STOCK-BASED COMPENSATION

The following table shows total stock-based compensation expense by type of award, and the resulting tax effect, included in the Condensed Consolidated Statements of Income for the three and six months ended December 29, 2012 and December 31, 2011:



	Three Months Ended
	December 29, 2012								December 31, 2011
	Stock Options		Restricted Stock Units		Employee Stock Purchase Plan		Total		Stock Options		Restricted Stock Units		Employee Stock Purchase Plan		Total
	(in thousands)
Cost of goods sold	$	477	$	2,572	$	634	$	3,683	$	565	$	2,657	$	470	$	3,692
Research and development	2,288		8,401		1,451		12,140		2,440		9,207		1,262		12,909
Selling, general and administrative	1,286		5,152		584		7,022		1,704		4,778		391		6,873
Pre-tax stock-based compensation expense	$	4,051	$	16,125	$	2,669	$	22,845	4,709		$	16,642	$	2,123	$	23,474
Less: income tax effect							3,938								5,809
Net stock-based compensation expense							$	18,907							$	17,665



	Six Months Ended
	December 29, 2012								December 31, 2011
	Stock Options		Restricted Stock Units		Employee Stock Purchase Plan		Total		Stock Options		Restricted Stock Units		Employee Stock Purchase Plan		Total
	(in thousands)
Cost of goods sold	$	875	$	4,743	$	1,053	$	6,671	$	1,082	$	4,964	$	903	$	6,949
Research and development	4,117		17,611		2,735		24,463		4,495		19,165		2,510		26,170
Selling, general and administrative	2,841		10,271		1,096		14,208		3,132		9,903		785		13,820
Pre-tax stock-based compensation expense	$	7,833	$	32,625	$	4,884	$	45,342	$	8,709	$	34,032	$	4,198	$	46,939
Less: income tax effect							8,770								11,268
Net stock-based compensation expense							$	36,572							$	35,671

Fair Value

The fair value of options granted to employees under the Company's Amended and Restated 1996 Stock Incentive Plan and rights to acquire common stock under the Company's 2008 Employee Stock Purchase Plan (the "ESPP") is estimated on the date of grant using the Black-Scholes option valuation model. The fair value of Restricted Stock Units ("RSUs") 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.

Expected volatilities are based on the historical volatilities from the Company's traded common stock over a period equal to the expected term. The Company is utilizing the simplified method to estimate expected holding periods. The risk-free interest rate is based on the U.S. Treasury yield. The Company determines the dividend yield by dividing the annualized dividends per share by the prior quarter's average stock price. The result is analyzed by the Company to decide whether it represents expected future dividend yield. The Company also estimates forfeitures at the time of grant and makes revisions to forfeitures on a quarterly basis.

The fair value of share-based awards granted to employees has been estimated at the date of grant using the Black-Scholes option valuation model and the following weighted-average assumptions:



	Stock Options
	Three Months Ended				Six Months Ended
	December 29, 2012		December 31, 2011		December 29, 2012		December 31, 2011
Expected holding period (in years)	5.1		5.1		5.4		5.1
Risk-free interest rate	0.7	%	1.0	%	0.7	%	1.3	%
Expected stock price volatility	37.6	%	38.0	%	37.8	%	38.0	%
Dividend yield	3.6	%	3.8	%	3.3	%	3.1	%



	ESPP
	Three Months Ended				Six Months Ended
	December 29, 2012		December 31, 2011		December 29, 2012		December 31, 2011
Expected holding period (in years)	0.5		0.5		0.5		0.5
Risk-free interest rate	0.1	%	0.1	%	0.1	%	0.1	%
Expected stock price volatility	26.1	%	32.2	%	26.1	%	32.2	%
Dividend yield	3.6	%	3.8	%	3.6	%	3.8	%

The weighted-average fair value of stock options granted was $6.59 and $6.05 per share for the three months ended December 29, 2012 and December 31, 2011, respectively. The weighted-average fair value of RSUs granted was $26.82 and $23.46 per share for the three months ended December 29, 2012 and December 31, 2011, respectively.

The weighted-average fair value of stock options granted was $6.26 and $5.81 per share for the six months ended December 29, 2012 and December 31, 2011, respectively. The weighted-average fair value of RSUs granted was $24.67 and $20.05 per share for the six months ended December 29, 2012 and December 31, 2011, respectively.

Stock Options

The following table summarizes outstanding, exercisable and vested and expected to vest stock options as of December 29, 2012 and their activity for the six months ended December 29, 2012:



	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value (1)
Balance at June 30, 2012	24,234,994		$	25.20
Options Granted	2,656,716		27.30
Options Exercised	(2,316,931	)	16.58
Options Cancelled	(1,483,197	)	31.53
Balance at December 29, 2012	23,091,582		$	25.90	3.6	$	151,652,908
Exercisable, December 29, 2012	11,965,565		$	30.23	2.0	$	53,498,126
Vested and expected to vest, December 29, 2012	21,740,804		$	26.06	3.4	$	142,535,169



(1)	Aggregate intrinsic value represents the difference between the exercise price and the closing price per share of the Company's common stock on December 28, 2012, the last business day preceding the fiscal quarter-end, multiplied by the number of options outstanding, exercisable or vested and expected to vest as of December 29, 2012.

As of December 29, 2012, there was $38.2 million of total unrecognized stock compensation cost related to 11.1 million unvested stock options, which is expected to be recognized over a weighted average period of approximately 3.0 years.

Restricted Stock Units

The following table summarizes outstanding and expected to vest RSUs as of December 29, 2012 and their activity during the six months ended December 29, 2012:



	Number of Shares		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value (1)
Balance at June 30, 2012	8,923,454
Restricted stock units granted	2,612,007
Restricted stock units released	(1,615,135	)
Restricted stock units cancelled	(422,274	)
Balance at December 29, 2012	9,498,052		2.9	$	286,379,516
Outstanding and expected to vest, December 29, 2012	8,307,507		2.8	$	249,723,671



(1)	Aggregate intrinsic value for RSUs represents the closing price per share of the Company's common stock on December 28, 2012, the last business day preceding the fiscal quarter-end, multiplied by the number of RSUs outstanding or expected to vest as of December 29, 2012.

The Company withheld shares totaling $6.5 million and $13.6 million in value as a result of employee withholding taxes based on the value of the RSUs on their vesting date for the three and six months ended December 29, 2012, respectively. The total payments for the employees' tax obligations to the taxing authorities are reflected as financing activities within the Condensed Consolidated Statements of Cash Flows.

As of December 29, 2012, there was $139.7 million of unrecognized compensation expense related to 9.5 million unvested RSUs, which is expected to be recognized over a weighted average period of approximately 2.9 years.

Employee Stock Purchase Plan

As of December 29, 2012, there was $9.0 million of unrecognized compensation expense related to the ESPP.