This is from MXIM's CC, but I can't figure out what it means. Are they saying they are going to reprice (or grant new) employee stock options? (now that the stock is at a 10-year low) What is the "3 year catch-up"?:
Excerpt from Maxim Integrated Products Inc. F1Q09 (Qtr. End 09/30/08) Earnings Conference Call Transcript:
Operator:
Thank you. Our next question comes from Steve Smigie from Raymond James.
Steve Smigie - Raymond James:
Great, thank you. Just wanted to follow up a little bit on the options expense. It seems to be pretty significant shift in terms of cost of goods sold sequentially in R&D SG&A. Can you help me understand what that would look like in this quarter and then in terms of the three year catch up I guess. When would I expect to see that sort of hit the P&L?
Tunç Doluca - President, Chief Executive Officer and Director:
Sure.
Bruce E. Kiddoo - Chief Financial Officer:
Yes, normally you would expect to see about 20% of our stock-based comp, the COGS line, this quarter it was higher than that. And the reason for that was is we actually lowered inventory, and so the stock-based comp that was on the balance sheet got amortized out at a faster rate. And so that's really why we saw that sort of one-time profit in that. But I think longer term, I think another 20% is going to COGS is the appropriate way to model that.
I am sorry, what was your other question?
Steve Smigie - Raymond James:
Yes, just when is the three year catch up, when would that happen on a stock comp, and how does that roll through?
Bruce E. Kiddoo - Chief Financial Officer:
Sure. We are looking at that right now. Obviously we are trying to get done as soon as possible to the extent we can execute on it sooner. That would result in a lower stock-based comp charge for those... for that grant at the current stock price. So that's why we are trying to move very quickly to do that. It would probably be for out years, and so it probably is for say calendar years 1011, and '12. And so from a stock-based comp point of view, it would amortize between the grant bay and calendar year '12.
Clearly our goal even with that on annual grant is that a lot of the old options are rapidly falling off. And so again our goal is to take that $37 million number and bring that down as aggressively as we can long-term while obviously continuing to incentivize our employees. We do have a very good benefit right now if there is a still remaining to the current stock price performance as that we can incentivize our employees and get them new grants at a relatively low stock-based comp change.
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