11. Share-Based Compensation

Share-based compensation and the related tax benefit recognized in our condensed consolidated statements of income were as follows (in thousands):


	Three Months Ended				Nine Months Ended
	March 31,				March 31,
	2014		2013		2014		2013
Cost of revenue	$	328	$	249	$	844	$	690
Research and development		4,951		3,993		13,119		11,783
Selling, general, and administrative		3,496		3,991		9,476		12,233

Total	$	8,775	$	8,233	$	23,439	$	24,706

Income tax benefit on share-based compensation	$	2,593	$	2,279	$	7,399	$	6,676

Historically, we have issued new shares in connection with our share-based compensation plans, however, treasury shares were also available for issuance as of March 31, 2014, including shares repurchased under our common stock repurchase program.

Stock Options

Stock option activity, including stock options granted, exercised, and forfeited, and weighted average exercise prices for options outstanding and exercisable, and the aggregate intrinsic value were as follows:


	Stock			Weighted		Aggregate
	Option			Average		Intrinsic
	Awards			Exercise		Value
	Outstanding			Price		(in thousands)
Balance at June 30, 2013		6,030,287		$	26.15
Granted		395,022			48.20
Exercised		(2,277,830	)		25.88
Forfeited		(126,418	)		29.70

Balance at March 31, 2014		4,021,061			28.36	$	120,197

Exercisable at March 31, 2014		2,893,995		$	25.58	$	94,416

The aggregate intrinsic value was determined using the closing price of our common stock on March 28, 2014 of $58.20 and excludes the impact of stock options that were not in-the-money.

Deferred Stock Units

DSU activity, including DSUs granted, delivered, and forfeited, and the balance and aggregate intrinsic value of DSUs was as follows:


				Aggregate
				Intrinsic
	DSU Awards			Value
	Outstanding			(in thousands)
Balance at June 30, 2013		1,005,435
Granted		535,860
Delivered		(381,783	)
Forfeited		(71,142	)

Balance at March 31, 2014		1,088,370		$	63,343

The aggregate intrinsic value was determined using the closing price of our common stock on March 28, 2014 of $58.20.

Of the shares delivered, 118,025 shares valued at $5.7 million were withheld to meet statutory minimum tax withholding requirements.

Market Stock Units

Our Amended and Restated 2010 Incentive Compensation Plan provides for the grant of MSU awards, which are a type of DSU award, to our employees, consultants, and directors. An MSU is a promise to deliver shares of our common stock at a future date based on the achievement of market-based performance requirements in accordance with the terms of the MSU grant agreement. We began granting MSUs in November 2012.

We have granted MSUs to our executive officers, which were designed to vest in three tranches with the target quantity for each tranche equal to one-third of the total MSU grant. The first tranche vests based on a one-year performance period; the second tranche vests based on a two-year performance period; and the third tranche vests based on a three-year performance period. Performance is measured based on the achievement of a specified level of total stockholder return, or TSR, relative to the TSR of the Philadelphia Semiconductor Index, or SOX Index. The potential payout ranges from 0% to 200% of the grant target quantity and is adjusted on a two-to-one ratio based on our TSR performance relative to the SOX Index TSR performance using the following formula:

(100% + ([Synaptics TSR - SOX Index TSR] x 2))

Delivery of shares earned, if any, will take place on the dates provided in the applicable MSU grant agreement, assuming the grantee is still an employee, consultant, or director of our company at the end of the applicable performance period. On the delivery date, we withhold shares to cover statutory minimum tax withholding by delivering a net quantity of shares. Until delivery of shares, the grantee has no rights as a stockholder with respect to any shares underlying the MSU award.

During the nine months ended March 31, 2014, MSU activity, including MSUs granted, delivered, and forfeited, and the balance and aggregate intrinsic value of MSUs as of March 31, 2014 was as follows:


				Aggregate
				Intrinsic
	MSU Awards			Value
	Outstanding			(in thousands)
Balance at June 30, 2013		67,400
Granted		80,730
Performance adjustment		10,782
Delivered		(33,249	)
Forfeited		(5,333	)

Balance at March 31, 2014		120,330		$	7,003

As a result of the Synaptics TSR exceeding the SOX Index TSR by 24 percentage points, we delivered 148% of the targeted shares underlying the November 2012 MSU grants, or 10,782 additional shares. Of the shares delivered, 15,148 shares valued at $670,000 were withheld to meet statutory minimum tax withholding requirements.

We valued the MSUs using the Monte Carlo simulation model and amortize the compensation expense over the three-year performance and service period on a straight-line basis. The grant date fair value for MSUs granted during the nine months ended March 31, 2014 was $60.62 per MSU. The unrecognized share-based compensation cost of our outstanding MSUs was approximately $5.1 million as of March 31, 2014, which will be recognized over a weighted average period of approximately 1.4 years. The aggregate intrinsic value was determined using the closing price of our common stock on March 28, 2014 of $58.20.