Stock-Based Compensation

12 Months Ended

Jun. 30, 2018

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

STOCK-BASED COMPENSATION

At June 30, 2018, 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 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 seven 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. RSU granted after August 2017 will continue to vest post-employment at the Company for certain individuals satisfying specific eligibility requirements.

MSUs granted to employees typically vest 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. 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. For MSUs granted prior to September 2017, 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 SPDR S&P (the “XSD”). For MSUs granted in September 2017, the performance metrics for this program are based on the total shareholder return ("TSR") of the Company relative to the TSR of the other companies included in the XSD; these MSUs vest based upon annual performance subject to continued service through the end of the four-year cliff period. MSUs granted after August 2017 will continue to vest post-employment at the Company for certain individuals satisfying specific eligibility requirements.

The following tables show total stock-based compensation expense by type of award, and the resulting tax effect, included in the Consolidated Statements of Income for fiscal years 2018, 2017 and 2016:



	For the Year Ended
	June 30, 2018
	Stock Options		Restricted Stock Units and Other Awards		Employee Stock Purchase Plan		Total
	(in thousands)
Cost of goods sold	$	212	$	8,131	$	2,098	$	10,441
Research and development	518		32,088		4,442		37,048
Selling, general and administrative	700		28,162		2,334		31,196
Pre-tax stock-based compensation expense	$	1,430	$	68,381	$	8,874	$	78,685
Less: income tax effect							9,342
Net stock-based compensation expense							$	69,343



	For the Year Ended
	June 24, 2017
	Stock Options		Restricted Stock Units and Other Awards		Employee Stock Purchase Plan		Total
	(in thousands)
Cost of goods sold	$	536	$	6,630	$	1,928	$	9,094
Research and development	1,654		29,504		4,514		35,672
Selling, general and administrative	1,424		22,713		2,214		26,351
Pre-tax stock-based compensation expense	$	3,614	$	58,847	$	8,656	$	71,117
Less: income tax effect							12,934
Net stock-based compensation expense							$	58,183



	For the Year Ended
	June 25, 2016
	Stock Options		Restricted Stock Units and Other Awards		Employee Stock Purchase Plan		Total
	(in thousands)
Cost of goods sold	$	837	$	5,697	$	2,340	$	8,874
Research and development	3,469		27,784		5,133		36,386
Selling, general and administrative	3,043		19,127		2,271		24,441
Pre-tax stock-based compensation expense	$	7,349	$	52,608	$	9,744	$	69,701
Less: income tax effect							11,314
Net stock-based compensation expense							$	58,387

The expenses included in the Consolidated Statements of Income related to Restricted Stock Units and Other Awards include expenses related to Market Stock Units of $7.8 million, $3.6 million and $2.8 million for fiscal years 2018, 2017 and 2016, respectively.

Stock Options

The fair value of options granted to employees under the 1996 Plan is estimated on the date of grant using the Black-Scholes option valuation model.

The Company did not grant any stock options in fiscal years 2018, 2017 or 2016.

The following table summarizes outstanding, exercisable and vested and expected to vest stock options as of June 30, 2018 and their activity during fiscal years 2018, 2017 and 2016:



	Options			Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (1)
	Number of Shares		Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (1)
Balance at June 27, 2015	10,173,016		$25.83
Options Granted	—		—
Options Exercised	(3,242,881	)	25.05
Options Cancelled	(995,056	)	32.67

Balance at June 25, 2016	5,935,079		25.11
Options Granted	—		—
Options Exercised	(2,741,659	)	22.98
Options Cancelled	(393,413	)	27.07

Balance at June 24, 2017	2,800,007		26.92
Options Granted	—		—
Options Exercised	(1,090,163	)	25.69
Options Cancelled	(21,591	)	26.47

Balance at June 30, 2018	1,688,253		$27.72	1.8	$	55,152,145

Exercisable at June 30, 2018	1,686,694		$27.72	1.8	$	55,103,599

Vested and expected to vest, June 30, 2018	1,688,227		$27.72	1.8	$	55,151,345


(1)	Aggregate intrinsic value represents the difference between the exercise price and the closing price per share of the Company's common stock on June 29, 2018, the last business day preceding the fiscal year end, multiplied by the number of options outstanding, exercisable or vested and expected to vest as of June 30, 2018.

The following table summarizes information about stock options that were outstanding and exercisable at June 30, 2018:



	Outstanding Options			Options Exercisable
Range of Exercise Prices	Number Outstanding at June 30, 2018	Weighted Average Remaining Contractual Term (in years)	Weighted Average Exercise Price	Number Exercisable at June 30, 2018	Weighted Average Exercise Price
$12.00 - $20.00	42,232	2.0	$19.47	42,232	$19.47
$20.01 - $30.00	1,562,697	1.8	$27.66	1,561,696	$27.66
$30.01 - $40.00	83,324	2.6	$32.99	82,766	$33.01
	1,688,253			1,686,694

The total intrinsic value of options exercised during fiscal years 2018, 2017 and 2016 were $30.7 million, $55.1 million and $39.8 million, respectively. As of June 30, 2018, there was less than $0.1 million of total unrecognized compensation costs related to 0.1 million unvested stock options expected to be recognized over a weighted average period of approximately 0.1 years.

Restricted Stock Units and Other Awards

The fair value of Restricted Stock Units (“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 $44.95, $37.33 and $29.75 per share for fiscal years 2018, 2017 and 2016, respectively.

The following table summarizes outstanding and expected to vest RSUs and other awards as of June 30, 2018 and their activity during fiscal years 2018, 2017 and 2016:



	Number of Shares		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (1)
Balance at June 27, 2015	7,129,985
Restricted stock units and other awards granted	2,905,973
Restricted stock units and other awards released	(2,049,430	)
Restricted stock units and other awards cancelled	(1,365,715	)

Balance at June 25, 2016	6,620,813
Restricted stock units and other awards granted	2,237,679
Restricted stock units and other awards released	(1,876,050	)
Restricted stock units and other awards cancelled	(1,040,319	)

Balance at June 24, 2017	5,942,123
Restricted stock units and other awards granted	1,989,959
Restricted stock units and other awards released	(1,794,029	)
Restricted stock units and other awards cancelled	(613,621	)

Balance at June 30, 2018	5,524,432		2.6	$	334,768,100

Expected to vest at June 30, 2018	4,669,741		2.6	$	282,005,686

(1) Aggregate intrinsic value for RSUs and other awards represents the closing price per share of the Company's common stock on June 29, 2018, the last business day preceding the fiscal year end, multiplied by the number of RSUs and other awards outstanding, or expected to vest as of June 30, 2018.

The Company withheld shares totaling $30.3 million in value as a result of employee withholding taxes based on the value of the RSUs on their vesting date for the fiscal year ended June 30, 2018. The total payments for the employees' tax obligations to the taxing authorities are reflected as financing activities within the Consolidated Statements of Cash Flows.

As of June 30, 2018, there was $140.5 million of unrecognized compensation cost related to 5.5 million unvested RSUs and other awards, which is expected to be recognized over a weighted average period of approximately 2.6 years.

Market Stock Units

The Company grants MSUs to senior members of management in lieu of granting stock options. For MSUs granted prior to September 2017, 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 SPDR S&P (the “XSD”). For MSUs granted in September 2017, the performance metrics for this program are based on the total shareholder return ("TSR") of the Company relative to the TSR of the other companies included in the XSD. 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 or the TSR of the companies included in the XSD, as applicable. Vesting for MSUs is contingent upon both service and market conditions and has a four-year vesting cliff period. MSUs granted in September 2017 vest based upon annual performance and are subject to continued service through the end of the four-year period, but will continue to vest post-employment at the Company for certain individuals satisfying specific eligibility requirements.

The weighted-average fair value of MSUs granted was $51.03, $37.29 and $29.64 per share for the per share for fiscal years 2018, 2017 and 2016, respectively.

The following table summarizes the number of MSUs outstanding and expected to vest as of June 30, 2018 and their activity during fiscal years 2018, 2017 and 2016:



	Number of Shares		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (1)
Balance at June 27, 2015	414,840
Market stock units granted	361,684
Market stock units released	—
Market stock units cancelled	(102,992	)

Balance at June 25, 2016	673,532
Market stock units granted	308,432
Market stock units released	—
Market stock units cancelled	(163,936	)

Balance at June 24, 2017	818,028
Market stock units granted	292,336
Market stock units released	—
Market stock units cancelled	(31,300	)

Balance at June 30, 2018	1,079,064		2.6	$	65,164,675

Expected to vest at June 30, 2018	663,497		2.7	$	40,068,559

(1) Aggregate intrinsic value for MSUs represents the closing price per share of the Company’s common stock on June 29, 2018, the last business day preceding the fiscal quarter-end, multiplied by the number of MSUs outstanding or expected to vest as of June 30, 2018.

As of June 30, 2018, there was $21.6 million of unrecognized compensation cost related to 1.1 million unvested MSUs, which is expected to be recognized over a weighted average period of approximately 2.6 years.

At June 30, 2018, the Company had 22.1 million shares of its common stock available for issuance to employees and other recipients under the 1996 Plan.

Employee Stock Purchase Plan

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

The Company issued 0.9 million shares of its common stock for total consideration of $36.3 million related to the 2008 ESPP during the fiscal year ended June 30, 2018. As of June 30, 2018, the Company had 7.2 million shares of its common stock reserved and available for future issuance under the 2008 ESPP.

The fair value of shares granted to employees under the 2008 ESPP in fiscal years 2018, 2017 and 2016 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 For the Year Ended
	June 30, 2018	June 24, 2017	June 25, 2016
Expected holding period (in years)	0.5	0.5	0.5
Risk-free interest rate	0.8% - 2.1%	0.5% - 1.1%	0.1% - 0.5%
Expected stock price volatility	19.1% - 32.7%	19.1% - 30.4%	21.8% - 33.1%
Dividend yield	2.8% - 3.4%	3.0% - 3.6%	3.3% - 3.6%

As of June 30, 2018, there was $5.8 million of unrecognized compensation expense related to the 2008 ESPP.