Stock‑Based Compensation

The Company issues new shares to fulfill the obligations under all of its stock‑based compensation awards. Such shares are subject to registration under applicable securities laws, including the rules and regulations promulgated by the SEC, unless an applicable exemption applies.

During the six months ended December 29, 2013, the Company granted an aggregate of 4,000 stock options to Company employees under its 2011 Performance Incentive Plan (the "2011 Plan"). Subject to the terms and conditions of the 2011 Plan and applicable award documentation, such awards generally vest and become exercisable in equal installments over each of the first three anniversaries of the date of grant, with a maximum award term of five years.

The following table summarizes the stock option activity for the six months ended December 29, 2013 (in thousands, except per share price data):



	Stock Option Shares		Weighted Average Option Exercise Price per Share		Weighted Average Grant Date Fair Value per Share		Aggregate Intrinsic Value
Outstanding, June 30, 2013	1,187		$	17.08			$	4,978
Granted	4		$	24.76	$	6.82
Exercised	(673	)	$	16.19			$	5,330
Expired or forfeited	(5	)	$	16.83
Outstanding, December 29, 2013	513		$	18.31			$	3,919

For the six months ended December 29, 2013 and December 23, 2012, the Company received proceeds of $10.9 million and $1.0 million, respectively, as a result of the exercise of stock options issued under its stock based compensation plans. There were no tax benefits realized from issuance of stock-based awards for each of the three and six months ended December 29, 2013 and December 23, 2012.

During the six months ended December 29, 2013, the Company granted 25,050 Restricted Stock Units ("RSUs") to employees, and 43,704 RSUs to members of the Board of Directors (the "Board"), in each case under the 2011 Plan. The RSUs provided for vesting over a period of service, subject to the terms and conditions of the 2011 Plan and the applicable award documentation. For the RSU awards made to employees, the vesting of awards generally takes place in equal installments over each of the first three anniversaries of the date of grant. The RSU awards made to members of the Board were made as part of the Board’s annual director compensation program, under which the vesting of RSU awards takes place generally on the first anniversary of the date of grant.

The following table summarizes the RSU activity for the six months ended December 29, 2013 (in thousands, except per share price data):



	Restricted Stock Units		Weighted Average Grant Date Fair Value Per Share		Aggregate Intrinsic Value
Outstanding, June 30, 2013	3,696		$	21.31	$	77,394
Granted	69		$	24.73
Vested	(215	)	$	18.99	$	4,901
Expired or forfeited	(94	)	$	22.08
Outstanding, December 29, 2013	3,456		$	21.51	$	88,288

The Company's stock-based compensation plans permit the reduction of a participant’s RSUs for purposes of settling a participant’s income tax withholding obligation. During the six months ended December 29, 2013, the Company withheld RSUs representing 52,516 underlying shares to fund participant income tax withholding obligations.

Additional information relating to the Company’s stock based compensation plans, including employee stock options and RSUs at December 29, 2013 and June 30, 2013 is as follows (in thousands):



	December 29, 2013	June 30, 2013
Outstanding options exercisable	377	1,039
Options and RSUs available for grant	6,079	6,040
Total reserved common stock shares for stock option plans	10,048	10,923

Forfeitures are estimated at the time of grant. Based on the Company’s historical exercise and termination data, a four percent forfeiture rate is assumed for the majority of the options and RSUs.

For the three and six months ended December 29, 2013 and December 23, 2012, stock‑based compensation expense associated with the Company’s stock options and RSUs was as follows (in thousands):



	Three Months Ended				Six Months Ended
	December 29, 2013		December 23, 2012		December 29, 2013		December 23, 2012
Cost of sales	$	1,362	$	1,123	$	2,610	$	2,281
Selling, general and administrative expense	3,123		2,858		6,650		6,018
Research and development expense	2,142		1,397		4,229		2,818
Total stock‑based compensation expense	$	6,627	$	5,378	$	13,489	$	11,117

The total unrecognized compensation expense for outstanding stock options and RSUs was $39.8 million as of December 29, 2013. The weighted average number of years to recognize the total compensation expense for stock options and RSUs are 1.8 and 1.7, respectively.

The fair value of the stock options associated with the above compensation expense for the six months ended December 29, 2013 and December 23, 2012 was determined at the grant date using the Black‑Scholes option pricing model with the following weighted average assumptions:



	December 29, 2013		December 23, 2012
Expected life	3.5 years		3.5 years
Risk free interest rate	0.70	%	0.36	%
Volatility	36.37	%	39.30	%
Dividend yield	0.00	%	0.00	%