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 Board of 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. After 2014, non-employee directors no longer receive non-qualified stock options.

Stock Incentive Plan

The following disclosures are based on stock options granted to Teledyne’s employees and directors. Stock option compensation expense was $3.2 million and $11.0 million for the third quarter and first nine months of 2017, and was $2.5 million and $8.8 million for the third quarter and first nine months of 2016. Employee stock option grants are charged to expense evenly over the three year vesting period. For 2017, the Company currently expects approximately $14.4 million in stock option compensation expense based on stock options currently outstanding. This amount can be impacted by employee retirements and terminations or stock options granted during the remainder of the year. The Company issues shares of common stock upon the exercise of stock options.

The following assumptions were used in the valuation of stock options granted in 2017:



	2017
Expected volatility	32.3%
Risk-free interest rate range	1.0% to 2.5%
Expected life in years	7.2
Expected dividend yield	—

Based on the assumptions used in the valuation of stock options, the grant date weighted average fair value of stock options granted in 2017 was $48.45 per share.

Stock option transactions for the third quarter and nine months ended October 1, 2017 are summarized as follows:



	2017
	Third Quarter				Nine Months
	Shares		Weighted Average Exercise Price		Shares		Weighted Average Exercise Price
Beginning balance	2,515,100		$	82.26	2,175,442		$	70.44
Granted	—		$	—	543,880		$	123.40
Exercised	(104,496	)	$	66.49	(289,178	)	$	64.84
Canceled	(13,147	)	$	104.92	(32,687	)	$	92.52
Ending balance	2,397,457		$	82.83	2,397,457		$	82.83
Options exercisable at end of period	1,545,815		$	69.77	1,545,815		$	69.77

Performance Share Plan and Restricted Stock Award Program

In the first quarter of 2017, the Company issued 876 shares of Teledyne common stock as the third and final payout under the 2012 to 2014 Performance Share Plan.

The following table shows the restricted stock activity for the first nine months of 2017:



Restricted stock:	Shares		Weighted average fair value per share
Balance, January 1, 2017	95,304		$	83.87
Granted	23,002		$	114.42
Vested	(30,704	)	$	87.98
Forfeited/Canceled	(1,068	)	$	87.59
Balance, October 1, 2017	86,534		$	90.49