Stock Plans

In addition to the Company's Employee Stock Purchase Plan, the Company utilizes one stock-based compensation plan, the 2009 Incentive Plan (the “2009 Plan”). Under the 2009 Plan, 10.0 million shares of the Company's common stock are authorized for stock option grants, restricted stock awards, performance units and stock grants as part of the Company’s compensation programs. In addition to shares of the Company’s common stock originally authorized for issuance under the 2009 Plan, the 2009 Plan includes shares of the Company’s common stock previously granted under the Amended and Restated 2001 Incentive Plan and the 2005 Incentive Plan that were canceled or forfeited without the shares being issued.

The following table summarizes total pre-tax compensation expense recognized related to the Company’s stock options, restricted stock, restricted stock units, performance units and stock grants, net of estimated forfeitures, included in the Company’s condensed consolidated statements of operations for the three and six months ended June 28, 2015 and June 29, 2014:



	Three Months Ended				Six Months Ended
	June 28, 2015		June 29, 2014		June 28, 2015		June 29, 2014
	(In thousands)
Cost of product and service revenue	$	392	$	337	$	640	$	671
Research and development expenses	141		220		300		360
Selling, general and administrative expenses	3,673		4,246		7,253		8,288
Total stock-based compensation expense	$	4,206	$	4,803	$	8,193	$	9,319

The total income tax benefit recognized in the condensed consolidated statements of operations for stock-based compensation was $1.4 million and $2.7 million for the three and six months ended June 28, 2015, respectively. The total income tax benefit recognized in the condensed consolidated statements of operations for stock-based compensation was $1.8 million and $3.5 million for the three and six months ended June 29, 2014, respectively. Stock-based compensation costs capitalized as part of inventory were $0.3 million and $0.4 million as of June 28, 2015 and June 29, 2014, respectively.

Stock Options: The fair value of each option grant is estimated using the Black-Scholes option pricing model. The Company’s weighted-average assumptions used in the Black-Scholes option pricing model were as follows:



	Three and Six Months Ended
	June 28, 2015		June 29, 2014
Risk-free interest rate	1.3	%	1.5	%
Expected dividend yield	0.6	%	0.7	%
Expected term	5 years		5 years
Expected stock volatility	26.5	%	30.9	%

The following table summarizes stock option activity for the six months ended June 28, 2015:



	Number of Shares		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term	Total Intrinsic Value
	(In thousands)				(In years)	(In millions)
Outstanding at December 28, 2014	2,828		$	26.11
Granted	484		46.22
Exercised	(728	)	17.39
Canceled	(3	)	22.49
Forfeited	(78	)	30.63
Outstanding at June 28, 2015	2,503		$	32.40	4.1	$	49.3
Exercisable at June 28, 2015	1,619		$	26.33	3.0	$	41.7
Vested and expected to vest in the future	2,435		$	32.14	4.0	$	48.6

The Company did not grant any options during the three months ended June 28, 2015. The weighted-average per-share grant-date fair value of options granted during the six months ended June 28, 2015 was $10.99. The weighted-average per-share grant-date fair value of options granted during the three and six months ended June 29, 2014 was $11.80 and $11.84, respectively. The total intrinsic value of options exercised during the three and six months ended June 28, 2015 was $4.3 million and $21.9 million, respectively. The total intrinsic value of options exercised during the three and six months ended June 29, 2014 was $11.1 million and $17.6 million, respectively. Cash received from option exercises for the six months ended June 28, 2015 and June 29, 2014 was $12.7 million and $19.5 million, respectively.

The total compensation expense recognized related to the Company’s outstanding options was $1.1 million and $1.9 million for the three and six months ended June 28, 2015, respectively, and $1.4 million and $2.9 million for the three and six months ended June 29, 2014, respectively.

There was $8.1 million of total unrecognized compensation cost related to nonvested stock options granted as of June 28, 2015. This cost is expected to be recognized over a weighted-average period of 2.1 years and will be adjusted for any future changes in estimated forfeitures.

Restricted Stock Awards: The following table summarizes restricted stock award activity for the six months ended June 28, 2015:



	Number of Shares		Weighted- Average Grant- Date Fair Value
	(In thousands)
Nonvested at December 28, 2014	558		$	35.51
Granted	220		46.59
Vested	(229	)	30.38
Forfeited	(25	)	40.02
Nonvested at June 28, 2015	524		$	42.18

The weighted-average per-share grant-date fair value of restricted stock awards granted during the three and six months ended June 28, 2015 was $51.13 and $46.59, respectively. The weighted-average per-share grant-date fair value of restricted stock awards granted during the three and six months ended June 29, 2014 was $43.19 and $42.61, respectively. The fair value of restricted stock awards vested during the three and six months ended June 28, 2015 was $0.3 million and $7.0 million, respectively. The fair value of restricted stock awards vested during the three and six months ended June 29, 2014 was $0.2 million and $7.0 million, respectively. The total compensation expense recognized related to the Company’s outstanding restricted stock awards was $2.3 million and $4.3 million for the three and six months ended June 28, 2015, respectively, and $1.9 million and $3.9 million for the three and six months ended June 29, 2014, respectively.

As of June 28, 2015, there was $15.0 million of total unrecognized compensation cost related to nonvested restricted stock awards. That cost is expected to be recognized over a weighted-average period of 1.7 years.

Performance Units: The Company granted 66,509 and 79,463 performance units during the six months ended June 28, 2015 and June 29, 2014, respectively, as part of the Company’s executive incentive program. The weighted-average per-share grant-date fair value of performance units granted during the six months ended June 28, 2015 and June 29, 2014 was $46.83 and $42.84, respectively. During the six months ended June 28, 2015, 8,860 performance units were forfeited. During the six months ended June 29, 2014, no performance units were forfeited. The total compensation expense recognized related to performance units was $0.1 million and $1.2 million for the three and six months ended June 28, 2015, respectively, and expenses of $0.7 million and $1.7 million for the three and six months ended June 29, 2014, respectively. As of June 28, 2015, there were 201,415 performance units outstanding and subject to forfeiture, with a corresponding liability of $3.3 million recorded in accrued expenses and other current liabilities.

Stock Awards: The Company generally grants stock awards only to non-employee members of the Board. The Company granted 1,953 shares and 2,373 shares to each non-employee member of the Board during the six months ended June 28, 2015 and June 29, 2014, respectively. The Company also granted 544 shares to a new non-employee member of the Board during the three months ended March 29, 2015. The weighted-average per-share grant-date fair value of the stock awards granted during the six months ended June 28, 2015 and June 29, 2014 was $51.01 and $42.14, respectively. The total compensation expense recognized related to these stock awards was $0.7 million for each of the six months ended June 28, 2015 and June 29, 2014.

Employee Stock Purchase Plan: During the six months ended June 28, 2015, the Company issued 29,565 shares of common stock under the Company's Employee Stock Purchase Plan at a weighted-average price of $41.54 per share. During the six months ended June 29, 2014, the Company issued 31,854 shares of common stock under the Company's Employee Stock Purchase Plan at a weighted-average price of $39.17 per share. At June 28, 2015, an aggregate of 1.0 million shares of the Company’s common stock remained available for sale to employees out of the 5.0 million shares authorized by shareholders for issuance under this plan.