Stock-based compensation

The Company measures all stock-based payments at fair value and recognizes related expense within operating expenses in the consolidated statements of operations over the requisite service period (generally the vesting period). During fiscal 2014, 2013, and 2012, the Company recorded stock-based compensation expense of $45.9 million, $43.7 million and $35.7 million, respectively, for all forms of stock-based compensation awards.

Stock plan

At June 28, 2014, the Company had 11.3 million shares of common stock reserved for stock-based awards, which consisted of 1.8 million for stock options granted but not yet vested and vested but not yet exercised, 6.4 million available for future awards under plans approved by shareholders, 2.8 million for restricted stock incentive and performance shares granted but not yet vested, and 0.4 million shares available for future award under the Company's Employee Stock Purchase Plan ("ESPP").

Stock options

Stock option grants have a contractual life of ten years, vest in 25% increments on each anniversary of the grant date, commencing with the first anniversary, and require an exercise price of 100% of the fair market value at the date of grant. Stock-based compensation expense associated with stock options during fiscal 2014, 2013 and 2012 was $4.7 million, $4.0 million and $3.1 million, respectively.

The fair value of stock options is estimated as of the date of grant using the Black-Scholes model based on the assumptions in the following table. The assumption for the expected term is based on evaluations of historical and expected future employee exercise behavior. The risk-free interest rate is based on U.S. Treasury rates as of the date of grant with maturity dates approximately equal to the expected term at the grant date. The historical volatility of Avnet’s common stock is used as the basis for the volatility assumption. The Company estimates dividend yield based upon expectations of future dividends as of the grant date.



	Years Ended
	June 28, 2014		June 29, 2013		June 30, 2012
Expected term (years)	6.0		6.0		6.0
Risk-free interest rate	1.7	%	0.9	%	1.2	%
Weighted average volatility	34.3	%	35.0	%	33.7	%
Dividend yield	1.5	%	0.0	%	0.0	%

The following is a summary of the changes in outstanding options for fiscal 2014:



	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life
Outstanding at June 29, 2013	2,579,188		$	26.65	70 Months
Granted	417,692		39.04		109 Months
Exercised	(1,185,004	)	24.65		40 Months
Forfeited or expired	(2,700	)	17.47		3 Months
Outstanding at June 28, 2014	1,809,176		$	30.84	81 Months
Exercisable at June 28, 2014	820,520		$	27.40	61 Months

The weighted-average grant-date fair values of stock options granted during fiscal 2014, 2013 and 2012 were $11.45, $11.33 and $9.67, respectively.

At June 28, 2014, the aggregate intrinsic value of all outstanding stock option awards was $23.3 million and all exercisable stock options awards was $13.4 million.

The following is a summary of the changes in non-vested stock options for the fiscal year ended June 28, 2014:



	Shares		Weighted Average Grant-Date Fair Value
Non-vested stock options at June 29, 2013	944,290		$	10.21
Granted	417,692		11.45
Vested	(373,326	)	9.87
Forfeited	—		—
Non-vested stock options at June 28, 2014	988,656		$	10.86

As of June 28, 2014, there was $2.6 million of total unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted-average period of 2.2 years. The total fair value of shares vested, as of the vesting dates, during fiscal 2014, 2013 and 2012 were $3.7 million, $3.4 million and $3.6 million, respectively.

Cash received from stock option exercises during fiscal 2014, 2013 and 2012 totaled $4.7 million, $2.1 million, and $2.4 million, respectively. The impact of these cash receipts is included in “Other, net” as financing activity in the accompanying consolidated statements of cash flows.

Restricted incentive shares

Delivery of restricted incentive shares, and the associated compensation expense, is spread equally over the vesting period and is generally subject to the employee’s continued service and employment by the Company, except for employees who are retirement eligible. As of June 28, 2014, 2.0 million shares previously awarded have not yet vested. Stock-based compensation expense associated with restricted incentive shares was $34.4 million, $26.8 million and $21.0 million for fiscal years 2014, 2013 and 2012, respectively.

The following is a summary of the changes in non-vested restricted incentive shares for the fiscal year ended June 28, 2014:



	Shares		Weighted Average Grant-Date Fair Value
Non-vested restricted incentive shares at June 29, 2013	2,009,510		$	29.62
Granted	1,060,152		39.05
Vested	(972,420	)	31.33
Forfeited	(95,355	)	$	33.54
Non-vested restricted incentive shares at June 28, 2014	2,001,887		$	33.60

As of June 28, 2014, there was $51.7 million of total unrecognized compensation expense related to non-vested restricted incentive shares, which is expected to be recognized over a weighted-average period of 2.3 years. The total fair value of restricted incentive shares vested during fiscal 2014, 2013 and 2012 was $30.5 million, $25.4 million and $19.5 million, respectively.

Performance shares

Eligible employees, including Avnet’s executive officers, may receive a portion of their long-term stock-based incentive compensation through the performance share program, which allows for the vesting of shares based upon achievement of certain performance-based criteria (“Performance Share Program”). The Performance Share Program provides for the vesting to each grantee of a number of shares of Avnet’s common stock at the end of a three-year period based upon the Company’s achievement of certain performance goals established by the Compensation Committee of the Board of Directors for each Performance Share Program three-year period. The performance goals consist of measures of economic profit and total shareholder return.

During fiscal 2014, 2013 and 2012, the Company granted 0.2 million, 0.3 million and 0.3 million performance shares, respectively, of which approximately none have been forfeited. The actual amount of performance shares vested at the end of each three-year period is measured based upon the level of achievement of the defined performance goals and can range from 0% to 200% of the initial award grant. During fiscal 2014, 2013 and 2012, the Company recognized stock-based compensation expense associated with the Performance Share Program of $5.8 million, $11.9 million and $10.5 million, respectively.

Director stock-based compensation

Non-employee directors are awarded shares equal to a fixed dollar amount of Avnet common stock upon their re-election each year, as part of their director compensation. Directors may elect to receive this compensation in the form of common stock or they may elect to defer their compensation to be paid in common stock at a later date. During fiscal 2014, 2013 and 2012, compensation expense associated with the outside director stock-based compensation plan was $1.0 million, $1.0 million and $1.1 million, respectively.

Employee stock purchase plan

The Company has an Employee Stock Purchase Plan ("ESPP") under the terms of which eligible employees of the Company are allowed to purchase shares of Avnet common stock at a price equal to 95% of the fair market value on the last day of each monthly offering period. The ESPP is not compensatory based on its terms.

The Company has a policy of repurchasing shares on the open market to satisfy shares purchased by employees under the ESPP, and expects future repurchases during fiscal 2015 to be similar to the number of shares repurchased during fiscal 2014, based on current estimates of participation in the ESPP program. During each of fiscal 2014, 2013 and 2012, 0.06 million shares of common stock were purchased under the ESPP program.