stock units issued | (1,182 | ) | | — | | | — | | | — | | | | |
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Plan adjustment for restricted stock units issued | (721 | ) | | — | | | — | | | — | | | | |
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Restricted stock units cancelled | 319 | | | — | | | — | | | — | | | | |
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Plan adjustment for restricted stock units cancelled | 219 | | | — | | | — | | | — | | | | |
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Performance-based restricted stock units cancelled | 59 | | | — | | | — | | | — | | | | |
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Plan adjustment for performance-based restricted stock units cancelled | 36 | | | — | | | — | | | — | | | | |
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Options cancelled/expired/forfeited | 15 | | | (15 | ) | | $3.67-$7.12 | | | 4.97 | | | | |
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Options exercised | — | | | (402 | ) | | $1.68-$6.28 | | | 4.37 | | | | |
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Balances, March 31, 2013 | 4,893 | | | 6,258 | | | $1.77-$10.01 | | | $ | 4.33 | | | | |
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Additional shares approved for issuance | 25,000 | | | — | | | — | | | — | | | | |
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Restricted stock units issued | (838 | ) | | — | | | — | | | — | | | | |
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Plan adjustment for restricted stock units issued | (478 | ) | | — | | | — | | | — | | | | |
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Restricted stock units cancelled | 1,133 | | | — | | | — | | | — | | | | |
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Plan adjustment for restricted stock units cancelled | 763 | | | — | | | — | | | — | | | | |
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Performance-based restricted stock units cancelled | 298 | | | — | | | — | | | — | | | | |
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Plan adjustment for performance-based restricted stock units cancelled | 182 | | | — | | | — | | | — | | | | |
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Options cancelled/expired/forfeited | 31 | | | (31 | ) | | $1.77-$7.12 | | | 4.29 | | | | |
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Options exercised | — | | | (225 | ) | | $2.90-$8.20 | | | 4.1 | | | | |
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Balances, June 30, 2013 | 30,984 | | | 6,002 | | | $2.13-$10.01 | | | $ | 4.34 | | | | |
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Restricted stock units issued | (5,124 | ) | | — | | | — | | | — | | | | |
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Plan adjustment for restricted stock units issued | (2,921 | ) | | — | | | — | | | — | | | | |
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Restricted stock units cancelled | 314 | | | — | | | — | | | — | | | | |
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Plan adjustment for restricted stock units cancelled | 205 | | | — | | | — | | | — | | | | |
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Performance-based restricted stock units cancelled | 43 | | | — | | | — | | | — | | | | |
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Plan adjustment for performance-based restricted stock units cancelled | 26 | | | — | | | — | | | — | | | | |
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Options cancelled/expired/forfeited | 5 | | | (5 | ) | | $4.23-$4.92 | | | 4.73 | | | | |
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Options exercised | — | | | (1,145 | ) | | $2.66-$6.28 | | | 4.16 | | | | |
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Balances, September 30, 2013 | 23,532 | | | 4,852 | | | $2.13-$10.01 | | | $ | 4.39 | | | | |
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In connection with the Company's acquisition of Ozmo in December 2012, the Company assumed Ozmo's equity incentive plan. Excluded from the table above are 0.4 million shares assumed as part of the Ozmo acquisition. This amount is comprised of 0.3 million restricted stock units with a weighted-average grant date fair value of $6.17 and 0.1 million options with a weighted-average grant date fair value of $0.81. These stock options and restricted stock units remain governed by the terms and conditions of the Ozmo plan. No additional equity will be granted under the Ozmo plan. |
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Restricted stock units are granted from the pool of options available for grant. As the result of the amendment to the 2005 Stock Plan in May 2013, every share underlying restricted stock, restricted stock units (including performance-based restricted stock units), or stock purchase rights issued on or after May 9, 2013 (the date on which the amendment became effective) is counted against the numerical limit for options available for grant as 1.57 shares, as reflected in the table above in the line items for "Plan adjustments", except that restricted stock units (including performance-based restricted stock units), or stock purchase rights issued prior to May 9, 2013 but on or after May 18, 2011, continue to be governed by an earlier amendment to the 2005 Stock Plan that provided for a numerical limit of 1.61 shares, and restricted stock units (including performance-based restricted stock units), or stock purchase rights issued prior to May 18, 2011 and on or after May 14, 2008, continue to be governed by an earlier amendment to the 2005 Stock Plan that provided for a numerical limit of 1.78 shares. If shares issued pursuant to any restricted stock, restricted stock unit, or stock purchase right agreements granted on or after May 9, 2013 are cancelled, forfeited or repurchased by the Company or otherwise returned to the 2005 Stock Plan, 1.57 times the number of those shares will return to the 2005 Stock Plan and will again become available for issuance. If shares issued pursuant to any restricted stock, restricted stock unit, or stock purchase right agreements granted prior to May 9, 2013 and on or after May 18, 2011 are cancelled, forfeited or repurchased by the Company or otherwise returned to the 2005 Stock Plan, 1.61 times the number of those shares will return to the 2005 Stock Plan and will again become available for issuance. If shares issued pursuant to any restricted stock, restricted stock unit, or stock purchase right agreements granted prior to May 18, 2011 and on or after May 14, 2008 are cancelled, forfeited or repurchased by the Company or otherwise returned to the 2005 Stock Plan, 1.78 times the number of those shares will return to the 2005 Stock Plan and will again become available for issuance. |
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As of September 30, 2013, there were 23.5 million shares available for issuance under the 2005 Stock Plan, or 15.0 million shares after giving effect to the applicable ratios under the 2005 Stock Plan for issuances of restricted stock units, as described above. The restricted stock units and stock options assumed as part of the Ozmo acquisition were not issued under the 2005 Stock Plan. |
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Stock Option Awards |
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No options were granted in the nine months ended September 30, 2013 or 2012. |
As of September 30, 2013, total unearned compensation expense related to unvested stock options was approximately $0.1 million, excluding forfeitures, and is expected to be recognized over a weighted-average period of 1.73 years. |
Restricted Stock Units |
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Activity related to restricted stock units is set forth below: |
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| Number of | | Weighted-Average Grant Date | | | | | | | | | |
Units Outstanding | Fair Value | | | | | | | | | |
| (In thousands, except per share data) | | | | | | | | | |
Balance, December 31, 2012 | 21,944 | | | $ | 8.71 | | | | | | | | | | |
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Restricted stock units issued | 1,182 | | | 6.85 | | | | | | | | | | |
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Restricted stock units vested | (1,553 | ) | | 6.72 | | | | | | | | | | |
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Restricted stock units cancelled | (319 | ) | | 8.32 | | | | | | | | | | |
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Performance-based restricted stock units cancelled | (59 | ) | | 14 | | | | | | | | | | |
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Balance, March 31, 2013 | 21,195 | | | $ | 8.75 | | | | | | | | | | |
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Restricted stock units issued | 838 | | | 7.38 | | | | | | | | | | |
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Restricted stock units vested | (1,597 | ) | | 7.21 | | | | | | | | | | |
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Restricted stock units cancelled | (1,133 | ) | | 8.21 | | | | | | | | | | |
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Performance-based restricted stock units cancelled | (298 | ) | | 13.42 | | | | | | | | | | |
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Balance, June 30, 2013 | 19,005 | | | $ | 8.25 | | | | | | | | | | |
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Restricted stock units issued | 5,124 | | | 7.5 | | | | | | | | | | |
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Restricted stock units vested | (1,411 | ) | | 7.57 | | | | | | | | | | |
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Restricted stock units cancelled | (314 | ) | | 8.16 | | | | | | | | | | |
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Performance-based restricted stock units cancelled | (43 | ) | | 14 | | | | | | | | | | |
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Balance, September 30, 2013 | 22,361 | | | $ | 8.11 | | | | | | | | | | |
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Excluded from the table above are 0.3 million restricted stock units, with a weighted average grant date fair value of $6.17, assumed as part of the acquisition of Ozmo completed in December 2012. |
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As of September 30, 2013, total unearned share-based compensation related to unvested restricted stock units previously granted (including performance-based restricted stock units) was approximately $126.7 million, excluding forfeitures, and is expected to be recognized over a weighted-average period of 2.4 years. |
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For the three and nine months ended September 30, 2012, 1.9 million and 5.5 million restricted stock units vested. These vested restricted stock units had a weighted-average grant date fair value of $5.78 and $6.28 per share for the three and nine months ended September 30, 2012, respectively. |
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Until restricted stock units are vested, they do not have the voting rights of common stock and the shares underlying such restricted stock units are not considered issued and outstanding. Upon vesting of restricted stock units, shares withheld by the Company to pay taxes are retired. |
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Performance-Based Restricted Stock Units |
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In May 2011, the Company adopted the 2011 Incentive Plan, which provides for the grant of restricted stock units to eligible employees. Vesting of restricted stock units granted under the 2011 Incentive Plan is subject to the satisfaction of performance metrics tied to relative revenue growth and operating margin over the designated performance periods. The performance periods for the 2011 Incentive Plan run from January 1, 2011 through December 31, 2013 and consist of three one-year performance periods (calendar years 2011, 2012 and 2013) and a three-year cumulative performance period. The Company did not issue any performance-based restricted stock units in the nine months ended September 30, 2013. The Company issued zero and 0.3 million performance-based restricted stock units in the three and nine months ended September 30, 2012, respectively. The Company recognized share-based compensation credit related to performance-based restricted stock units of $6.4 million and $12.6 million under the 2011 Plan in the three and nine months ended September 30, 2013, respectively. The Company recorded total share-based compensation expense related to performance-based restricted stock units of $3.3 million and $11.0 million in the three and nine months ended September 30, 2012, respectively. The credit recorded for the three and nine months ended September 30, 2013 resulted from the Company reducing its estimates regarding the probability of achieving certain performance criteria and from an increase in the estimated forfeiture rate for these performance-based restricted stock units resulting in a reversal of share-based compensation expense recognized in the prior periods of $7.3 million and $16.9 million, respectively. The Company is required to reassess the probability of vesting at each reporting date, and any change in its forecasts may result in an increase or decrease to the expense recognized. As a result, the expense recognition for performance-based restricted stock units could change over time, requiring adjustments to the financial statements to reflect changes in management's judgment regarding the probability of achieving the performance goals. |
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The 2011 Incentive Plan performance metrics include revenue growth rankings for the Company relative to a semiconductor peer group or a microcontroller peer group, as determined by the Compensation Committee. In addition, in order for a participant to receive credit for a performance period, the Company must achieve a minimum operating margin during such performance period, measured on a pro forma basis as defined in the 2011 Incentive Plan, subject to adjustment by the Compensation Committee. The Compensation Committee is required by the terms of the 2011 Incentive Plan to adjust downward the pro forma operating margin threshold if an industry-wide decline in adjusted revenue for the Company's semiconductor peer companies occurs, and, if that occurs, any downward adjustment must be implemented in a manner consistent with the absolute decline in pro forma operating margin for peer companies as a group, as reviewed by the Compensation Committee. Management evaluates, on a quarterly basis, the likelihood of the Company meeting its performance metrics in determining share-based compensation expense for performance share plans. |
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Employee Stock Purchase Plan |
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Under the 2010 Employee Stock Purchase Plan (“2010 ESPP”), qualified employees are entitled to purchase shares of the Company's common stock at the lower of 85% of the fair market value of the common stock at the date of commencement of the six month offering period or 85% of the fair market value on the last day of the offering period. Purchases are limited to 10% of an employee’s eligible compensation. There were 0.9 million and 1.1 million shares purchased in the three months ended September 30, 2013 and 2012, respectively, at an average price per share of $6.10 and $4.94, respectively. There were 1.9 million and 1.8 million shares purchased under the 2010 ESPP for the nine months ended September 30, 2013 and 2012, respectively, at an average price per share of $5.52 and $6.64, respectively. Of the 25.0 million shares authorized for issuance under the 2010 ESPP, 20.6 million shares were available for issuance at September 30, 2013. |
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The fair value of each purchase under the 2010 ESPP is estimated on the date of the beginning of the offering period using the Black-Scholes option-pricing model. The following assumptions were utilized to determine the fair value of the 2010 ESPP shares: |
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| Three Months Ended | | Nine Months Ended | | | | |
| September 30, | | September 30, | | September 30, | | September 30, | | | | |
2013 | 2012 | 2013 | 2012 | | | | |
Risk-free interest rate | 0.07 | % | | 0.15 | % | | 0.1 | % | | 0.15 | % | | | | |
Expected life (years) | 0.5 | | | 0.5 | | | 0.5 | | | 0.5 | | | | | |
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Expected volatility | 38 | % | | 50 | % | | 44 | % | | 53 | % | | | | |
Expected dividend yield | — | | | — | | | — | | | — | | | | | |
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The weighted-average fair value per share of purchase rights granted under the 2010 ESPP for purchase periods beginning in the nine months ended September 30, 2013 and 2012 was $1.49 and $1.77, respectively. Cash proceeds from the issuance of shares under the 2010 ESPP were $10.6 million and $10.9 million for the nine months ended September 30, 2013 and 2012, respectively. |
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Common Stock Repurchase Program |
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Atmel’s Board of Directors has authorized an aggregate of $1,000.0 million of funding for the Company’s stock repurchase program since 2010. The repurchase program does not have an expiration date, and the number of shares repurchased and the timing of repurchases are based on the level of the Company’s cash balances, general business and market conditions, regulatory requirements, and other factors, including alternative investment opportunities. As of September 30, 2013, the Board of Directors had authorized an aggregate of $700.0 million of funding for repurchasing common stock under this program, of which $63.7 million remained available for repurchases as of such date. In October 2013, the Board of Directors authorized an additional $300.0 million of funding to this program. |
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During the three and nine months ended September 30, 2013, Atmel repurchased 4.6 million and 8.9 million shares, respectively, of its common stock in the open market at an average repurchase price of $7.52 and $7.14 per share, respectively, excluding commission, and subsequently retired those shares. Common stock and additional paid-in capital were reduced by $34.4 million and $63.6 million for the three and nine months ended September 30, 2013, respectively; and $22.8 million and $163.4 million, for the three and nine months ended September 30, 2012, respectively, as a result of the stock repurchases. |