|6 Months Ended|
Jun. 30, 2017
|Disclosure of Compensation Related Costs, Share-based Payments [Abstract]|
|Stock-Based Compensation and Employee Benefit Plans||
Stock-Based Compensation and Employee Benefit Plans
On March 29, 2017, each share of the Company’s then outstanding Class A common stock and Class B common stock automatically converted into a single class of common stock pursuant to the terms of the Company’s Amended and Restated Certificate of Incorporation. Also on March 29, 2017, the shares underlying outstanding stock options, restricted stock units and restricted stock awards automatically converted to rights to receive shares of a single class of common stock. The conversion had no impact on the total number of issued and outstanding shares of capital stock; the Class A shares and Class B shares converted into an equivalent number of shares of common stock. The board of directors approved a reduction in the Company’s total number of authorized shares of capital stock by 65,445,853 from 1,575,000,000 to 1,509,554,147 to account for the 58,876,053 shares of Class A common stock and 6,569,800 shares of Class B common stock retired upon conversion, such that the authorized number of shares of Class A common stock is 441,123,947 and the authorized number of shares of Class B common stock is 493,430,200. No additional Class A shares or Class B shares will be issued following the conversion. The authorized number of shares of common stock and preferred stock remain unchanged at 550,000,000 shares and 25,000,000 shares, respectively.
Following the conversion, each share of common stock is entitled to one vote per share and otherwise has the same designations, rights, powers and preferences as the Class A common stock prior to the conversion. In addition, holders of the common stock vote as a single class of stock on any matter that is submitted to a vote of stockholders. Prior to the conversion, the holders of the Company’s Class A and Class B common stock had identical voting rights, except that holders of Class A common stock were entitled to one vote per share and holders of Class B common stock were entitled to ten votes per share with respect to transactions that would result in a change of control of the Company or that relate to the Company’s equity incentive plans. In addition, holders of Class B common stock had the exclusive right to elect two members of the Company’s Board of Directors, each referred to as a Class B Director. The shares of Class B common stock were not publicly traded. Each share of Class B common stock was convertible at any time at the option of the holder into one share of Class A common stock and in most instances automatically converted upon sale or other transfer.
Employee Benefit Plans
At June 30, 2017, the Company had stock-based compensation awards outstanding under the following plans: the 2004 Stock Plan, the 2010 Equity Incentive Plan, as amended, or 2010 Plan, and the 2010 Employee Stock Purchase Plan, or ESPP, as well as the following former Entropic plans: the 2007 Equity Incentive Plan and the 2007 Non-Employee Director's Plan. Refer to the Company’s Annual Report for a summary of the stock-based compensation and equity plans. Other than the automatic conversion of common stock underlying the plans as described above and the assumption of certain outstanding stock-based awards from Exar under the following former Exar plans: the Exar Corporation 2006 Equity Incentive Plan, the Sipex Corporation 2006 Equity Incentive Plan and the Exar Corporation 2014 Equity Incentive Plan. There have been no material changes to such plans during the six months ended June 30, 2017.
As of June 30, 2017, the number of shares of common stock reserved for issuance under the 2010 Plan was 12,531,373 shares. As of June 30, 2017, the number of shares of common stock reserved for issuance under the ESPP was 1,663,226 shares.
The Company recognizes stock-based compensation in the consolidated statements of income, based on the department to which the related employee reports, as follows:
The total unrecognized compensation cost related to unvested restricted stock units and restricted stock awards as of June 30, 2017 was $56.4 million, and the weighted average period over which these equity awards are expected to vest is 2.68 years. The total unrecognized compensation cost related to unvested stock options as of June 30, 2017 was $10.8 million, and the weighted average period over which these equity awards are expected to vest is 2.25 years.
Restricted Stock Units and Restricted Stock Awards
The Company calculates the fair value of restricted stock units based on the fair market value of the Company's common stock (formerly Class A common stock) on the grant date. Stock based compensation is recognized over the vesting period using the straight-line method.
A summary of the Company’s restricted stock unit and restricted stock award activity is as follows:
Employee Stock Purchase Rights and Stock Options
The Company uses the Black-Scholes valuation model to calculate the fair value of employee stock purchase rights and stock options granted to employees. Stock based compensation expense is recognized over the vesting period using the straight-line method.
Employee Stock Purchase Rights
During the six months ended June 30, 2017, there were 117,217 shares of common stock purchased under the ESPP. The shares were purchased on May 15, 2017 at a grant price of $18.11 per share.
The fair values of employee stock purchase rights were estimated using the Black-Scholes option pricing model at their respective grant date using the following assumptions:
The risk-free interest rate assumption was based on the United States Treasury’s rates for U.S. Treasury zero-coupon bonds with maturities similar to those of the expected term of the award being valued. The assumed dividend yield was based on the Company’s expectation of not paying dividends in the foreseeable future. The expected life is the duration of the offering period for each grant date, which occurs on a semi-annual basis. In addition, the estimated volatility incorporates the historical volatility of the Company's daily share closing price.
A summary of the Company’s stock options activity is as follows:
No stock options were granted by the Company during the six months ended June 30, 2017.
The intrinsic value of stock options exercised was $14.3 million and $3.2 million in the six months ended June 30, 2017 and 2016, respectively.
Cash received from exercise of stock options was $6.0 million and $2.1 million during the six months ended June 30, 2017 and 2016, respectively. The tax benefit from stock options exercised was $10.3 million and $4.5 million during the six months ended June 30, 2017 and 2016, respectively.
Employee Incentive Bonus
The Company settles a majority of bonus awards for its employees, including executives, in shares of common stock under the 2010 Equity Incentive Plan. When bonus awards are settled in common stock issued under the 2010 Equity Incentive Plan, the number of shares issuable to plan participants is determined based on the closing price of the Company's common stock as determined in trading on the New York Stock Exchange on a date approved by the Board of Directors. In connection with the Company's bonus programs, in February 2017 we issued 0.2 million freely-tradable shares of our Class A common stock in settlement of bonus awards to employees, including executives, for the July 1, 2016 to December 31, 2016 performance period. At June 30, 2017, an accrual of $3.3 million was recorded for bonus awards for employees for year-to-date achievement in the 2017 performance period. The Company's compensation committee retains discretion to effect payment in cash, stock, or a combination of cash and stock.
The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.
Reference 1: http://www.xbrl.org/2003/role/presentationRef