Stock Based Compensation Plans

12 Months Ended

Jul. 02, 2011

Stock Based Compensation Plans [Abstract]

Stock-based compensation plans

12. Stock-based compensation plans

The Company measures all share-based payments, including grants of employee stock options, at fair value and recognizes related expense in the consolidated statement of operations over the service period (generally the vesting period). During fiscal 2011, 2010, 2009, the Company expensed $28,931,000, $28,363,000 and $18,269,000, respectively, for all stock-based compensation awards.

In August 2011, the Board of Directors approved the repurchase of up to an aggregate of $500 million of shares of the Company’s common stock through a share repurchase program.

Stock plan

The Company currently has one stock compensation plan pursuant to which it can issue new awards. The 2010 Stock Compensation Plan (“2010 Plan”) was approved by the shareholders in fiscal 2011. The 2010 Plan has a termination date of November 4, 2020 and 6,694,816 shares were available for grant at July 2, 2011. At July 2, 2011, the Company had 12,074,232 shares of common stock reserved for stock option and stock incentive programs.

Stock options

Option grants under the 2010 Plan have a contractual life of ten years, vest 25% on each anniversary of the grant date, commencing with the first anniversary, and provide for a minimum exercise price of 100% of fair market value at the date of grant. Compensation expense associated with stock options during fiscal 2011, 2010 and 2009 were $3,499,000, $3,558,000 and $4,245,000, respectively.

The fair value of options granted is estimated on 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 the U.S. Treasury rates at the date of grant with maturity dates approximately equal to the expected term at the grant date. The historical volatility of Avnet’s stock is used as the basis for the volatility assumption.

	Years Ended
	July 2,			July 3,			June 27,
	2011			2010			2009
Expected term (years)		6.0			6.0			5.75
Risk-free interest rate		1.8	%		3.0	%		3.4	%
Weighted average volatility		33.7	%		34.3	%		30.7	%
Dividend yield		—			—			—

The following is a summary of the changes in outstanding options for fiscal 2011:

						Weighted
				Weighted		Average
				Average		Remaining
				Exercise		Contractual
	Shares			Price		Life
Outstanding at July 3, 2010		3,530,118		$	21.06	56 Months
Granted		382,612		$	24.41	109 Months
Exercised		(751,396	)	$	18.69	20 Months
Forfeited or expired		(102,119	)	$	29.35	18 Months
Outstanding at July 2, 2011		3,059,215		$	21.79	59 Months
Exercisable at July 2, 2011		2,139,921		$	19.99	42 Months

The weighted-average grant-date fair values of stock options granted during fiscal 2011, 2010, and 2009 were $8.72, $9.58 and $10.21, respectively. There were no intrinsic values of share options outstanding or exercisable at July 2, 2011 and July 3, 2010. The total intrinsic values of share options exercised during fiscal 2009 was $3,000.

The following is a summary of the changes in non-vested stock options for the fiscal year ended July 2, 2011:

				Weighted
				Average
				Grant-Date
	Shares			Fair Value
Non-vested stock options at July 3, 2010		881,556		$	10.40
Granted		382,612		$	8.72
Vested		(330,200	)	$	10.37
Forfeited		(14,674	)	$	11.67
Non-vested stock options at July 2, 2011		919,294		$	9.69

As of July 2, 2011, there was $8,910,000 of total unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of 3.2 years. The total fair values of shares vested during fiscal 2011, 2010 and 2009 were $3,425,000, $3,293,000, $5,555,000, respectively.

Cash received from option exercises during fiscal 2011, 2010 and 2009 totaled $3,506,000, $4,134,000, and $563,000, respectively. The impact of these cash receipts is included in “Other, net” in financing activities in the accompanying consolidated statements of cash flows.

Incentive shares

Delivery of incentive shares, and the associated compensation expense, is spread equally over a five-year period and is subject to the employee’s continued employment by the Company. As of July 2, 2011, 1,414,784 shares previously awarded have not yet been delivered. Compensation expense associated with this program was $17,008,000, $14,614,000 and $14,883,000 for fiscal years 2011, 2010 and 2009, respectively.

The following is a summary of the changes in non-vested incentive shares for the fiscal year ended July 2, 2011:

				Weighted
				Average
				Grant-Date
	Shares			Fair Value
Non-vested incentive shares at July 3, 2010		1,258,054		$	26.57
Granted		817,965		$	25.40
Vested		(623,333	)	$	25.53
Forfeited		(37,902	)	$	26.24
Non-vested incentive shares at July 2, 2011		1,414,784		$	26.47

As of July 2, 2011, there was $33,961,000 of total unrecognized compensation cost related to non-vested incentive shares, which is expected to be recognized over a weighted-average period of 2.7 years. The total fair values of shares vested during fiscal 2011, 2010 and 2009 were $15,916,000, $14,301,000, $12,588,000, respectively.

Performance shares

Eligible employees, including Avnet’s executive officers, may receive a portion of their long-term equity-based incentive compensation through the performance share program, which allows for the award of shares of stock against performance-based criteria (“Performance Share Program”). The Performance Share Program provides for the issuance 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 performance goals established by the Compensation Committee of the Board of Directors for each three-year period. For the Performance Share Program granted in fiscal 2009, the performance goals were initially based upon a three-year cumulative increase in the Company’s absolute economic profit, as defined, over the prior three-year period and the increase in the Company’s economic profit relative to the increase in the economic profit of a group of specific technology companies. During fiscal 2010, these performance goals were modified to eliminate the absolute economic profit goal; in addition, the fiscal 2009 program was modified to limit the percentage of performance stock units vesting to a maximum of 100%.

For the Performance Share Program granted in fiscal 2011 and 2010, the performance goals are based upon a three-year cumulative increase in the Company’s economic profit relative to the increase in the economic profit of a group of specific technology companies.

During fiscal 2011, 2010 and 2009, the Company granted 380,200, 242,390 and 246,650 performance shares, respectively, to be awarded to participants in the Performance Share Program, of which 22,530 cumulatively have been forfeited. For the Performance Share Program granted in fiscal 2011 and 2010, the actual amount of performance shares issued at the end of the three-year period is determined based upon the level of achievement of the defined performance goals and can range from 0% to 200% of the initial award. As previously mentioned, the Performance Share Program granted in fiscal 2009 was limited to 100% of the initial award. The Company anticipates issuing 227,285 shares in the first quarter of fiscal 2012 based upon the goals achieved during the three-year performance period which ended July 2, 2011. During fiscal 2011 and 2010, the Company recognized compensation expense associated with the Performance Share Programs of $7,374,000 and $9,171,000, respectively. During fiscal 2009, the Company recorded a credit of $1,819,000 in selling, general and administrative expenses associated with the Performance Share Programs based upon actual performance under the 2007 Performance Share Program and based upon the probability assessment of the remaining plans.

Outside director equity 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 package. 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 2011, 2010 and 2009, compensation cost associated with the outside director stock bonus plan was $1,050,000, $1,020,000, $960,000, 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 offered options 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. Based on the terms of the ESPP, Avnet is not required to record expense in the consolidated statements of operations related to the ESPP.

The Company has a policy of repurchasing shares on the open market to satisfy shares purchased under the ESPP, and expects future repurchases during fiscal 2012 to be similar to the number of shares repurchased during fiscal 2011, based on current estimates of participation in the program. During fiscal 2011, 2010 and 2009, there were 62,329, 67,168 and 100,206 shares, respectively, of common stock issued under the ESPP program.