Stock-Based Incentive Plan

12 Months Ended

Mar. 31, 2012

Stock-Based Incentive Plan [Abstract]

12. Stock-Based Incentive Plan

The Company has awarded restricted common shares, restricted stock units, stock options and stock appreciation rights to its employees and directors. As of March 31, 2012, the plan had 15.2 million common shares of stock available for future grants.

Restricted Stock Units and Restricted Common Shares

Restricted stock units represent the right to receive a share of Opnext stock at a designated time in the future, provided that the stock unit is vested at the time. Restricted stock units granted to non-employee directors generally vest over a one-year period from the grant date. The restricted stock units are convertible into common shares on a one-for-one basis on or within 15 days following the earliest to occur of the director’s separation from service, the date of the director’s death or the date of a change in control of the Company. Recipients of restricted stock units do not pay any cash consideration for the restricted stock units or the underlying shares and do not have the right to vote or have any other rights of a shareholder until such time as the underlying shares of stock are distributed.

The following table presents a summary of restricted stock unit activity (in thousands, except per share data):


	Restricted Stock Units			Weighted Average Grant Date Fair Value		Aggregate Intrinsic Value		Average Remaining Vesting Period
				(per share)				(in years)
Non-vested balance at March 31, 2009		126		$	2.16
Granted		179			1.86
Forfeited		(157	)		2.07

Non-vested balance at March 31, 2010		148			1.89
Granted		207			2.11
Vested		(148	)		1.89

Non-vested balance at March 31, 2011		207			2.11
Granted		183			1.15
Converted		(94	)		2.42
Vested		(113	)		1.85

Non-vested balance at March 31, 2012		183		$	2.11	$	210		0.9

Vested balance at March 31, 2012		452		$	2.17	$	520

During the fiscal year ended March 31, 2012, the Company issued an aggregate of 183,000 restricted stock units to non-employee members of the board of directors as compensation for services to be performed. The awards generally vest in full on the one-year anniversary of grant. Total compensation expense to be recognized over the vesting period for the awards is $0.2 million based on a weighted average fair value of $1.15 per share as of the grant date, of which $22,000 was recognized in the fiscal year ended March 31, 2012. Total compensation expense for restricted stock units of $0.3 million, $0.4 million and $0.3 million was recognized in the fiscal years ended March 31, 2012, 2011 and 2010, respectively.

During the fiscal year ended March 31, 2011, the Company issued an aggregate of 132,000 restricted stock units to non-employee members of the board of directors as compensation for services to be performed. The awards generally vest in full on the one-year anniversary of grant. Total compensation expense to be recognized over the vesting period for the awards is $0.2 million based on a weighted average fair value of $1.85 per share as of the grant date, of which $46,000 was recognized in the fiscal year ended March 31, 2011. Also during the fiscal year ended March 31, 2011, 75,000 restricted stock units were issued to the Company’s Chief Executive Officer. The award will vest in full on June 30, 2011 and the total compensation to be recognized over the vesting period for the award is $0.2 million based on a fair value of $2.56 per share as of the grant date.

As of March 31, 2009, there were 20,000 restricted common shares outstanding. The 20,000 restricted common shares outstanding at March 31, 2009 fully vested on November 1, 2009. No restricted common shares were awarded during the fiscal years ended March 31, 2012, 2011 and 2010. Total compensation expense for restricted common shares was $0.1 million for the fiscal year ended March 31, 2010, and there was no compensation expense for restricted common shares for the fiscal year ended March 31, 2012 and 2011, respectively. Total grant-date fair value of restricted common shares that vested during the fiscal years ended March 31, 2010 was $0.2 million.

Employee Incentive Award Program

On June 29, 2011, the compensation committee (the “Committee”) of the board of directors of the Company approved an annual incentive award program (the “Program”) for the Company’s fiscal year ending March 31, 2012. The Program provided for the payment of fully vested shares of the Company’s common stock under the Opnext, Inc. Second Amended and Restated 2001 Long-Term Stock Incentive Plan, as amended, based upon the achievement of pre-established corporate and/or individual performance objectives established by the Committee. The Program was in lieu of an annual cash bonus opportunity for participants in the Program for the Company’s fiscal year ending March 31, 2012 and was administered by the Committee.

Employees of the Company at specified grade levels, including the Company’s executive officers, were eligible to participate in the Program. The individual performance objectives related to certain functional goals established by the Committee based on the recipient’s position within the Company, and included, without limitation, goals relating to product delivery and support, organizational and leadership development, market position, operational and departmental objectives, financial and strategic objectives, and supplier related objectives. The Company performance objectives relate to the Company’s achievement of a minimum level of operating income and, for certain recipients, the achievement of other financial goals established for the Company or particular business units of the Company, including, without limitation, contribution margin, inventory management and other operational objectives. The achievement of any performance objectives was determined by the Committee in its sole discretion. An employee’s right to receive a stock bonus under the Program was subject to and conditioned on his or her active employment with the Company in good standing on the date on which the shares related to such stock bonus were issued. On May 17, 2012, 326,085 shares with a fair value of $0.92 per share were issued in connection with the Program and the associated compensation expense of the Program was $0.3 million for the fiscal year ended March 31, 2012.

On July 18, 2011, awards providing for the issuance of up to 300,000 shares of the Company’s common stock were issued in connection with a key employee incentive award program. These awards have a fair value of $2.21 per issuable share and vest in two equal installments on the first and second anniversaries of the date of issuance. Total compensation expense associated with the program for the fiscal year ended March 31, 2012 was $0.3 million. At March 31, 2012, the total compensation costs related to the unvested common stock awards but not recognized was $0.3 million and will be recognized over the remaining vesting period.

Stock Options

Stock option awards to employees generally become exercisable with respect to one quarter or one third of the shares awarded on each one-year anniversary of the date of grant and have a ten- or seven-year life. Fair value of the awards is calculated on the grant date using the Black-Scholes option pricing valuation model. Options issued to non-employees are also measured at fair value on the grant date and are revalued at each financial statement date until fully vested. At March 31, 2012, the Company had 510,000 outstanding options that were granted to Hitachi, Ltd. (“Hitachi”) in connection with the appointment of its employees as directors of the Company. The non-employee options expire ten years from the grant date and were fully vested as of November 2004. Accordingly, no costs were incurred in connection with non-employee options during the fiscal years ended March 31, 2012, 2011 and 2010.

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model and the assumptions noted in the following table:


	Fiscal Year Ended March 31,
	2012			2011			2010
Expected term (in years)		4.75			4.64			4.50
Volatility		80.0	%		82.6	%		86.2	%
Risk-free interest rate		1.7	%		2.0	%		2.1	%
Dividend yield		—			—			—
Forfeiture rate		10.0	%		10.0	%		10.0	%

Compensation expense for employee stock option awards was $4.5 million, $7.4 million and $6.1 million for the fiscal years ended March 31, 2012, 2011 and 2010, respectively. At March 31, 2012, the total compensation costs related to unvested stock option awards granted under the Company’s stock-based incentive plans but not recognized was $5.1 million and will be recognized over the remaining weighted average vesting period of 1.7 years. The weighted average fair value of options granted during the fiscal years ended March 31, 2012, 2011 and 2010 was $1.76, $1.35 and $1.41 per share, respectively.

A summary of stock option activity follows (in thousands, except per share data):


	Options			Weighted Average Exercise Price		Aggregate Intrinsic Value		Average Remaining Contractual Life
				(per share)				(in years)
Balance at March 31, 2009		9,029		$	8.17
Granted		4,746			2.16
Forfeited		(350	)		2.54
Expired		(59	)		13.28
Exercised		(11	)		1.51

Balance at March 31, 2010		13,355			6.16
Granted		2,501			2.11
Forfeited		(2,081	)		2.28
Expired		(879	)		11.68
Exercised		(171	)		1.71

Balance at March 31, 2011		12,725			5.68
Granted		1,467			2.80
Forfeited		(509	)		2.43
Expired		(3,117	)		9.99
Exercised		(72	)		1.69

Balance at March 31, 2012		10,494		$	4.18	$	0		6.1


Options exercisable at March 31, 2012		6,286		$	5.24	$	0		6.1

The following table summarizes information concerning outstanding and exercisable options at March 31, 2012 (in thousands, except per share data):


	Options Outstanding						Options Exercisable
Range of Exercise Prices	Number Outstanding		Weighted Average Remaining Life		Weighted Average Exercise Price		Number Exercisable		Weighted Average Remaining Life		Weighted Average Exercise Price
			(in years)						(in years)
$0.78 - $1.68		884		6.8	$	1.66		660		6.8	$	1.67
$1.74 - $2.73		6,378		6.4		2.32		2,650		6.7		2.26
$4.47 - $8.89		2,052		6.3		5.98		1,796		6.3		5.56
$11.34 - $15.00		1,180		3.6		13.97		1,180		3.6		13.44

Total		10,494						6,286

Stock Appreciation Rights (SARs)

The Company has awarded stock appreciation rights to its employees in Japan and China. The awards generally vest with respect to one-third or one-quarter of the shares on each of the first three or four anniversaries of the date of grant and have a ten-year life. Prior to June 15, 2007, all SARs required settlement in the Company’s common stock and were accounted for as equity instruments. On May 17, 2007, the Company commenced an exchange offer pursuant to which those employees who held stock appreciation rights were offered an opportunity to exchange those stock appreciation rights for amended stock appreciation rights. The amended stock appreciation rights require settlement in cash upon exercise and are accounted for as liability instruments. All other terms and conditions remain unchanged.

During the year ended March 31, 2012, the Company granted 9,100 stock appreciation rights requiring settlement in cash which vest in four years with a seven-year contract life. These rights had a Black-Scholes average fair value of $1.56 per award based on an exercise price of $2.23, a risk-free rate of 1.51% and a volatility rate of 80.0%. As of March 31, 2012, the Company had 530,000 SARs outstanding, 465,000 requiring settlement in the Company’s stock with average remaining lives of 2.3 years and 65,000 requiring settlement in cash with average remaining lives of 4.1 years.

Compensation expense for vested stock appreciation rights requiring settlement in the Company’s stock was $46,000 and $72,000 for the fiscal years ended March 31, 2011 and 2010, respectively. At March 31, 2011, total compensation cost related to these stock appreciation rights was fully recognized. Stock appreciation rights requiring cash settlement are revalued at the end of each reporting period. These awards will continue to be re-measured at each financial statement date until settlement.

A summary of stock appreciation right activity follows (in thousands, except per share data):


	Cash Settlement					Stock Settlement					Total SARs
	Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price		Shares			Weighted Average Exercise Price
Balance at March 31, 2010		39		$	15.00		543		$	15.00		582		$	15.00
Forfeited		—			15.00		(18	)		15.00		(18	)		15.00

Balance at March 31, 2011		39			15.00		525			15.00		564			15.00
Granted		22			1.77		—			—		22			1.77
Expired		(3	)		15.00		(9	)		15.00		(12	)		15.00
Forfeited		—			—		(9	)		15.00		(9	)		15.00

Balance at March 31, 2011		58			9.98		507			15.00		565			14.48
Granted		9			2.52		—			—		9			2.52
Expired		(2	)		15.00		(40	)		15.00		(42	)		15.00
Forfeited		—			—		(2	)		15.00		(2	)		15.00

Balance at March 31, 2012		65		$	8.34		465		$	15.00		530		$	14.23

- Definition

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.

+ References

Reference 1: http://www.xbrl.org/2003/role/presentationRef

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