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Stock Based Compensation Plans
12 Months Ended
Jun. 30, 2012
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock-based compensation plans
Stock-based compensation plans
The Company measures all share-based payments, including grants of employee stock options, at fair value and recognizes related expense in the consolidated statement of operations over the service period (generally the vesting period). During fiscal 2012, 2011, 2010, the Company expensed $35,737,000, $28,931,000 and $28,363,000, respectively, for all stock-based compensation awards.
Stock plan
The Company currently has one stock compensation plan pursuant to which it can issue new awards. The 2010 Stock Compensation Plan (“2010 Plan”) was approved by the shareholders in fiscal 2011. The 2010 Plan has a termination date of November 4, 2020 and 4,956,183 shares were available for grant at June 30, 2012. At June 30, 2012, the Company had 11,047,000 shares of common stock reserved for stock option and stock incentive programs.
Stock options
Option grants under the 2010 Plan have a contractual life of ten years, vest 25% on each anniversary of the grant date, commencing with the first anniversary, and provide for a minimum exercise price of 100% of fair market value at the date of grant. Compensation expense associated with stock options during fiscal 2012, 2011 and 2010 were $3,147,000, $3,499,000 and $3,558,000, respectively.
The fair value of options granted is estimated on the date of grant using the Black-Scholes model based on the assumptions in the following table. The assumption for the expected term is based on evaluations of historical and expected future employee exercise behavior. The risk-free interest rate is based on the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected term at the grant date. The historical volatility of Avnet’s stock is used as the basis for the volatility assumption.
 
Years Ended
 
June 30,
2012
 
July 2,
2011
 
July 3,
2010
Expected term (years)
6.00

 
6.00

 
6.00

Risk-free interest rate
1.2
%
 
1.8
%
 
3.0
%
Weighted average volatility
33.7
%
 
33.7
%
 
34.3
%
Dividend yield

 

 


The following is a summary of the changes in outstanding options for fiscal 2012:
 
Shares
 
Weighted
Average
Exercise Price
 
Weighted Average
Remaining
Contractual Life
Outstanding at July 2, 2011
3,059,215

 
$
21.79

 
59 Months
Granted
332,476

 
$
27.94

 
109 Months
Exercised
(486,302
)
 
$
14.09

 
6 Months
Forfeited or expired
(23,471
)
 
$
23.90

 
73 Months
Outstanding at June 30, 2012
2,881,918

 
$
23.78

 
61 Months
Exercisable at June 30, 2012
1,994,623

 
$
22.69

 
45 Months

The weighted-average grant-date fair values of stock options granted during fiscal 2012, 2011, and 2010 were $9.67, $8.72 and $9.58, respectively. There were no intrinsic values of share options outstanding or exercisable at June 30, 2012, July 2, 2011 or July 3, 2010.
The following is a summary of the changes in non-vested stock options for the fiscal year ended June 30, 2012:
 
Shares
 
Weighted
Average
Grant-Date
Fair Value
Non-vested stock options at July 2, 2011
919,294

 
$
9.69

Granted
332,476

 
$
9.67

Vested
(345,254
)
 
$
10.43

Forfeited
(19,221
)
 
$
9.30

Non-vested stock options at June 30, 2012
887,295

 
$
9.41


As of June 30, 2012, there was $1,808,000 of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of 1.1 years. The total fair values of shares vested during fiscal 2012, 2011 and 2010 were $3,599,000, $3,425,000, $3,293,000, respectively.
Cash received from option exercises during fiscal 2012, 2011 and 2010 totaled $2,405,000, $3,506,000, and $4,134,000, respectively. The impact of these cash receipts is included in “Other, net” in financing activities in the accompanying consolidated statements of cash flows.
Incentive shares
Delivery of incentive shares, and the associated compensation expense, is spread equally over a five-year period and is generally subject to the employee’s continued employment by the Company. As of June 30, 2012, 1,749,519 shares previously awarded have not yet been delivered. Compensation expense associated with this program was $20,978,000, $17,008,000 and $14,614,000 for fiscal years 2012, 2011 and 2010, respectively.
The following is a summary of the changes in non-vested incentive shares for the fiscal year ended June 30, 2012:
 
Shares
 
Weighted
Average
Grant-Date
Fair Value
Non-vested incentive shares at July 2, 2011
1,414,784

 
$
26.47

Granted
1,114,510

 
$
27.94

Vested
(704,220
)
 
$
27.71

Forfeited
(75,555
)
 
$
26.38

Non-vested incentive shares at June 30, 2012
1,749,519

 
$
26.82


As of June 30, 2012, there was $36,092,000 of total unrecognized compensation cost related to non-vested incentive shares, which is expected to be recognized over a weighted-average period of 2.9 years. The total fair values of shares vested during fiscal 2012, 2011 and 2010 were $19,516,000, $15,916,000, $14,301,000, respectively.
Performance shares
Eligible employees, including Avnet’s executive officers, may receive a portion of their long-term equity-based incentive compensation through the performance share program, which allows for the award of shares of stock against performance-based criteria (“Performance Share Program”). The Performance Share Program provides for the issuance to each grantee of a number of shares of Avnet’s common stock at the end of a three-year period based upon the Company’s achievement of performance goals established by the Compensation Committee of the Board of Directors for each three-year period. The performance goals have recently consisted of measures of economic profit and total shareholder return.
During fiscal 2012, 2011 and 2010, the Company granted 349,070, 380,200 and 242,390 performance shares, respectively, to be awarded to participants in the Performance Share Program, of which 6,800 cumulatively have been forfeited. The actual amount of performance shares issued at the end of the three-year period is determined based upon the level of achievement of the defined performance goals and can range from 0% to 200% of the initial award. The Company anticipates issuing 355,484 shares in the first quarter of fiscal 2013 based upon the goals achieved during the three-year performance period which ended June 30, 2012. During fiscal 2012, 2011 and 2010, the Company recognized compensation expense associated with the Performance Share Programs of $10,502,000, $7,374,000 and $9,171,000, respectively.
Outside director equity compensation
Non-employee directors are awarded shares equal to a fixed dollar amount of Avnet common stock upon their re-election each year, as part of their director compensation package. Directors may elect to receive this compensation in the form of common stock or they may elect to defer their compensation to be paid in common stock at a later date. During fiscal 2012, 2011 and 2010, compensation cost associated with the outside director stock bonus plan was $1,110,000, $1,050,000, $1,020,000, respectively.
Employee stock purchase plan
The Company has an Employee Stock Purchase Plan (“ESPP”) under the terms of which eligible employees of the Company are offered options to purchase shares of Avnet common stock at a price equal to 95% of the fair market value on the last day of each monthly offering period. Based on the terms of the ESPP, Avnet is not required to record expense in the consolidated statements of operations related to the ESPP.
The Company has a policy of repurchasing shares on the open market to satisfy shares purchased under the ESPP, and expects future repurchases during fiscal 2013 to be similar to the number of shares repurchased during fiscal 2012, based on current estimates of participation in the program. During fiscal 2012, 2011 and 2010, there were 64,187, 62,329 and 67,168 shares, respectively, of common stock issued under the ESPP program.