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Stock-Based Compensation | 12 Months Ended
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Jun. 27, 2020
Share-based Payment Arrangement [Abstract] |
Stock-Based Compensation | Note 16. Stock-Based Compensation Stock-Based Benefit Plans Stock Option Plans On November 13, 2019, the Company's stockholders approved the amendment and restatement of the Company’s Amended and Restated 2003 Equity Incentive Plan (the 2003 Plan, as most recently amended and restated, the Amended and Restated 2003 Plan). An additional 10.5 million shares were authorized under the re-approved 2003 plan effective as of November 13, 2019. The Amended and Restated 2003 Plan provides for the granting of stock options, stock appreciation rights (SARs), dividend equivalent rights, restricted stocks, restricted stock units, performance units and performance shares, the vesting of which may be time-based or upon satisfaction of performance criteria or other conditions. As of June 27, 2020, the Company had 7.2 million shares subject to (i) stock options and Full Value Awards (defined below) issued and outstanding under the Amended and Restated 2003 Plan, (ii) inducement grants made in connection with the appointment of new CEO in fiscal 2016 and (iii) stock options and Full Value Awards issued and outstanding under various other plans the Company assumed through acquisitions. The exercise price for stock options is equal to the fair value of the underlying stock at the date of grant. The Company issues new shares of common stock upon exercise of stock options. Options generally become exercisable over a three- or four-year period and, if not exercised, expire from five to ten years after the date of grant. As of June 27, 2020, 17.8 million shares of common stock, primarily under Amended and Restated 2003 Plan, were available for grant. Employee Stock Purchase Plans In June 1998, the Company adopted the ESPP, which became effective August 1, 1998 and provides eligible employees with the opportunity to acquire an ownership interest in the Company through periodic payroll deductions and provides a discounted purchase price as well as a look-back period. The ESPP is structured as a qualified employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986. The ESPP will terminate upon the earlier of November 15, 2027 or the date on which all shares available for issuance have been sold. As of June 27, 2020, 2.9 million shares remained available for issuance. The ESPP as adopted provided for a 5% discount and a six months look-back period. In May 2019, the ESPP was amended to provide for a 15% discount. Full Value Awards Full Value Awards refer to RSUs, MSUs and PSUs that are granted without an exercise price and are converted to shares immediately upon vesting. Full Value Awards are time-based, performance-based with market conditions or other performance conditions and are expected to vest over one to four years. The fair value of the time-based RSUs is based on the closing market price of the Company’s common stock on the date the award is granted. Stock-Based Compensation The impact on the Company’s results of operations of recording stock-based compensation expense by function for fiscal 2020, 2019 and 2018 was as follows (in millions):
| Years Ended
| June 27, 2020 |  | June 29, 2019 |  | June 30, 2018
Cost of revenue | $ | 4.3 |  |  | $ | 3.8 |  |  | $ | 3.3 |
Research and development | 7.7 |  |  | 6.1 |  |  | 4.9 |
Selling, general and administrative | 32.6 |  |  | 28.3 |  |  | 22.3 |
Total stock-based compensation expense | $ | 44.6 |  |  | $ | 38.2 |  |  | $ | 30.5 |
Approximately $1.2 million of stock-based compensation expense was capitalized to inventory at June 27, 2020. Stock Option Activity The following is a summary of stock option activities (in millions, except per share amounts):
| Options Outstanding
| Number of Shares |  | Weighted-Average Exercise Price
Balance as of July 1, 2017 | 1.5 |  |  | $ | 6.16 |
Exercised | (0.2 | ) |  | 4.53 |
Balance as of June 30, 2018 | 1.3 |  |  | 6.42 |
Exercised | (0.1 | ) |  | 10.54 |
Balance as of June 29, 2019 | 1.2 |  |  | 5.95 |
Exercised | — |  |  | — |
Balance as of June 27, 2020 | 1.2 |  |  | $ | 5.95 |
Expected to vest | 1.2 |  |  | $ | 5.95 |
As of June 27, 2020, stock-based compensation expense related to stock options have been fully amortized and recognized. The following table summarizes outstanding and exercisable options as of June 27, 2020.
|  | Options Outstanding |  | Options Exercisable
Exercise Price |  | Number of Shares |  | Weighted Average Remaining Contractual Term (years) |  | Weighted Average Exercise Price |  | Aggregate Intrinsic Value (millions) |  | Number of Shares |  | Weighted Average Remaining Contractual Term (years) |  | Weighted Average Exercise Price |  | Aggregate Intrinsic Value (millions)
$5.95 |  | 1,180,257 |  |  | 3.64 |  | 5.95 |  |  | $ | 7.7 |  |  | 1,180,257 |  |  | 3.64 |  | 5.95 |  |  | $ | 7.7 |
The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value, based on the Company’s closing stock price of $12.50 as of June 27, 2020, which would have been received by the option holders had all option holders exercised their options as of that date. The total number of in-the-money options exercisable as of June 27, 2020 was 1.2 million. Employee Stock Purchase Plan Activity The expense related to the ESPP is recorded on a straight-line basis over the relevant subscription period. The following summarizes the shares purchased and issued, pursuant to the Company’s ESPP during the year ended June 27, 2020 and the fair value market value of the shares at the purchase date:
Purchase date | July 31, 2019 |  | January 31, 2020
Shares issued | 222,956 |  |  | 261,303 |
Fair market value at purchase date | $ | 10.98 |  |  | $ | 14.45 |
As of June 27, 2020, there was $0.2 million of unrecognized stock-based compensation cost related to the ESPP that remains to be amortized. The cost will be recognized in the first quarter of fiscal 2021. Full Value Awards Activity A summary of the status of the Company’s non-vested Full Value Awards as of June 27, 2020 and changes during the same period is presented below (amount in millions, except per share amounts):
| Full Value Awards
| Performance Shares (1) |  | Non-Performance Shares |  | Total Number of Shares |  | Weighted-average Grant-dated Fair Value
Non-vested at July 1, 2017 | 1.0 |  |  | 6.3 |  |  | 7.3 |  |  | $ | 7.17 |
Awards granted | 0.8 |  |  | 3.3 |  |  | 4.1 |  |  | $ | 10.01 |
Awards vested | (0.6 | ) |  | (3.6 | ) |  | (4.2 | ) |  | $ | 7.10 |
Awards forfeited | (0.1 | ) |  | (0.7 | ) |  | (0.8 | ) |  | $ | 8.01 |
Non-vested at June 30, 2018 | 1.1 |  |  | 5.3 |  |  | 6.4 |  |  | $ | 8.93 |
Awards granted | 0.5 |  |  | 3.9 |  |  | 4.4 |  |  | $ | 11.52 |
Awards vested | (0.6 | ) |  | (3.2 | ) |  | (3.8 | ) |  | $ | 8.61 |
Awards forfeited | — |  |  | (0.3 | ) |  | (0.3 | ) |  | $ | 9.63 |
Non-vested June 29, 2019 | 1.0 |  |  | 5.7 |  |  | 6.7 |  |  | $ | 10.81 |
Awards granted | 0.7 |  |  | 3.2 |  |  | 3.9 |  |  | $ | 13.76 |
Awards vested | (0.7 | ) |  | (3.4 | ) |  | (4.1 | ) |  | $ | 10.40 |
Awards forfeited | — |  |  | (0.4 | ) |  | (0.4 | ) |  | $ | 11.44 |
Non-vested June 27, 2020 | 1.0 |  |  | 5.1 |  |  | 6.1 |  |  | $ | 12.97 |
(1) | Performance Shares refer to the Company’s MSU and PSU awards, where the actual number of shares awarded upon vesting may be higher or lower than the target amount depending on the achievement of the relevant market conditions and performance goal achievement. The majority of MSUs vest
in equal annual installments over three to four years based on the attainment of certain total shareholder performance measures and the employee’s continued service through the vest date. The aggregate grant-date fair value of MSUs granted during fiscal 2020, 2019 and 2018 was estimated to be $7.7 million, $6.2 million and $4.7 million, respectively, and was calculated using a Monte Carlo simulation. The Company did no t grant any PSU awards in fiscal 2020 and 2019. The fair value of the PSUs granted in fiscal 2018 was $1.4 million. PSU awards vest based on the attainment of certain performance measures and the employee’s continued service through the vest date. As of June 27, 2020, $54.5 million of unrecognized stock-based compensation cost related to Full Value Awards remains to be amortized. That cost is expected to be recognized over an estimated amortization period of 1.7 years. Valuation Assumptions The Company estimates the fair value of the MSUs on the date of grant using a Monte Carlo simulation with the following assumptions:
| Years Ended
| June 27, 2020 |  | June 29, 2019 |  | June 30, 2018
Volatility of common stock | 30.4 | % |  | 28.9 | % |  | 30.1 | %
Average volatility of peer companies | 52.5 | % |  | 31.0 | % |  | 32.6 | %
Average correlation coefficient of peer companies | 0.1842 |  |  | 0.1383 |  |  | 0.1618 |
Risk-free interest rate | 1.5 | % |  | 2.6 | % |  | 1.4 | %
The Company did no t issue stock option grants during the fiscal years ended June 27, 2020, June 29, 2019 and June 30, 2018. The Company estimates the fair value ESPP purchase rights using a BSM valuation model. The fair value is estimated on the date of grant using the BSM option valuation model with the following weighted-average assumptions:
| Employee Stock Purchase Plans
| June 27, 2020 |  | June 29, 2019 |  | June 30, 2018
Expected term (in years) | 0.5 |  |  | 0.5 |  |  | 0.5 |
Expected volatility | 27.6 | % |  | 33.2 | % |  | 28.0 | %
Risk-free interest rate | 1.8 | % |  | 2.3 | % |  | 1.4 | %
Expected Term: The Company's expected term for stock options was calculated utilizing the simplified method in accordance with the authoritative guidance. The Company used the simplified method as the Company does not have sufficient historical share option exercise data due to the limited number of shares granted as well as changes in the Company's business following the Separation, rendering existing historical experience less reliable in formulating expectations for current grants. The Company’s expected term for ESPP purchase rights is in line with the six months offerings periods provided for under the ESPP. Expected Volatility: The expected volatility for stock options was based on the historical volatility of the Company's common stock and its peers. The expected volatility for ESPP purchase rights was based on the historical volatility of its stock price with similar expected term. Risk-Free Interest Rate: The Company bases the risk-free interest rate used in the BSM valuation method on the implied yield currently available on U.S. Treasury zero-coupon issues with an equivalent remaining term. Expected Dividend: The BSM valuation model calls for a single expected dividend yield as an input. The Company has not paid and does not anticipate paying any dividends in the near future.

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- Definition The entire disclosure for share-based payment arrangement. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 + Details
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