Stock-Based Compensation

12 Months Ended

Jun. 28, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation [Text Block]

STOCK-BASED COMPENSATION

At June 28, 2014, the Company had one stock option plan and one employee stock purchase plan, including the Company's 1996 Stock Incentive Plan (the “1996 Plan”), and the 2008 Employee Stock Purchase Plan (the “2008 ESPP”).

The following tables show total stock-based compensation expense by type of award, and the resulting tax effect, included in the Consolidated Statements of Income for fiscal years 2014, 2013 and 2012:

	For the Year Ended
	June 28, 2014
	Stock Options		Restricted Stock Units		Employee Stock Purchase Plan		Total
	(in thousands)
Cost of goods sold	$	1,650	$	8,466	$	2,132	$	12,248
Research and development	8,676		31,548		5,452		45,676
Selling, general and administrative	5,486		19,734		2,308		27,528
Pre-tax stock-based compensation expense	$	15,812	$	59,748	$	9,892	$	85,452
Less: income tax effect							15,245
Net stock-based compensation expense							$	70,207

	For the Year Ended
	June 29, 2013
	Stock Options		Restricted Stock Units		Employee Stock Purchase Plan		Total
	(in thousands)
Cost of goods sold	$	1,532	$	8,862	$	2,210	$	12,604
Research and development	7,230		31,475		5,441		44,146
Selling, general and administrative	5,331		19,523		2,204		27,058
Pre-tax stock-based compensation expense	$	14,093	$	59,860	$	9,855	$	83,808
Less: income tax effect							14,745
Net stock-based compensation expense							$	69,063

	For the Year Ended
	June 30, 2012
	Stock Options		Restricted Stock Units		Employee Stock Purchase Plan		Total
	(in thousands)
Cost of goods sold	$	2,014	$	9,387	$	1,738	$	13,139
Research and development	7,844		35,699		5,525		49,068
Selling, general and administrative	6,436		19,493		1,731		27,660
Pre-tax stock-based compensation expense	$	16,294	$	64,579	$	8,994	$	89,867
Less: income tax effect							20,215
Net stock-based compensation expense							$	69,652

Volterra Substitute Awards

In connection with the Volterra acquisition, the Company issued substitute awards to certain Volterra employees. Substitute awards included options to purchase approximately 673,185 shares of Maxim Integrated's common stock at a weighted-average grant date fair value of approximately $10.56 and a weighted-average exercise price of approximately $22.26 per share and also issued approximately 418,955 restricted stock units with a weighted-average grant date fair value of $29.53. The terms of these awards were substantially the same as those granted by Volterra. The intrinsic value of these awards was substantially the same immediately prior to and after the substitution as of October 1, 2013.

Stock Options

The fair value of options granted to employees under the Company’s Amended and Restated 1996 Stock Incentive Plan is estimated on the date of grant using the Black-Scholes option valuation model.

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 Company also estimates forfeitures at the time of grant and makes revisions to forfeitures on a quarterly basis.

The fair value of options granted to employees in fiscal years 2014, 2013 and 2012 has been estimated at the date of grant using the Black-Scholes option valuation model and the following weighted-average assumptions:

	Stock Options For the Year Ended (1)
	June 28, 2014		June 29, 2013		June 30, 2012
Expected holding period (in years)	5.3		5.3		5.1
Risk-free interest rate	1.4	%	0.7	%	1.2	%
Expected stock price volatility	34.6	%	37.7	%	36.9	%
Dividend yield	3.2	%	3.3	%	3.2	%

(1) Table excludes impact from assumptions used in valuing the Volterra substitute options granted on October 1, 2013 based on an expected holding period of 3.8 years, risk-free interest rate of 1.0%, expected stock price volatility of 27.5% and dividend yield of 3.4%.

The weighted-average fair value of stock options granted was $7.36, $6.69 and $5.91 per share for fiscal years 2014, 2013 and 2012, respectively.

At June 28, 2014, the Company had 23.0 million shares of its common stock available for issuance to employees and other option recipients under its 1996 Stock Incentive Plan.

The following table summarizes outstanding, exercisable and vested and expected to vest stock options as of June 28, 2014 and their activity during fiscal years 2014, 2013 and 2012:

	Options			Weighted Average Remaining Contractual Term (In Years)	Aggregate Intrinsic Value (1)
	Number of Shares		Weighted Average Exercise Price
Balance at June 25, 2011	28,332,486		$25.62
Options Granted	3,353,017		23.14
Options Exercised	(2,843,444	)	16.55
Options Cancelled	(4,607,065	)	31.62
Balance at June 30, 2012	24,234,994		25.20
Options Granted	2,788,088		27.47
Options Exercised	(3,919,847	)	18.17
Options Cancelled	(3,021,896	)	31.10
Balance at June 29, 2013	20,081,339		26.00
Options Granted	2,965,544		28.44
Volterra substitute options granted	673,185		22.26
Options Exercised	(3,568,775	)	18.60
Options Cancelled	(3,987,649	)	34.86
Balance at June 28, 2014	16,163,644		25.74	3.7	$	156,104,454
Exercisable at June 28, 2014	7,223,798		$26.39	1.9	$	71,554,178
Vested and expected to vest, June 28, 2014	15,252,343		$25.67	3.6	$	148,801,725

(1) Aggregate intrinsic value represents the difference between the exercise price and the closing price per share of the Company's common stock on June 27, 2014, the last business day preceding the fiscal year end, multiplied by the number of option outstanding, exercisable or vested and expected to vest as of June 28, 2014.

The following table summarizes information about stock options that were outstanding and exercisable at June 28, 2014:

	Outstanding Options			Options Exercisable
Range of Exercise Prices	Number Outstanding at June 28, 2014	Weighted Average Remaining Contractual Term (In years)	Weighted Average Exercise Price	Number Exercisable at June 28, 2014	Weighted Average Exercise Price
$12.00 - $20.00	4,607,191	2.7	$16.32	3,413,183	$16.06
$20.01 - $30.00	8,410,759	5.1	$26.24	858,901	$25.47
$30.01 - $40.00	1,972,293	1.9	$36.37	1,778,313	$36.85
$40.01 - $51.00	1,173,401	0.5	$41.25	1,173,401	$41.25
	16,163,644			7,223,798

During fiscal year 2014, the Company granted approximately 3.6 million stock options from its 1996 Plan with an estimated total grant date fair value of $26.8 million. The total intrinsic value of options exercised during fiscal years 2014, 2013 and 2012 were $47.2 million, $44.7 million and $30.7 million, respectively. The grant date fair value of options vested during fiscal years 2014, 2013 and 2012 were $16.0 million, $11.2 million and $14.7 million, respectively. As of June 28, 2014, there was $36.4 million of total unrecognized compensation costs related to 8.9 million unvested stock options expected to be recognized over a weighted average period of approximately 2.6 years.

Restricted Stock Units

The fair value of Restricted Stock Units (“RSUs”) under the Company’s Amended and Restated 1996 Stock Incentive Plan 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. The Company also estimates forfeitures at the time of grant and makes revisions to forfeitures on a quarterly basis.

The weighted-average fair value of RSUs granted was $26.60, $25.30 and $20.80 per share for fiscal years 2014, 2013 and 2012, respectively.

The following table summarizes outstanding and expected to vest RSUs as of June 28, 2014 and their activity during fiscal years 2014, 2013 and 2012:

	Number of Shares		Weighted Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value (1)
Balance at June 25, 2011	10,000,738
Restricted stock units granted	3,645,864
Restricted stock units released	(3,433,989	)
Restricted stock units cancelled	(1,289,159	)
Balance at June 30, 2012	8,923,454
Restricted stock units granted	3,074,466
Restricted stock units released	(3,097,369	)
Restricted stock units cancelled	(935,019	)
Balance at June 29, 2013	7,965,532
Restricted stock units granted	3,233,300
Volterra substitute restricted stock units granted	418,955
Restricted stock units released	(2,904,787	)
Restricted stock units cancelled	(1,017,869	)
Balance at June 28, 2014	7,695,131		2.6	$	276,548,336
Expected to vest at June 28, 2014	7,034,280		2.6	$	243,667,458

(1) Aggregate intrinsic value for RSUs represents the closing price per share of the Company's common stock on June 27, 2014, the last business day preceding the fiscal year end, multiplied by the number of RSUs outstanding, or expected to vest as of June 28, 2014.

The Company withheld shares totaling $31.4 million in value as a result of employee withholding taxes based on the value of the RSUs on their vesting date for the year ended June 28, 2014. The total payments for the employees' tax obligations to the taxing authorities are reflected as financing activities within the Consolidated Statements of Cash Flows.

As of June 28, 2014, there was $133.7 million of unrecognized compensation cost related to 7.7 million unvested RSUs, which is expected to be recognized over a weighted average period of approximately 2.6 years.

Employee Stock Purchase Plan

The fair value of rights to acquire common stock under the Company’s 2008 ESPP is estimated on the date of grant using the Black-Scholes option valuation model.

The Company issued 1.7 million shares of its common stock for total consideration of $42.8 million related to the ESPP plan during the fiscal year ended June 28, 2014. As of June 28, 2014, the Company had 5.1 million shares of its common stock reserved and available for future issuance under the 2008 ESPP.

The fair value of ESPP granted to employees in fiscal years 2014, 2013 and 2012 has been estimated at the date of grant using the Black-Scholes option valuation model and the following weighted-average assumptions:

	ESPP For the Year Ended
	June 28, 2014		June 29, 2013		June 30, 2012
Expected holding period (in years)	0.5		0.5		0.5
Risk-free interest rate	0.1	%	0.1	%	0.1	%
Expected stock price volatility	20.7	%	24.0	%	25.0	%
Dividend yield	3.4	%	3.1	%	3.2	%

As of June 28, 2014, there was $5.6 million of unrecognized compensation expense related to the ESPP.