Stock-Based Compensation

Stock-based compensation expense for each employee and director is presented in the same income statement caption as their cash compensation. Stock-based compensation expense by income statement caption and the related income tax benefit were as follows:



	Year Ended December 31,
(In thousands)	2015		2014		2013
Cost of sales	$	39	$	16	$	1
Research and development	428		323		226
Selling, general and administrative:
Employees	5,946		4,927		4,494
Outside directors	1,500		1,178		621
Total stock-based compensation expense	$	7,913	$	6,444	$	5,342

Income tax benefit	$	2,366	$	1,897	$	1,575

Stock Options

The assumptions we utilized in the Black-Scholes option pricing model and the resulting weighted average fair value of stock option grants were the following:



	Year Ended December 31,
	2015			2014			2013
Weighted average fair value of grants	$	24.47		$	13.64		$	9.26
Risk-free interest rate	1.39		%	1.29		%	0.95		%
Expected volatility	43.36		%	44.84		%	53.39		%
Expected life in years	4.57			4.56			5.20

Stock option activity was as follows:



	2015							2014							2013
	Number of Options (in 000's)		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Terms (in years)	Aggregate Intrinsic Value (in 000's)		Number of Options (in 000's)		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Terms (in years)	Aggregate Intrinsic Value (in 000's)		Number of Options (in 000's)		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Terms (in years)	Aggregate Intrinsic Value (in 000's)
Outstanding at beginning of the year	650		$	25.56				924		$	22.04				1,412		$	20.56
Granted	77		64.81					133		35.28					201		19.68
Exercised	(71	)	23.97			$	2,193	(391	)	20.76			$	10,651	(679	)	18.22			$	8,355
Forfeited/canceled/expired	(8	)	20.64					(16	)	20.77					(10	)	24.75
Outstanding at end of the year ⁽¹⁾	648		$	30.50	4.85	$	14,556	650		$	25.56	5.59	$	25,653	924		$	22.04	6.09	$	14,854
Vested and expected to vest at the end of the year ⁽¹⁾	648		$	30.50	4.85	$	14,551	649		$	25.57	5.58	$	25,618	921		$	22.05	6.08	$	14,791
Exercisable at the end of the year ⁽¹⁾	493		$	25.03	4.51	$	12,979	421		$	23.84	4.87	$	17,345	671		$	22.62	5.14	$	10,388

⁽¹⁾

The aggregate intrinsic value represents the total pre-tax value (the difference between our closing stock price on the last trading day of 2015, 2014, and 2013 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had they all exercised their options on December 31, 2015, 2014, and 2013. This amount will change based on the fair market value of our stock.

During the years ended December 31, 2015, 2014, and 2013, there were no modifications made to outstanding stock options.

Cash received from option exercises for the years ended December 31, 2015, 2014, and 2013 was $1.7 million, $8.1 million, and $12.4 million, respectively. The actual tax benefit realized from option exercises was $0.5 million, $3.1 million and $2.3 million for the years ended December 31, 2015, 2014, and 2013, respectively.

Significant option groups outstanding at December 31, 2015 and the related weighted average exercise price and life information were as follows:



	Options Outstanding				Options Exercisable
Range of Exercise Prices	Number Outstanding (in 000’s)	Weighted-Average Remaining Years of Contractual Life	Weighted-Average Exercise Price		Number Exercisable (in 000’s)	Weighted-Average Exercise Price
$17.60 to $21.95	279	5.32	$	20.23	257	$	20.26
24.91 to 29.25	163	3.26	27.99		163	27.99
35.28 to 35.35	128	5.05	35.28		73	35.28
51.38 to 65.54	78	6.17	64.81		—	—
	648	4.85	$	30.50	493	$	25.03

As of December 31, 2015, we expect to recognize $2.1 million of total unrecognized pre-tax stock-based compensation expense related to non-vested stock options over a remaining weighted-average life of 1.8 years.

On January 1, 2016, certain executive employees were granted 93,135 stock options in connection with the 2015 annual review cycle. The options were granted as part of long-term incentive compensation to assist us in meeting our performance and retention objectives and are subject to a three-year vesting period (33.33% on January 1, 2017 and 8.33% each quarter thereafter). The total grant date fair value of these awards was $1.8 million.

On February 10, 2016, members of the board of directors were granted 150,000 stock options. The options are subject to a three-year vesting period (33.33% per year beginning on February 10, 2017). The total grant date fair value of these awards was $2.6 million.

Restricted Stock

Non-vested restricted stock award activity was as follows:



	2015			2014			2013
	Shares Granted (in 000’s)		Weighted-Average Grant Date Fair Value	Shares Granted (in 000’s)		Weighted-Average Grant Date Fair Value	Shares Granted (in 000’s)		Weighted-Average Grant Date Fair Value
Non-vested at beginning of the year	266		39.28	285		24.64	270		$	18.72
Granted	138		53.64	155		51.29	196		28.86
Vested	(178	)	35.09	(171	)	25.78	(178	)	20.44
Forfeited	(1	)	63.19	(3	)	37.78	(3	)	15.49
Non-vested at end of the year	225		51.31	266		39.28	285		24.64

As of December 31, 2015, we expect to recognize $10.7 million of total unrecognized pre-tax stock-based compensation expense related to non-vested restricted stock awards over a weighted-average life of 2.1 years.

On January 1, 2016, certain executive employees were granted 34,060 restricted stock awards in connection with the 2015 annual review cycle. The awards were granted as part of long-term incentive compensation to assist us in meeting our performance and retention objectives and are subject to a three-year vesting period (33.33% on January 1, 2017 and 8.33% each quarter thereafter). The total grant date fair value of these awards was $1.8 million.

Stock Incentive Plans

Our active stock-based incentive plans include those adopted in 1998, 1999, 2002, 2003, 2006, 2010 and 2014 ("Stock Incentive Plans"). Under the Stock Incentive Plans, we may grant stock options, stock appreciation rights, restricted stock units, performance stock units, or any combination thereof for a period of ten years from the approval date of each respective plan, unless the plan is terminated by resolution of our Board of Directors. No stock appreciation rights or performance stock units have been awarded under our Stock Incentive Plans. Only directors and employees meeting certain employment qualifications are eligible to receive stock-based awards.

The grant price of stock option and restricted stock awards granted under our Stock Incentive Plans is the average of the high and low trades of our stock on the grant date. We prohibit the re-pricing or backdating of stock options. Our stock options become exercisable in various proportions over a three- or four-year time frame. Stock options have a maximum ten-year term. Restricted stock awards vest in various proportions over a one- to three-year time period.

Detailed information regarding our active Stock Incentive Plans was as follows at December 31, 2015:



Name	Approval Date	Initial Shares Available for Grant Under the Plan	Remaining Shares Available for Grant Under the Plan	Outstanding Shares Granted Under the Plan
1998 Stock Incentive Plan	5/27/1998	630,000	—	3,400
1999A Stock Incentive Plan	10/7/1999	1,000,000	—	20,500
2002 Stock Incentive Plan	2/5/2002	1,000,000	—	480
2003 Stock Incentive Plan	6/18/2003	1,000,000	—	63,241
2006 Stock Incentive Plan	6/13/2006	1,000,000	—	196,357
2010 Stock Incentive Plan	6/15/2010	1,000,000	13,219	379,673
2014 Stock Incentive Plan	6/12/2014	1,100,000	821,820	209,180
			835,039	872,831