CAPITAL STOCK

Stock Plans

The 2005 Long-Term Incentive Compensation Plan (the “2005 Incentive Compensation Plan”) permits the award of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, deferred stock/restricted stock units, other stock units and performance shares to the Company’s key employees, officers and directors. The 2005 Incentive Compensation Plan is administered by the Compensation Committee of the Board of Directors (the “Committee”) consisting of three independent members of our Board of Directors.

The maximum number of shares available for award under the 2005 Incentive Compensation Plan is 19,824,920. The maximum number of shares that may be issued pursuant to incentive stock options may not exceed 500,000. Any shares that are subject to the award of stock options shall be counted against this limit as one share for every one share issued. Any shares that are subject to awards other than stock options shall be counted against this limit as 3.02 shares for every one share granted. The total shares available for future grant as of April 1, 2017 were 5,045,728.

Stock-Based Compensation

Compensation cost related to stock-based transactions is recognized in the consolidated financial statements based on fair value. The total amount of stock-based compensation expense, which is recorded on a straight line basis, was as follows:



(In thousands)	2017	2016	2015
Selling, general and administrative expenses	$6,894	$5,183	$11,251
Research and development	1,549	1,060	1,706
Cost of goods sold	707	706	1,138
	$9,150	$6,949	$14,095

We did not recognize an income tax benefit associated with our stock-based compensation arrangements for the fiscal years ended April 1, 2017 and April 2, 2016. We recognized an income tax benefit associated with our stock-based compensation arrangements of $4.5 million for the fiscal year ended March 28, 2015. There was no excess cash tax benefit classified as a financing cash inflow in fiscal 2017 and 2016. The excess cash tax benefit classified as a financing cash inflow in fiscal 2015 was $1.6 million.

Stock Options

Options are granted to purchase ordinary shares at prices as determined by the Committee, but in no event shall such exercise price be less than the fair market value of the common stock at the time of the grant. Options generally vest in equal installments over a four year period for employees and one year from grant for non-employee directors. Options expire not more than 7 years from the date of the grant. The grant-date fair value of options, adjusted for estimated forfeitures, is recognized as expense on a straight line basis over the requisite service period, which is generally the vesting period. Forfeitures are estimated based on historical experience.

A summary of stock option activity for the fiscal year ended April 1, 2017 is as follows:



	Options Outstanding (shares)		Weighted Average Exercise Price per Share		Weighted Average Remaining Life (years)	Aggregate Intrinsic Value ($000’s)
Outstanding at April 2, 2016	2,951,183		$	33.59	3.34	$	9,684
Granted	501,127		32.47
Exercised	(1,083,824	)	28.79
Forfeited/Canceled	(329,691	)	35.95
Outstanding at April 1, 2017	2,038,795		$	35.51	3.88	$	10,963

Exercisable at April 1, 2017	1,284,592		$	37.04	2.66	$	5,129

Vested or expected to vest at April 1, 2017	1,906,548		$	35.69	4.24	$	9,937

The total intrinsic value of options exercised was $8.3 million, $4.5 million, and $5.6 million during fiscal 2017, 2016, and 2015, respectively.

As of April 1, 2017, there was $4.9 million of total unrecognized compensation cost related to non-vested stock options. This cost is expected to be recognized over a weighted average period of 3.09 years.

The fair value was estimated using the Black-Scholes option-pricing model based on the weighted average of the high and low stock prices at the grant date and the weighted average assumptions specific to the underlying options. Expected volatility assumptions are based on the historical volatility of our common stock over the expected term of the option. The risk-free interest rate was selected based upon yields of U.S. Treasury issues with a term equal to the expected life of the option being valued. The expected life of the option was estimated with reference to historical exercise patterns, the contractual term of the option and the vesting period.

The assumptions utilized for option grants during the periods presented are as follows:



	2017			2016			2015
Volatility	24.0		%	22.8		%	22.5		%
Expected life (years)	4.9			4.9			4.9
Risk-free interest rate	1.2		%	1.4		%	1.5		%
Dividend yield	0.0		%	0.0		%	0.0		%
Fair value per option	$	7.61		$	7.40		$	7.91

Restricted Stock Units

Restricted Stock Units ("RSUs") generally vest in equal installments over a four year period for employees and one year from grant for non-employee directors. The grant-date fair value of RSUs, adjusted for estimated forfeitures, is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period. The fair market value of RSUs is determined based on the market value of the Company’s shares on the date of grant.

A summary of RSU activity for the fiscal year ended April 1, 2017 is as follows:



	Shares		Weighted Average Grant Date Fair Value
Unvested at April 2, 2016	380,871		$	34.33
Granted	212,105		32.61
Vested	(150,113	)	34.98
Forfeited	(101,222	)	33.70
Unvested at April 1, 2017	341,641		$	33.16

The weighted-average grant-date fair value of RSUs granted and total fair value of RSUs vested were as follows:



(In thousands, except per share data)	2017		2016		2015
Grant-date fair value per RSU	$	32.61	$	33.19	$	34.89
Fair value of RSUs vested	$	34.98	$	36.07	$	36.62

As of April 1, 2017, there was $8.4 million of total unrecognized compensation cost related to non-vested restricted stock units. This cost is expected to be recognized over a weighted average period of 2.87 years.

Performance Stock Units

The grant date fair value of Performance Stock Units ("PSUs"), adjusted for estimated forfeitures, is recognized as expense on a straight line basis from the grant date through the end of the performance period. The value of these PSUs is based on relative shareholder return which equals total shareholder return for the Company as compared to total shareholder return of the PSU comparison group, measured over a three year performance period. Depending on the Company's relative performance during the performance period, a recipient of the award is entitled to receive a number of ordinary shares equal to a percentage, ranging from 0% to 200%, of the award granted. As a result, we may issue up to 569,250 shares related to these awards. If the Company’s total shareholder return for the performance period is negative, then any share payout will be capped at 100% of the target award, regardless of the Company's performance relative to the Company's comparison group.

PSUs granted in fiscal 2016 and 2015 have a comparison group consisting of the Standard and Poor's ("S&P") Health Care Equipment Index, while PSUs granted in fiscal 2017 have a comparison group consisting of the S&P Small Cap 600 and the S&P Mid Cap 400 indices.

In addition to these relative shareholder return PSUs, the Company's Chief Executive Officer, upon hire, received a PSU grant with performance conditions based on the financial results of the Company and other internal metrics.

A summary of PSU activity for the fiscal year ended April 1, 2017 is as follows:



	Shares		Weighted Average Grant Date Fair Value
Unvested at April 2, 2016	102,336		$	31.38
Granted	228,884		34.07
Vested	—		—
Forfeited	(46,595	)	30.68
Unvested at April 1, 2017	284,625		$	33.66

The Company uses the Monte Carlo model to estimate the probability of satisfying the performance criteria and the resulting fair value of PSU awards with market conditions. The assumptions used in the Monte Carlo model for PSUs granted during each year were as follows:



	2017		2016		2015
Expected stock price volatility	26.39	%	22.27	%	20.08	%
Peer group stock price volatility	33.86	%	31.95	%	31.52	%
Correlation of returns	51.17	%	26.27	%	30.52	%

The weighted-average grant-date fair value of PSUs granted was $34.07, $29.20 and $35.09 in fiscal 2017, 2016, and 2015 respectively.

As of April 1, 2017, there was $7.8 million of total unrecognized compensation cost related to non-vested performance share units. This cost is expected to be recognized over a weighted average period of 2.29 years.

Market Stock Units

The Company used the Monte Carlo model to determine the fair value of each market stock unit granted in fiscal 2016 and 2015. The grant date fair value of Market Stock Units ("MSUs"), adjusted for estimated forfeitures, was recognized as expense on a straight line basis from the grant date through the end of the performance period. The value of these MSUs was based the performance of Haemonetics’ stock through March 31, 2017. Because Haemonetics' stock was below the minimum threshold price of $50 per share during the relevant measurement period, the holders received no market share units upon vesting. There were no MSUs granted in fiscal 2017.

A summary of MSU activity for the fiscal year ended April 1, 2017 is as follows:



	Shares		Weighted Average Grant Date Fair Value
Unvested at April 2, 2016	152,968		$	24.84
Granted	—		—
Vested	(116,550	)	—
Forfeited	(36,418	)	13.42
Unvested at April 1, 2017	—		$	—

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan (the “Purchase Plan”) under which a maximum of 3,200,000 shares (subject to adjustment for stock splits and similar changes) of common stock may be purchased by eligible employees. Substantially all of our full-time employees are eligible to participate in the Purchase Plan.

The Purchase Plan provides for two “purchase periods” within each of our fiscal years, the first commencing on November 1 of each year and continuing through April 30 of the next calendar year, and the second commencing on May 1 of each year and continuing through October 31 of such year. Shares are purchased through an accumulation of payroll deductions (of not less than 2% or more than 15% of compensation, as defined) for the number of whole shares determined by dividing the balance in the employee’s account on the last day of the purchase period by the purchase price per share for the stock determined under the Purchase Plan. The purchase price for shares is the lower of 85% of the fair market value of the common stock at the beginning of the purchase period, or 85% of such value at the end of the purchase period.

The fair values of shares purchased under the Employee Stock Purchase Plan are estimated using the Black-Scholes single option-pricing model with the following weighted average assumptions:



	2017		2016		2015
Volatility	31.3	%	21.1	%	23.7	%
Expected life (months)	6		6		6
Risk-free interest rate	—	%	0.2	%	0.1	%
Dividend Yield	0.0	%	0.0	%	0.0	%

The weighted average grant date fair value of the six-month option inherent in the Purchase Plan was approximately $7.79, $7.80, and $7.09 during fiscal 2017, 2016, and 2015, respectively.