XML 26 R13.htm IDEA: XBRL DOCUMENT

Stock-Based Compensation

3 Months Ended

Sep. 26, 2020

Sep. 28, 2019

Share-based Payment Arrangement [Abstract]

Nonvested Restricted Stock Shares Activity [Table Text Block]

The Company withheld shares totaling $17.0 million in value as a result of employee withholding taxes based on the value of RSUs and RSAs on their vesting date for the three months ended September 26, 2020. Total payments for employees’ tax obligations to taxing authorities are reflected as financing activities within the Condensed Consolidated Statements of Cash Flows.

As of September 26, 2020, there was $209.1 million of unrecognized compensation expense related to 5.4 million unvested RSUs and RSAs, which is expected to be recognized over a weighted average period of approximately 3.2 years.

Share-based Payment Arrangement, Restricted Stock and Restricted Stock Unit, Activity [Table Text Block]

The Company grants MSUs to senior members of management in lieu of granting stock options. For MSUs granted prior to September 2017, the performance metrics of this program are based on relative performance of the Company’s stock price as compared to the Semiconductor Exchange Traded Fund index SPDR S&P (the “XSD”). For MSUs granted in September 2017, September 2018, and September 2019, the performance metrics for this program are based on the total shareholder return ("TSR") of the Company relative to the TSR of the other companies included in the XSD. The fair value of MSUs is estimated using a Monte Carlo simulation model on the date of grant. The Company also estimates forfeitures at the time of grant and makes revisions to forfeitures on a quarterly basis. Compensation expense is recognized based on the initial valuation and is not subsequently adjusted as a result of the Company’s performance relative to that of the XSD or the TSR of the companies included in the XSD, as applicable. Vesting for MSUs is contingent upon both service and market conditions and has a four-year vesting cliff period. MSUs granted in September 2017, September 2018, and September 2019 vest based upon annual performance and are subject to continued service through the end of the four-year period but will continue to vest post-employment at the Company for certain individuals satisfying specific eligibility requirements. Pursuant to the terms of the ADI Merger Agreement, the Company grants RSUs in lieu of MSUs (or RSAs in lieu of MSUs for any potential “disqualified individuals” within the meaning of Section 280G of the Internal Revenue Code, which RSAs will not be eligible for dividends or dividend equivalent rights) from the date of the ADI Merger Agreement through the date that the transaction closes.

The expense included in the Condensed Consolidated Statements of Income for RSUs and other awards include expenses related to MSUs of $3.6 million and $4.4 million for the three months ended September 26, 2020 and September 28, 2019, respectively. In connection with the proposed ADI Merger, on September 1, 2020, the Company’s Board of Directors granted RSAs to certain employees. For employees who made IRS Section 83(b) elections, Maxim accelerated a portion of the RSAs to satisfy tax withholding requirements. The Company recorded $7.9 million of stock-based compensation expense related to the accelerated RSAs in the three months ended September 26, 2020.

Restricted Stock Units and Restricted Stock Awards

The fair value of RSUs and RSAs under the Company’s 1996 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 and RSAs granted was $69.05 and $47.61 per share for the three months ended September 26, 2020 and September 28, 2019, respectively.

The following table summarizes the outstanding and expected to vest RSUs and RSAs as of September 26, 2020 and related activity during the three months ended September 26, 2020:

Stock-Based Compensation [Text Block]

STOCK-BASED COMPENSATION

At September 26, 2020, the Company had one stock incentive plan, the Company's 1996 Stock Incentive Plan (the “1996 Plan”) and one employee stock purchase plan, the 2008 Employee Stock Purchase Plan (the “2008 ESPP”). The 1996 Plan was adopted by the Board of Directors to provide the grant of incentive stock options, non-statutory stock options, restricted stock units (“RSUs”), restricted stock awards ("RSAs") and market stock units (“MSUs”) to employees, directors, and consultants.

Pursuant to the 1996 Plan, the exercise price for incentive stock options and non-statutory stock options is determined to be the fair market value of the underlying shares on the date of grant. Options typically vest ratably over a four-year period measured from the date of grant. Options generally expire no later than seven years after the date of grant, subject to earlier termination upon an optionee's cessation of employment or service.

RSUs granted to employees typically vest ratably over a four-year period and are released or converted into shares of the Company's common stock upon vesting, subject to the employee's continued service to the Company over that period. RSUs granted from September 2017 to July 2020 will continue to vest post-employment at the Company for certain individuals satisfying specific eligibility requirements.

RSAs granted to employees typically vest over a four-year cliff period and are converted into shares of the Company's common stock upon vesting, subject to the employee's continued service to the Company over that period. RSAs have certain shareholder rights, such as voting rights, but are not eligible for dividends or dividend equivalents.

MSUs granted to employees typically vest over a four-year cliff period and are converted into shares of the Company's common stock upon vesting, subject to the employee's continued service to the Company over that period. The number of shares that are released at the end of the performance period can range from zero to a maximum cap depending on the Company's performance. MSUs granted in September 2017, September 2018, and September 2019 will continue to vest post-employment at the Company for certain individuals satisfying specific eligibility requirements.

The following tables show 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 months ended September 26, 2020 and September 28, 2019, respectively:



	Three Months Ended								Three Months Ended
	September 26, 2020								September 28, 2019
	Stock Options		Restricted Stock Units and Other Awards		Employee Stock Purchase Plan		Total		Stock Options		Restricted Stock Units and Other Awards		Employee Stock Purchase Plan		Total
	(in thousands)
Cost of goods sold	$	11	$	3,794	$	864	$	4,669	$	9	$	2,280	$	669	$	2,958
Research and development	3		12,267		2,106		14,376		4		9,485		1,395		10,884
Selling, general and administrative	75		15,483		1,127		16,685		67		9,953		810		10,830
Pre-tax stock-based compensation expense	$	89	$	31,544	$	4,097	$	35,730	$	80	$	21,718	$	2,874	$	24,672
Less: income tax effect							2,531								2,888
Net stock-based compensation expense							$	33,199							$	21,784

Stock Options

The fair value of options granted to employees under the 1996 Plan is estimated on the date of grant using the Black-Scholes option valuation model.

There were no stock options granted in the three months ended September 26, 2020 and September 28, 2019.

The following table summarizes outstanding, exercisable and vested and expected to vest stock options as of September 26, 2020 and related activity for the three months ended September 26, 2020:



	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value⁽¹⁾
Balance at June 27, 2020	104,447		$	28.76
Options Granted	—		—
Options Exercised	(94,375	)	28.30
Options Cancelled	—		—
Balance at September 26, 2020	10,072		$	33.09	0.6	$	326,753
Exercisable, September 26, 2020	10,072		$	33.09	0.6	$	326,753
Vested and expected to vest, September 26, 2020	10,072		$	33.09	0.6	$	326,753
⁽¹⁾Aggregate intrinsic value represents the difference between the exercise price and the closing price per share of the Company’s common stock on September 25, 2020, 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 September 26, 2020.

As of September 26, 2020, there was no unrecognized stock compensation from unvested stock options.

Restricted Stock Units and Restricted Stock Awards

The weighted-average fair value of RSUs and RSAs granted was $69.05 and $47.61 per share for the three months ended September 26, 2020 and September 28, 2019, respectively.

The following table summarizes the outstanding and expected to vest RSUs and RSAs as of September 26, 2020 and related activity during the three months ended September 26, 2020:



	Number of Shares		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value⁽¹⁾
Balance at June 27, 2020	4,606,592
Restricted stock units and restricted stock awards granted	1,304,862
Restricted stock units and restricted stock awards released	(500,583	)
Restricted stock units and restricted stock awards cancelled	(45,575	)
Balance at September 26, 2020	5,365,296		3.2	$	351,587,847
Outstanding and expected to vest, September 26, 2020	4,446,092		2.9	$	291,352,394
⁽¹⁾Aggregate intrinsic value for RSUs and RSAs represents the closing price per share of the Company’s common stock on September 25, 2020, the last business day preceding the fiscal quarter-end, multiplied by the number of RSUs and RSAs outstanding or expected to vest as of September 26, 2020.

Market Stock Units (MSUs)

No MSUs were granted during the three months ended September 26, 2020. The weighted-average fair value of MSUs granted was $54.70 per share for the three months ended September 28, 2019.

The following table summarizes the number of MSUs outstanding and expected to vest as of September 26, 2020 and their activity during the three months ended September 26, 2020:



	Number of Shares		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value⁽¹⁾
Balance at June 27, 2020	971,220
Market stock units granted	—
Market stock units released	—
Market stock units cancelled	(230,132	)
Balance at September 26, 2020	741,088		2.2	$	48,563,497
Outstanding and expected to vest, September 26, 2020	576,716		2.2	$	37,792.218
⁽¹⁾Aggregate intrinsic value for MSUs represents the closing price per share of the Company’s common stock on September 25, 2020, the last business day preceding the fiscal quarter-end, multiplied by the number of MSUs outstanding or expected to vest as of September 26, 2020.

As of September 26, 2020, there was $22.3 million of unrecognized compensation expense related to 0.7 million unvested MSUs, which is expected to be recognized over a weighted average period of approximately 2.2 years.

Employee Stock Purchase Plan

Employees are granted rights to acquire common stock under the 2008 ESPP.

The fair value of 2008 ESPP rights granted to employees has been estimated at the date of grant using the Black-Scholes option valuation model using the following assumptions for the offering periods outstanding:



	Three Months Ended
	September 26, 2020	September 28, 2019
Expected holding period (in years)	0.5 years	0.5 years
Risk-free interest rate	0.2% - 1.6%	2.3% - 2.7%
Expected stock price volatility	29.2% - 55.2%	29.5% - 31.3%
Dividend yield	3.3% - 3.3%	3.1% - 3.4%

As of September 26, 2020 and September 28, 2019, there was $2.5 million and $4.0 million, respectively, of unrecognized compensation expense related to the 2008 ESPP. At the end of the current offering period in November 2020, the Company will suspend the 2008 ESPP program pursuant to the terms of the ADI Merger Agreement.

Compensation and Employee Benefit Plans [Text Block]