Stock-Based Compensation
 9 Months Ended
Mar. 25, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-Based Compensation [Text Block]
STOCK-BASED COMPENSATION

At March 25, 2017, the Company had one stock incentive plan, the Company's 1996 Stock Incentive Plan (the “1996 Plan”) and one employee stock purchase plan, the 2008 Employee Stock Purchase Plan (the “2008 ESPP”). The 1996 Plan was adopted by the Board of Directors to provide the grant of incentive stock options, non-statutory stock options, restricted stock units (“RSUs”), and performance shares, including market stock units (“MSUs”), to employees, directors, and consultants.

Pursuant to the 1996 Plan, the exercise price for incentive stock options and non-statutory stock options is determined to be the fair market value of the underlying shares on the date of grant. Options typically vest ratably over a four-year period measured from the date of grant. Options generally expire no later than ten years after the date of grant, subject to earlier termination upon an optionee's cessation of employment or service.

RSUs granted to employees typically vest ratably over a four-year period and are converted into shares of the Company's common stock upon vesting, subject to the employee's continued service to the Company over that period.

MSUs granted to employees typically vest ratably over a two to four-year period and are converted into shares of the Company's common stock upon vesting, subject to the employee's continued service to the Company over that period. The number of shares that are released at the end of the performance period can range from zero to a maximum cap depending on the Company's performance. The performance metrics of this program are based on relative performance of the Company’s stock price as compared to the Semiconductor Exchange Traded Fund index XSD (the “SPDR S&P”).

The following tables show total stock-based compensation expense by type of award, and the resulting tax effect, included in the Condensed Consolidated Statements of Income for the three and nine months ended March 25, 2017 and March 26, 2016, respectively:

Three Months Ended

March 25, 2017

March 26, 2016

Stock Options

Restricted Stock Units

Employee Stock Purchase Plan

Total

Stock Options

Restricted Stock Units

Employee Stock Purchase Plan

Total

(in thousands)
Cost of goods sold
$
105


$
1,660


$
494


$
2,259


$
120


$
1,182


$
629


$
1,931

Research and development
462


7,602


1,251


9,315


895


7,587


1,522


10,004

Selling, general and administrative
296


5,820


609


6,725


795


4,507


638


5,940

Pre-tax stock-based compensation expense
$
863


$
15,082


$
2,354


$
18,299


$
1,810


$
13,276


$
2,789


$
17,875

Less: income tax effect






2,659








1,989

Net stock-based compensation expense








$
15,640








$
15,886



 
Nine Months Ended
 
March 25, 2017
 
March 26, 2016
 
Stock Options
 
Restricted Stock Units
 
Employee Stock Purchase Plan
 
Total
 
Stock Options
 
Restricted Stock Units
 
Employee Stock Purchase Plan
 
Total
 
(in thousands)
Cost of goods sold
$
440

 
$
5,000

 
$
1,491

 
$
6,931

 
$
735

 
$
5,140

 
$
1,808

 
$
7,683

Research and development
1,305

 
22,293

 
3,536

 
27,134

 
2,608

 
20,671

 
3,904

 
27,183

Selling, general and administrative
1,115

 
16,557

 
1,756

 
19,428

 
2,415

 
14,271

 
1,705

 
18,391

Pre-tax stock-based compensation expense
$
2,860

 
$
43,850

 
$
6,783

 
$
53,493

 
$
5,758

 
$
40,082

 
$
7,417

 
$
53,257

Less: income tax effect
 
 
 
 
 
 
8,551

 
 
 
 
 
 
 
8,046

Net stock-based compensation expense
 
 
 
 
 
 
$
44,942

 
 
 
 
 
 
 
$
45,211



The expenses included in the Condensed Consolidated Statements of Income related to RSUs include expenses related to MSUs of $1.1 million and $0.7 million for the three months ended March 25, 2017 and March 26, 2016, respectively and $2.5 million and $2.0 million for the nine months ended March 25, 2017 and March 26, 2016, respectively.

Stock Options

There were no stock options granted in the three and nine months ended March 25, 2017 and three and nine months ended March 26, 2016.

The following table summarizes outstanding, exercisable and vested and expected to vest stock options as of March 25, 2017 and their activity for the nine months ended March 25, 2017:

 
Number of
Shares 
 
Weighted Average Exercise Price
 
Weighted Average Remaining Contractual Term (in Years)
 
Aggregate Intrinsic Value (1)
Balance at June 25, 2016
5,935,079

 
$
25.11

 
 
 
 
Options Granted
—

 
—

 
 
 
 
Options Exercised
(1,970,705
)
 
22.61

 
 
 
 
Options Cancelled
(351,285
)
 
25.50

 
 
 
 
Balance at March 25, 2017
3,613,089

 
$
26.26

 
2.6
 
$
69,109,520

Exercisable, March 25, 2017
2,473,039

 
$
25.27

 
2.3
 
$
49,684,566

Vested and expected to vest, March 25, 2017
3,576,218

 
$
26.23

 
2.6
 
$
68,414,258

(1)
Aggregate intrinsic value represents the difference between the exercise price and the closing price per share of the Company’s common stock on March 24, 2017, the last business day preceding the fiscal quarter-end, multiplied by the number of options outstanding, exercisable or vested and expected to vest as of March 25, 2017.


As of March 25, 2017, there was $2.2 million of total unrecognized stock compensation cost related to 1.1 million unvested stock options, which is expected to be recognized over a weighted average period of approximately 0.7 years.

Restricted Stock Units and Other Awards

The fair value of RSUs and other awards under the Company’s 1996 Plan is estimated using the value of the Company’s common stock on the date of grant, reduced by the present value of dividends expected to be paid on the Company’s common stock prior to vesting. The Company also estimates forfeitures at the time of grant and makes revisions to forfeitures on a quarterly basis.

The weighted-average fair value of RSUs and other awards granted was $42.30 and $33.15 per share for the three months ended March 25, 2017 and March 26, 2016, respectively and $37.02 and $29.25 per share for the nine months ended March 25, 2017 and March 26, 2016, respectively.

The following table summarizes the outstanding and expected to vest RSUs and other awards as of March 25, 2017 and their activity during the nine months ended March 25, 2017:

 
Number of
Shares 
 
Weighted Average
Remaining
Contractual Term
(in Years) 
 
Aggregate Intrinsic
Value (1) 
Balance at June 25, 2016
6,620,813

 
 
 
 
Restricted stock units and other awards granted
2,132,967

 
 
 
 
Restricted stock units and other awards released
(1,380,533
)
 
 
 
 
Restricted stock units and other awards cancelled
(743,139
)
 
 
 
 
Balance at March 25, 2017
6,630,108

 
2.8
 
$
297,872,452

Outstanding and expected to vest, March 25, 2017
5,421,956

 
2.7
 
$
245,939,941

(1)
Aggregate intrinsic value for RSUs and other awards represents the closing price per share of the Company’s common stock on March 24, 2017, the last business day preceding the fiscal quarter-end, multiplied by the number of RSUs outstanding or expected to vest as of March 25, 2017.

The Company withheld shares totaling $8.3 million and $17.7 million in value as a result of employee withholding taxes based on the value of the RSUs on their vesting date for the three and nine months ended March 25, 2017. The total payments for the employees’ tax obligations to the taxing authorities are reflected as financing activities within the Condensed Consolidated Statements of Cash Flows.

As of March 25, 2017, there was $147.8 million of unrecognized compensation expense related to 6.6 million unvested RSUs and other awards, which is expected to be recognized over a weighted average period of approximately 2.8 years.

Market Stock Units

The Company granted MSUs to senior members of management in September 2014, 2015 and 2016. The grant of MSUs was in lieu of granting stock options. MSUs are valued based on the relative performance of the Company’s stock price as compared to the Semiconductor Exchange Traded Fund index XSD (the “SPDR S&P”). The fair value of MSUs is estimated using a Monte Carlo simulation model on the date of grant. The Company also estimates forfeitures at the time of grant and makes revisions to forfeitures on a quarterly basis. Compensation expense is recognized based on the initial valuation and is not subsequently adjusted as a result of the Company’s performance relative to that of the XSD index. Vesting for MSUs is contingent upon both service and market conditions, and has a four-year vesting cliff period.

There were no MSUs granted for the three months ended March 25, 2017 and March 26, 2016.

The weighted-average fair value of MSUs granted was $37.29 and $29.64 per share for the nine months ended March 25, 2017 and March 26, 2016, respectively.

The following table summarizes the number of MSUs outstanding and expected to vest as of March 25, 2017 and their activity during the nine months ended March 25, 2017:

 
Number of
Shares 
 
Weighted Average
Remaining
Contractual Term
(in Years) 
 
Aggregate Intrinsic
Value (1) 
Balance at June 25, 2016
673,532

 
 
 
 
Market stock units granted
308,432

 
 
 
 
Market stock units released
—

 
 
 
 
Market stock units cancelled
(128,520
)
 
 
 
 
Balance at March 25, 2017
853,444

 
2.9
 
$
38,712,220

Outstanding and expected to vest, March 25, 2017
677,094

 
2.8
 
$
30,712,962

(1)
Aggregate intrinsic value for MSUs represents the closing price per share of the Company’s common stock on March 24, 2017, the last business day preceding the fiscal quarter-end, multiplied by the number of MSUs outstanding or expected to vest as of March 25, 2017.


As of March 25, 2017, there was $17.8 million of unrecognized compensation expense related to 0.9 million unvested MSUs, which is expected to be recognized over a weighted average period of approximately 2.9 years.

Employee Stock Purchase Plan

Employees are granted rights to acquire common stock under the 2008 ESPP.

The fair value of ESPP rights granted to employees has been estimated at the date of grant using the Black-Scholes option valuation model using the following assumptions for the offering periods outstanding:

 
ESPP
 
ESPP
 
Three Months Ended
 
Nine Months Ended
 
March 25,
2017
 
March 26,
2016
 
March 25,
2017
 
March 26,
2016
Expected holding period (in years)
0.5
 
0.5
 
0.5
 
0.5
Risk-free interest rate
0.5%
 
0.2% - 0.4%
 
0.5% - 0.7%
 
0.1% - 0.4%
Expected stock price volatility
27.2% - 28.2%
 
24.2% - 33.1%
 
22.1% - 30.4%
 
21.8% - 33.1%
Dividend yield
3.5% - 3.6%
 
3.3% - 3.6%
 
3.4% - 3.6%
 
3.3% - 3.6%


As of March 25, 2017 and March 26, 2016, there was $3.6 million and $4.7 million, respectively, of unrecognized compensation expense related to the 2008 ESPP.