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 31, 2011 and December 25, 2010:



Stock-based compensation expense by type of award
	Three Months Ended				Six Months Ended
	December 31, 2011		December 25, 2010		December 31, 2011		December 25, 2010
	(in thousands)
Cost of goods sold
Stock options	$	565	$	729	$	1,082	$	1,483
Restricted stock units	2,657		2,637		4,964		5,411
Employee stock purchase plan	470		382		903		749
	$	3,692	$	3,748	$	6,949	$	7,643
Research and development expense
Stock options	$	2,440	$	2,710	$	4,495	$	7,259
Restricted stock units	9,207		9,914		19,165		20,128
Employee stock purchase plan	1,262		1,292		2,510		2,634
	$	12,909	$	13,916	$	26,170	$	30,021
Selling, general and administrative expense
Stock options	$	1,704	$	1,659	$	3,132	$	3,288
Restricted stock units	4,778		4,847		9,903		10,005
Employee stock purchase plan	391		352		785		704
	$	6,873	$	6,858	$	13,820	$	13,997
Total stock-based compensation expense
Stock options	$	4,709	$	5,098	$	8,709	$	12,030
Restricted stock units	16,642		17,398		34,032		35,544
Employee stock purchase plan	2,123		2,026		4,198		4,087
Pre-tax stock-based compensation expense	23,474		24,522		46,939		51,661
Less: income tax effect	5,809		6,954		11,268		14,293
Net stock-based compensation expense	$	17,665	$	17,568	$	35,671	$	37,368

Fair Value

The fair value of options granted to employees under the Company's 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 if the estimates change significantly or the actual forfeitures differ from those estimates.

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 Option Plan
	Three Months Ended				Six Months Ended
	December 31, 2011		December 25, 2010		December 31, 2011		December 25, 2010
Expected holding period (in years)	5.1		5.1		5.1		5.2
Risk-free interest rate	1.0	%	1.3	%	1.3	%	1.7	%
Expected stock price volatility	38.0	%	36.3	%	38.0	%	36.8	%
Dividend yield	3.8	%	4.8	%	3.1	%	4.3	%



	ESPP
	Three Months Ended				Six Months Ended
	December 31, 2011		December 25, 2010		December 31, 2011		December 25, 2010
Expected holding period (in years)	0.5		0.5		0.5		0.5
Risk-free interest rate	0.1	%	0.2	%	0.1	%	0.2	%
Expected stock price volatility	32.2	%	30.0	%	32.2	%	30.0	%
Dividend yield	3.8	%	4.2	%	3.8	%	4.2	%

The weighted-average fair value of stock options granted was $6.05 and $4.42 per share for the three months ended December 31, 2011 and December 25, 2010, respectively. The weighted-average fair value of RSUs granted was $23.46 and $20.35 per share for the three months ended December 31, 2011 and December 25, 2010, respectively.

The weighted-average fair value of stock options granted was $5.81 and $3.81 per share for the six months ended December 31, 2011 and December 25, 2010, respectively. The weighted-average fair value of RSUs granted was $20.05 and $14.99 per share for the three months ended December 31, 2011 and December 25, 2010, respectively.

Stock Options

The following table summarizes outstanding, exercisable and vested and expected to vest stock options as of December 31, 2011 and their activity for the six months ended December 31, 2011:



	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value(1)
Balance at June 25, 2011	28,332,486		$	25.62
Options Granted	2,942,124		22.52
Options Exercised	(831,689	)	16.19
Options Cancelled	(2,286,993	)	32.32
Balance at December 31, 2011	28,155,928		$	25.03	3.8	$	153,055,757
Exercisable, December 31, 2011	15,546,715		$	30.86	2.5	$	45,579,755
Vested and expected to vest, December 31, 2011	26,494,477		$	25.39	3.6	$	141,211,913



(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 30, 2011, 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 31, 2011.

As of December 31, 2011, there was $40.9 million of total unrecognized stock compensation cost related to 12.6 million unvested stock options, which is expected to be recognized over a weighted average period of approximately 2.8 years.

Restricted Stock Units

The following table summarizes outstanding and expected to vest RSUs as of December 31, 2011 and their activity during the six months ended December 31, 2011:



	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	3,140,684
Restricted stock units released	(1,763,984	)
Restricted stock units cancelled	(609,368	)
Balance at December 31, 2011	10,768,070		2.7	$	269,478,768
Vested and expected to vest, December 31, 2011	9,924,364		2.7	$	261,010,767



(1)	Aggregate intrinsic value for RSUs represents the closing price per share of the Company's common stock on December 30, 2011, the last business day preceding the fiscal quarter-end, multiplied by the number of RSUs outstanding or expected to vest as of December 31, 2011.

The Company withheld shares totaling $7.9 million and $14.9 million in value as a result of employee withholding taxes based on the value of the RSUs on their vesting date as determined by the Company's closing stock price for the three and six months ended December 31, 2011, 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 31, 2011, there was $143.2 million of unrecognized compensation expense related to 10.8 million unvested RSUs, which is expected to be recognized over a weighted average period of approximately 2.7 years.

Employee Stock Purchase Plan

As of December 31, 2011, there was $7.2 million of unrecognized compensation expense related to the ESPP.