13. 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 2019, 2018, and 2017, the Company recorded stock-based compensation expense of $30.1 million, $24.0 million, and $53.9 million, respectively, for all forms of stock-based compensation awards. Included in the fiscal 2017 expense was $6.2 million of stock-based compensation related to discontinued operations and the divestiture of the TS business.

Stock plan

At June 29, 2019, the Company had 8.5 million shares of common stock reserved for stock-based payments, which consisted of 2.0 million shares for unvested or unexercised stock options, 4.6 million shares available for stock-based awards under plans approved by shareholders, 1.4 million shares for restricted stock units and performance share units granted but not yet vested, and 0.5 million shares available for future purchases under the Company’s Employee Stock Purchase Plan.

Stock options

Service based 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 of common stock at the date of grant. Stock-based compensation expense associated with all stock options during fiscal 2019, 2018 and 2017 was $2.2 million, $(0.2) million and $5.8 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 compared to the market value of the Company’s stock as of the grant date.


	Years Ended
	June 29,		June 30,		July 1,
	2019		2018		2017
Expected term (years)	6.0		6.0		6.0
Risk-free interest rate	2.8	%	2.0	%	1.9	%
Weighted average volatility	23.1	%	26.3	%	27.9	%
Dividend yield	1.8	%	2.0	%	1.5	%

The following is a summary of the changes in outstanding options for fiscal 2019:


		Weighted		Weighted Average
		Average		Remaining
	Shares	Exercise Price		Contractual Life
Outstanding at June 30, 2018	2,321,787	$	40.93	79 Months
Granted	301,148		48.50	110 Months
Exercised	(559,796)		36.14	49 Months
Forfeited or expired (1)	(826,500)		46.98	91 Months
Outstanding at June 29, 2019 (1)	1,236,639	$	40.90	78 Months
Exercisable at June 29, 2019	545,166	$	37.41	60 Months

(1)

The above table excludes the Performance Based Stock Options (“PBSOs”). Since the performance metrics for the PBSOs were not achieved by the end of calendar year 2018, as stated in the PBSO Terms and Conditions, although the shares have not yet been canceled, the Company has excluded from the outstanding stock options above.

The weighted-average grant-date fair values of stock options granted during fiscal 2019, 2018 and 2017 were $10.74, $8.33 and $9.46, respectively.

At June 29, 2019, the aggregate intrinsic value of all outstanding stock option awards was $6.6 million and all exercisable stock option awards was $4.4 million.

The following is a summary of the changes in non-vested stock options for the fiscal year 2019:


		Weighted
		Average
		Grant-Date
	Shares	Fair Value
Non-vested stock options at June 30, 2018	1,455,234	$	11.05
Granted	301,148		10.74
Vested	(238,409)		10.23
Forfeited (1)	(826,500)		12.05
Non-vested stock options at June 29, 2019	691,473	$	10.00

(1)

Included in forfeitures above are the PBSOs, as noted above in the changes in outstanding stock options table

As of June 29, 2019, there was $3.2 million of total unrecognized compensation cost related to stock options, which is expected to be recognized over a weighted-average period of 2.3 years. The total fair value of stock options vested, as of the vesting dates, during fiscal 2019, 2018 and 2017 were $5.7 million, $3.6 million and $3.3 million, respectively.

Cash received from stock option exercises during fiscal 2019, 2018, and 2017 totaled $20.2 million, $9.2 million, and $25.2 million, respectively. The impact of these cash receipts is included in “Other, net” within financing activities in the accompanying consolidated statements of cash flows.

Restricted stock units

Delivery of restricted stock units, and the associated compensation expense, is recognized over the vesting period and is generally subject to the employee’s continued service to the Company, except for employees who are retirement eligible under the terms of the restricted stock units. As of June 29, 2019, 0.9 million shares previously awarded have not yet vested. Stock-based compensation expense associated with restricted stock units was $23.7 million, $23.0 million and $42.4 million for fiscal years 2019, 2018 and 2017, respectively.

The following is a summary of the changes in non-vested restricted stock units during fiscal 2019:


		Weighted
		Average
		Grant-Date
	Shares	Fair Value
Non-vested restricted stock units at June 30, 2018	1,036,160	$	38.48
Granted	633,276		46.65
Vested	(623,680)		41.16
Forfeited	(136,579)		40.50
Non-vested restricted stock units at June 29, 2019	909,177	$	42.03

As of June 29, 2019, there was $21.9 million of total unrecognized compensation expense related to non-vested restricted stock units, which is expected to be recognized over a weighted-average period of 2.2 years. The total fair value of restricted stock units vested during fiscal 2019, 2018 and 2017 was $25.7 million, $26.0 million and $54.6 million, respectively.

Performance share units

Certain eligible employees, including Avnet’s executive officers, may receive a portion of their long-term stock-based 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 performance 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 performance period. The performance goals consist of a combination of measures including earnings per share, economic profit, return on capital employed and total shareholder return.

During each of fiscal 2019, 2018 and 2017, the Company granted 0.2 million performance share units. The actual amount of performance share units vested at the end of each three-year period is measured based upon the actual level of achievement of the defined performance goals and can range from 0% to 200% of the award grant. During fiscal 2019, 2018 and 2017, the Company recognized stock-based compensation expense associated with the Performance Share Program of $2.8 million, $0.2 million and $4.6 million, respectively.