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Stock-Based Compensation
 6 Months Ended
Apr. 03, 2021
Share-based Payment Arrangement [Abstract]  
Stock-Based Compensation STOCK-BASED COMPENSATION
 
Fair Value of Stock Compensation
 
We recognize compensation expense for all share-based payment awards based on the fair value of such awards. The expense is recognized on a straight-line basis per tranche over the respective requisite service period of the awards.
 
Determining Fair Value
 
The fair values of shares purchased under the Employee Stock Purchase Plan ("ESPP") for the three and six months ended April 3, 2021 and April 4, 2020, respectively, were estimated using the following weighted-average assumptions:
Employee Stock Purchase Plan
Three Months EndedSix Months Ended
April 3, 2021April 4, 2020April 3, 2021April 4, 2020
Expected life in years0.50.50.50.5
Volatility43.4 %46.7 %48.6 %46.9 %
Risk-free interest rate0.11 %1.55 %0.11 %1.70 %
Expected dividend yield— %— %— %— %
Weighted average fair value per share$33.07 $44.61 $34.92 $44.08 

We grant performance restricted stock units to officers and certain employees. The performance restricted stock unit agreements provide for the award of performance units with each unit representing the right to receive one share of our common stock to be issued after the applicable award vesting period. The final number of units awarded, if any, for these performance grants will be determined as of the vesting dates, based upon our total shareholder return over the performance period compared to the applicable Russell Index and could range from no units to a maximum of twice the initial award units.

The weighted average fair value for the performance units granted for the six months ended April 3, 2021 and April 4, 2020 was determined using a Monte Carlo simulation model incorporating the following weighted average assumptions:
Six Months Ended
April 3, 2021April 4, 2020
Risk-free interest rate0.19 %1.60 %
Volatility51.7 %47.2 %
Weighted average fair value per share$119.54 $190.86 


We recognize the estimated cost of these awards, as determined under the simulation model, over the related service period of approximately 3 years, with no adjustment in future periods based upon the actual shareholder return over the performance period.

In addition, during fiscal 2020, we granted performance restricted stock unit awards to certain employees with vesting based on goals related to free cash flow target amounts, with the initial fair value determined based on our closing stock price on the date of grant. Such awards were granted to serve as a performance incentive with a pay-for-performance forward-looking free cash flow target for the fiscal year in recognition of the impact of the COVID-19 pandemic. The number of shares issuable under these performance units upon satisfaction of the free cash flow performance criteria was capped at 100% of target. The total stock-based compensation of these awards was adjusted based on the level of achievement of free cash flow. These awards vested, in the three months ended January 2, 2021, at 100% of target.
Stock Compensation Expense
 
The following table shows total stock-based compensation expense and related tax benefits included in the condensed consolidated statements of operations for the three and six months ended April 3, 2021 and April 4, 2020 (in thousands):
Three Months EndedSix Months Ended
April 3, 2021April 4, 2020April 3, 2021April 4, 2020
Cost of sales$1,989 $1,011 $4,261 $2,193 
Research and development1,030 894 2,229 1,455 
Selling, general and administrative6,073 6,993 14,787 13,042 
Income tax benefit(1,346)(1,006)(2,918)(1,862)
$7,746 $7,892 $18,359 $14,828 

During the three and six months ended April 3, 2021, $1.7 million and $3.6 million of stock-based compensation cost, respectively, were capitalized as part of inventory for all stock plans, $2.0 million and $4.3 million, respectively, were amortized into cost of sales and $2.1 million remained in inventory at April 3, 2021. During the three and six months ended April 4, 2020, $1.3 million and $2.3 million of stock-based compensation cost, respectively, were capitalized as part of inventory for all stock plans, $1.0 million and $2.2 million, respectively, were amortized into cost of sales and $1.5 million remained in inventory at April 4, 2020. 
 
At April 3, 2021, the total compensation cost related to unvested stock-based awards granted to employees under our stock plans but not yet recognized was approximately $63.7 million. We do not estimate forfeitures and account for them as they occur. This cost will be amortized on a straight-line basis over a weighted-average period of approximately 1.6 years.

Stock Awards Activity

The following table summarizes the activity of our time-based and performance-based restricted stock units for the first six months of fiscal 2021 (in thousands, except per share amounts):
Time Based Restricted Stock UnitsPerformance Based Restricted Stock Units
Number of
Shares		Weighted
Average
Grant Date
Fair Value		Number of
Shares		Weighted
Average
Grant Date
Fair Value
Nonvested stock at October 3, 2020419 $144.87 136 $177.54 
Granted284 132.28 64 119.43 
Vested (1)
(214)145.92 (12)118.45 
Forfeited(7)137.63 (30)315.05 
Nonvested stock at April 3, 2021482 $137.09 158 $131.90 
(1) Service-based restricted stock units vested during the fiscal year. Performance-based restricted stock units included at 100% of target goal. Under the terms of the market based awards, the recipient may earn between 0% and 200% of the award. Under the terms of the performance based awards based on free cash flow targets, the recipient may earn between 0% and 100% of the award.