STOCK-BASED COMPENSATION

9 Months Ended

Jun. 30, 2013

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

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

Stock Based Compensation

In January 2012, our stockholders approved an amendment to the Microsemi Corporation 2008 Performance Incentive Plan (the “2008 Plan”). The amendment a) increased the share limit by an additional 14.5 million shares so that the amended aggregate share limit for the 2008 Plan is 28.5 million shares; b) extended the plan term to December 5, 2021; c) increased the number of shares counted against the share limit for every one share issued in connection with a full-value award to 2.41; d) terminated the evergreen provision in the original plan; and e) extended the Performance-Based Award feature through the first annual meeting of stockholders that occurs in calendar year 2017. Awards authorized by the 2008 Plan include options, stock appreciation rights, restricted stock, stock bonuses, stock units, performance share awards, and other cash- or share-based awards. The shares issued under the 2008 Plan may be newly issued or shares held by the Company as treasury stock. The maximum term of a stock option grant or a stock appreciation right granted under the 2008 Plan is 6 years.

For the quarter and nine months ended June 30, 2013, stock-based compensation expense was $7.1 million and $25.4 million, respectively. For the quarter and nine months ended July 1, 2012, stock-based compensation expense was $9.4 million and $27.0 million, respectively.

The quantity of restricted shares and performance stock units at target levels granted and their weighted-average fair value are as follows (quantity in thousands):

Nine Months Ended	Quantity	Weighted Average Fair Value per Award
July 1, 2012
Restricted shares	1,560	$	19.31
Performance stock units	350	$	17.77
June 30, 2013
Restricted shares	1,826	$	20.25
Performance stock units	350	$	21.62

Restricted Shares

Compensation expense for restricted shares was calculated based on the closing price of our common stock on the date of grant and are subject to forfeiture if a participant does not meet length of service requirements. Restricted stock awards granted to employees typically vest over a three year period and awards granted to non-employee directors vest in accordance with our director compensation policy.

Performance Stock Units

Performance stock units granted in 2012 will vest based on the Company's growth in net sales and earnings per share (subject to certain adjustments) for 2012 and 2013 in comparison with the growth in net sales and adjusted earnings per share over the same period for a peer group selected by the Compensation Committee. For these performance stock units, 50% of each performance-based award opportunity will be subject to the net sales metric for the performance period and 50% will be subject to the earnings per share metric for the performance period.

Performance stock units granted in 2013 will vest based on the Company achieving net sales and earnings per share (subject to certain adjustments) levels for 2013, 2014 and 2015. For these performance stock units, 25% of each performance-based award opportunity will be subject to the net sales metric for the performance period and 75% will be subject to the earnings per share metric for the performance period.

Compensation expense is based upon either our estimate of performance relative to a peer group for the 2012 grant and our expected performance over the performance period for the 2013 grant. The maximum percentage for a particular metric is 200% of the “target” number of units subject to the award related to that metric. For performance stock units granted in 2013, the maximum percentage is further adjusted by the Company's total shareholder return relative to a peer group selected by the Compensation Committee, up to a maximum of 125%.

We continually update our estimates with respect to our performance stock units and compared to the estimates used prior to the quarter ended June 30, 2013, our updated estimates had the impact of reducing stock-based compensation expense by $2.8 million for the quarter ended June 30, 2013 and $3.4 million for the nine months ended June 30, 2013.