Stock-Based Compensation

9 Months Ended

Mar. 30, 2013

Stock-Based Compensation

Stock-Based Compensation

Note 13. Stock-Based Compensation

Overview

The impact on the Company’s results of operations of recording stock-based compensation by function for the three and nine months ended March 30, 2013 and March 31, 2012 was as follows (in millions):

	Three Months Ended				Nine Months Ended
	March 30,		March 31,		March 30,		March 31,
	2013		2012		2013		2012
Cost of sales	$	2.4	$	2.2	$	6.7	$	5.5
Research and development	3.7		3.1		10.0		8.8
Selling, general and administrative	9.2		8.0		24.8		22.8
	$	15.3	$	13.3	$	41.5	$	37.1

Approximately $2.3 million of stock-based compensation was capitalized in inventory at March 30, 2013.

Stock Options

The Company issues stock options that generally become exercisable over a three-year or four-year period and, if not exercised, expire from five to ten years after the date of grant. The Company granted no stock options in the first three quarters of fiscal 2013 or fiscal 2012.

As of March 30, 2013, $2.4 million of unrecognized stock-based compensation cost related to stock options remains to be amortized. That cost is expected to be recognized over an estimated amortization period of 1.1 years.

Employee Stock Purchase Plan

The Company’s ESPP provides eligible employees with an opportunity to acquire an ownership interest in the Company at a discounted purchase price with a 6-month look-back period. The fair value of ESPP is estimated on the date of offering using a Black-Scholes-Merton valuation model.

As of March 30, 2013, $0.9 million of unrecognized stock-based compensation cost related to the ESPP remains to be amortized. That cost is expected to be recognized through the first quarter of fiscal 2014.

Full Value Awards

“Full Value Awards” refer to RSUs and Performance Units that are granted with the exercise price equal to zero and are converted to shares immediately upon vesting. These Full Value Awards are performance-based, time-based or a combination of both and expected to vest over one year to four years. The fair value of the time based Full Value Awards is based on the closing market price of the Company’s common stock on the date of award.

For the nine months ended March 30, 2013 and March 31, 2012, the Company granted 6.0 million and 4.7 million RSUs, of which 0.7 million and 0.5 million, respectively, are performance-based RSUs with market conditions (“MSUs”). These MSUs shares represent the target amount of grants, and the actual number of shares awarded upon vesting of the MSUs may be higher or lower depending upon the achievement of the relevant market conditions. The majority of MSUs vest in equal annual installments over three years based on the attainment of certain total shareholder return performance measures and the employee’s continued service through the vest date. The aggregate grant-date fair value of MSUs granted during the first nine months of fiscal 2013 and fiscal 2012 was estimated to be $10.7 million and $9.3 million, respectively, and was calculated using a Monte Carlo simulation. The remaining 5.3 million and 4.2 million shares for the nine months ended March 30, 2013 and March 31, 2012 are mainly time-based RSUs. The majority of these time-based RSUs vest over three years, with 33% vesting after one year and quarterly over the remaining two years.

As of March 30, 2013, $80.8 million of unrecognized stock-based compensation cost related to Full Value Awards remains to be amortized. That cost is expected to be recognized over an estimated amortization period of 2.2 years.

Valuation Assumptions

The Company estimates the fair value of the MSUs on the date of grant using a Monte Carlo simulation with the following assumptions:

	Nine Months Ended
	March 30,		March 31,
	2013		2012
Volatility of common stock	57.5	%	68.7	%
Average volatility of peer companies	58.3	%	68.4	%
Average correlation coefficient of peer companies	0.3208		0.3383
Risk-free interest rate	0.4	%	0.7	%