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 2013, 2012, 2011, the Company expensed $43,677,000, $35,737,000 and $28,931,000, respectively, for all stock-based compensation awards.

Stock plan

At June 29, 2013, the Company had 8,988,130 shares of common stock reserved for equity awards, which consisted of 2,579,188 for options granted that have not yet been exercised, 2,995,588 available for future awards under plans approved by shareholders, 2,980,565 for stock incentive and performance shares granted but not yet vested, and 432,789 shares available for future award under the Company's Employee Stock Purchase Plan ("ESPP").

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 2013, 2012 and 2011 was $3,989,000, $3,147,000 and $3,499,000, 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 29, 2013		June 30, 2012		July 2, 2011
Expected term (years)	6.00		6.00		6.00
Risk-free interest rate	0.9	%	1.2	%	1.8	%
Weighted average volatility	35.0	%	33.7	%	33.7	%
Dividend yield	—		—		—

The following is a summary of the changes in outstanding options for fiscal 2013:



	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
Outstanding at June 30, 2012	2,881,918		$	23.78	61 Months
Granted	416,128		$	32.34	110 Months
Exercised	(708,421	)	$	18.25	12 Months
Forfeited or expired	(10,437	)	$	30.50	40 Months
Outstanding at June 29, 2013	2,579,188		$	26.65	70 Months
Exercisable at June 29, 2013	1,634,898		$	25.37	53 Months

The weighted-average grant-date fair values of stock options granted during fiscal 2013, 2012 and 2011 were $11.33, $9.67 and $8.72, respectively.

At June 29, 2013, the aggregate intrinsic value of all outstanding stock option awards was $18,089,000 and all exercisable stock options awards was $13,624,000.

The following is a summary of the changes in non-vested stock options for the fiscal year ended June 29, 2013:



	Shares		Weighted Average Grant-Date Fair Value
Non-vested stock options at June 30, 2012	887,295		$	9.41
Granted	416,128		$	11.33
Vested	(359,133	)	$	9.53
Forfeited	—		$	—
Non-vested stock options at June 29, 2013	944,290		$	10.21

As of June 29, 2013, there was $2,534,000 of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of 2.2 years. The total fair values of shares vested during fiscal 2013, 2012 and 2011 were $3,424,000, $3,599,000, $3,425,000, respectively.

Cash received from option exercises during fiscal 2013, 2012 and 2011 totaled $2,053,000, $2,405,000, and $3,506,000, 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 29, 2013, 2,009,510 shares previously awarded have not yet been delivered. Compensation expense associated with this program was $26,788,000, $20,978,000 and $17,008,000 for fiscal years 2013, 2012 and 2011, respectively.

The following is a summary of the changes in non-vested incentive shares for the fiscal year ended June 29, 2013:



	Shares		Weighted Average Grant-Date Fair Value
Non-vested incentive shares at June 30, 2012	1,749,519		$	26.82
Granted	1,292,030		$	32.42
Vested	(900,701	)	$	28.24
Forfeited	(131,338	)	$	28.64
Non-vested incentive shares at June 29, 2013	2,009,510		$	29.62

As of June 29, 2013, there was $47,413,000 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 2013, 2012 and 2011 were $25,439,000, $19,516,000, $15,916,000, 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 2013, 2012 and 2011, the Company granted 252,185, 349,070 and 380,200 performance shares, respectively, to be awarded to participants in the Performance Share Program, of which 10,400 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. During fiscal 2013, 2012 and 2011, the Company recognized compensation expense associated with the Performance Share Programs of $11,902,000, $10,502,000 and $7,374,000, 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 2013, 2012 and 2011, compensation cost associated with the outside director stock bonus plan was $999,000, $1,110,000, $1,050,000, respectively.

Employee stock purchase plan

The Company has an 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. The ESPP is not compensatory based on its terms.

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 2014 to be similar to the number of shares repurchased during fiscal 2013, based on current estimates of participation in the program. During fiscal 2013, 2012 and 2011, there were 61,731, 64,187 and 62,329 shares, respectively, of common stock issued under the ESPP program.