Stock-Based Compensation Plans

3 Months Ended

Mar. 29, 2015

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation Plans

Stock-Based Compensation Plans

Teledyne has long-term incentive plans pursuant to which it has granted non-qualified stock options, restricted stock and performance shares to certain employees. The Company also has non-employee director stock compensation plans, pursuant to which non-qualified stock options and common stock, and beginning in 2015 restricted stock units, have been issued to its directors.

Stock Incentive Plan

The following disclosures are based on stock options granted to Teledyne’s employees and directors. The Company recorded a total of $3.8 million in stock option compensation expense for the first quarter of 2015 and $2.6 million for the first quarter of 2014. Employee stock option grants are charged to expense evenly over the three year vesting period. Director stock option grants are charged to expense evenly over the one-year vesting period. For 2015, the Company currently expects approximately $12.8 million in stock option compensation expense based on stock options already granted. This does not include any estimated expense for stock options that may be granted during the remainder of the year and can be impacted by employee retirements and terminations. The Company issues shares of common stock upon the exercise of stock options.

The Company uses its historical stock price volatility on the Company stock to compute the expected volatility for purposes of valuing stock options issued. The period used for the historical stock price corresponded to the expected term of the options and was seven years, five months. The expected dividend yield is based on Teledyne’s practice of not paying dividends. The risk-free rate of return is based on the yield of U. S. Treasury Strips with terms equal to the expected life of the options as of the grant date. The expected life in years is based on historical actual stock option exercise experience.

No stock options have been granted in 2015. The following assumptions were used in the valuation of stock options granted in 2014:

	2014
Expected dividend yield	—
Expected volatility	30.7	%
Risk-free interest rate	1.7	%
Expected life in years	7.4

Based on the assumptions in the table above, the grant date weighted average fair value of stock options granted in 2014 was $36.19.

Stock option transactions for Teledyne’s employee stock option plans for the first quarter ended March 29, 2015 are summarized as follows:

	2015
	First Quarter
	Shares		Weighted Average Exercise Price
Beginning balance	2,499,708		$	63.85
Exercised	(61,333	)	$	39.04
Canceled	(10,846	)	$	69.26
Ending balance	2,427,529		$	64.45
Options exercisable at end of period	1,413,872		$	50.31

Stock option transactions for Teledyne’s non-employee director stock option plans for the first quarter ended March 29, 2015 are summarized as follows:

	2015
	First Quarter
	Shares		Weighted Average Exercise Price
Beginning balance	351,169		$	51.76
Exercised	(9,540	)	$	29.75
Ending balance	341,629		$	52.38
Options exercisable at end of period	304,052		$	47.57

Performance Share Plan and Restricted Stock Award Program

For the first of three annual installments of the 2012 to 2014 Performance Share Plan, 1,944 shares of Teledyne common stock were issued in the first quarter of 2015. The remaining 8,309 shares are expected to be issued in approximately two equal annual installments. Also in the first quarter of 2015, the restriction was removed for 29,642 shares of Teledyne common stock and 7,662 shares were forfeited related to the 2012 to 2014 Restricted Stock Award Program. In the first three months of 2015, the Company granted 33,411 shares of restricted stock at a weighted average fair value of $100.80 per share.