Note 4. Equity Incentive Plan and Stock-Based Compensation
 9 Months Ended
Sep. 30, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Text Block]
4. Equity Incentive Plan and Stock-Based Compensation

Equity Incentive Plan

The Company’s 2010 Equity Incentive Award Plan (2010 Plan) provides for the grant of stock options, stock appreciation rights, restricted stock units, restricted stock, performance awards, and deferred stock to its employees, consultants and non-employee members of its Board of Directors.

The annual restricted stock unit (RSU) awards granted in fiscal 2010 and fiscal 2011 to employees vest over four years in four substantially equal annual installments on the anniversary date of the grant. Beginning in the first quarter of fiscal 2012, the Company issued RSU awards which vest over three years in three substantially equal annual installments on the anniversary date of the grant.

The key executive RSU awards granted in fiscal 2010 and fiscal 2011 have a four-year performance period, with 50 percent of each target award (base shares) subject to performance goals in each of the four fiscal years following the date of grant. The key executive RSU awards granted in fiscal 2012 have a three-year performance period, with 50 percent of each target award (base shares) subject to performance goals in each of the three fiscal years following the date of grant. A minimum of 50 percent and a maximum of 150 percent of base shares may vest over a three-year period, subject to the Company’s financial performance. If the performance goals are not met in a particular year, the unvested shares will be carried forward but will be forfeited if not earned by the last performance year. If performance is above target in a particular year, base shares earned will be accelerated after shares carried forward from prior years are used. However, no more than the number of shares in the initial grant can be earned.

In the first quarter of fiscal 2012, the Company issued additional key executive RSU awards with a two-year performance period, with 100 percent of each target award (base shares) subject to performance goals in each of the two fiscal years following the date of grant. The two-year awards were granted to certain executives in lieu of participation in the Company’s annual cash bonus plan. The annual performance goals for these awards are the same as those for the three and four-year key executive RSU awards. A minimum of 0 percent and maximum of 100 percent of base shares vest each year, subject to performance. Unvested shares will not be carried forward and will be forfeited if not earned in any particular year.

The numbers of shares of common stock available for grant under the 2010 Plan are shown in the following table:

   
Shares Available For Grant
 
Balance as of December 25, 2011
    2,150,354  
Additional shares issuable under 2010 Plan (annual increase for 2012)
    3,560,245  
Stock options granted, net of forfeitures/cancellations
    (2,415,102 )
RSU awards granted, net of forfeitures/cancellations
    (1,005,742 )
Key Executive RSU awards granted, net of forfeitures/cancellations
    (1,100,222 )
Balance as of September 30, 2012
    1,189,533  

Stock-Based Compensation

The following table presents the total stock-based compensation expense by financial statement caption resulting from the Company’s stock options and RSU awards:

   
Three Months Ended
   
Nine Months Ended
 
   
September 30, 2012
   
September 25, 2011
   
September 30, 2012
   
September 25, 2011
 
    (in thousands)  
                         
Cost of sales
  $ 1,713     $ 838     $ 4,747     $ 2,285  
Research and development
    2,350       1,157       6,045       3,131  
Sales, general and administrative
    4,698       2,629       13,384       8,804  
Stock-based compensation expense before income taxes
    8,761       4,624       24,176       14,220  
Stock-based compensation expense after income taxes(1)
  $ 8,761     $ 4,624     $ 24,176     $ 14,220  
 
(1) There was no income tax benefit related to stock-based compensation because all of the Company's U.S. deferred tax assets, net of U.S. deferred tax liabilities, continue to be subject to a full valuation allowance.

The weighted average fair value of the Company’s stock options granted is as follows:

   
Three Months Ended
   
Nine Months Ended
 
   
September 30, 2012
   
September 25, 2011
   
September 30, 2012
   
September 25, 2011
 
                         
Weighted average fair value of stock options granted
  $ 5.30     $ 7.71     $ 4.19     $ 8.67  

The fair value of each stock option was estimated at the date of grant using a Black-Scholes option pricing model, with the following assumptions for grants:

   
Three Months Ended
   
Nine Months Ended
 
   
September 30, 2012
   
September 25, 2011
   
September 30, 2012
   
September 25, 2011
 
                         
Expected volatility
    51.24 %     57.79 %     51.23 %     57.02 %
Risk-free interest rate
    0.50 %     0.69 %     0.67 %     1.08 %
Expected term (in years)
    4.35       4.35       4.35       4.35  
Dividend yield
    0.00 %     0.00 %     0.00 %     0.00 %

As of September 30, 2012, the total unrecognized compensation cost related to unvested stock options and RSU awards was approximately $47.7 million after reduction for estimated forfeitures. These stock options and RSU awards will generally vest ratably through 2015.

Stock Option and Restricted Stock Unit Activity

The following table summarizes stock option activities and related information under the 2010 Plan for the nine months ended September 30, 2012:

   
Number of
Shares
   
Weighted
Average
Exercise
Price
   
Weighted
Average
Remaining
Contractual
Life (in Years)
   
Aggregate
Intrinsic
Value
 
                     
(in thousands)
 
Outstanding stock options as of December 25, 2011
    4,295,794     $ 14.97       5.65     $ -  
Granted
    2,664,900     $ 10.00       -     $ -  
Canceled/Forfeited
    (249,798 )   $ 13.98       -     $ -  
Exercised
    (110,056 )   $ 10.51       -     $ -  
Outstanding stock options as of September 30, 2012
    6,600,840     $ 13.08       5.55     $ 7,697  
Total vested and exercisable as of September 30, 2012
    2,494,868     $ 14.29       4.94     $ 1,926  

No income tax benefit was realized from stock option exercises for the three and nine months ended September 30, 2012.

The following table summarizes RSU and key executive RSU award activities and related information for the nine months ended September 30, 2012:

   
RSU
   
Key Executive RSU
 
   
Number of
Shares
   
Weighted Average
Grant-date
Fair Value
   
Number of
Shares
   
Weighted Average
Grant-date
Fair Value
 
Outstanding as of December 25, 2011
    2,143,035     $ 14.94       969,956     $ 13.71  
Granted
    1,288,643     $ 10.35       1,100,222     $ 10.04  
Canceled/Forfeited
    (282,901 )   $ 13.45       -     $ -  
Vested
    (588,708 )   $ 11.09       (278,007 )   $ 10.06  
Outstanding as of September 30, 2012
    2,560,069     $ 13.68       1,792,171     $ 12.02  

As described above, key executive RSUs granted during the nine months ended September 30, 2012 have service and performance conditions for vesting.