STOCK-BASED COMPENSATION

6 Months Ended

Dec. 27, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

We recognize stock-based compensation expense in our condensed consolidated statement of operations related to all share-based awards, including grants of stock options, based on the grant date fair value of such share-based awards. Estimating the grant date fair value of such share-based awards requires us to make judgments in the determination of inputs into the Black-Scholes stock option pricing model which we use to arrive at an estimate of the grant date fair value for such awards. The assumptions used in this model to value stock option grants were as follows:

	Three Months Ended				Six Months Ended
	December 27, 2014		December 28, 2013		December 27, 2014		December 28, 2013
Stock options:
Expected life	5.3 years		5.3 years		5.3 years		5.3 years
Risk-free interest rate	1.6	%	1.5	%	1.6	%	1.5	%
Volatility	76.0	%	82.2	%	76.9	%	82.2	%
Dividend yield	—		—		—		—

The amounts included in cost of revenues and operating expenses for stock-based compensation were as follows:

	Three Months Ended				Six Months Ended
	December 27, 2014		December 28, 2013		December 27, 2014		December 28, 2013
	(Thousands)
Stock-based compensation by category of expense:
Cost of revenues	$	576	$	250	$	906	$	502
Research and development	410		206		742		452
Selling, general and administrative	770		390		1,394		855
	$	1,756	$	846	$	3,042	$	1,809
Stock-based compensation by type of award:
Stock options	$	88	$	262	$	230	$	593
Restricted stock awards	1,551		566		2,736		1,224
Inventory adjustment to cost of revenues	117		18		76		(8		)
	$	1,756	$	846	$	3,042	$	1,809

As of December 27, 2014 and June 28, 2014, we had capitalized approximately $0.5 million and $0.4 million, respectively, of stock-based compensation as inventory.

As of December 27, 2014, we had $0.6 million in unrecognized stock-based compensation expense related to unvested stock options, net of estimated forfeitures, that will be recognized over a weighted-average period of 2.9 years, and $7.4 million in unrecognized stock-based compensation expense related to unvested restricted stock awards, net of estimated forfeitures, that will be recognized over a weighted-average period of 1.6 years.

The amount of stock-based compensation expense recognized in any one period related to PSUs can vary based on the achievement or anticipated achievement of the performance conditions. If the performance conditions are not met or not expected be met, no compensation cost would be recognized on the underlying PSUs, and any previously recognized compensation expense related to those PSUs would be reversed. During the second quarter of fiscal year 2015, we determined that the achievement of the performance conditions associated with the PSUs granted in March 2014 was improbable. We reversed approximately $0.1 million in previously recognized stock-based compensation expense related to these PSUs.

During the three and six months ended December 27, 2014 and December 28, 2013, we recorded minimal stock-based compensation expense in connection with the issuance of the PSUs from July 2011, March 2014 and August 2014.