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Stock Plans
12 Months Ended
Jan. 01, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]  
Stock Plans
Stock Plans

Stock-Based Compensation:
 
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 consolidated statements of operations for fiscal years 2016, 2015 and 2014:
 
 
January 1,
2017
 
January 3,
2016
 
December 28,
2014
 
(In thousands)
Cost of product and service revenue
$
1,031

 
$
1,272

 
$
1,380

Research and development expenses
902

 
526

 
484

Selling, general and administrative expenses
15,225

 
15,480

 
12,193

Total stock-based compensation expense
$
17,158

 
$
17,278

 
$
14,057


 
The total income tax benefit recognized in the consolidated statements of operations for stock-based compensation was $10.5 million in fiscal year 2016, $5.8 million in fiscal year 2015 and $5.4 million in fiscal year 2014. Stock-based compensation costs capitalized as part of inventory were $0.3 million and $0.2 million as of January 1, 2017 and January 3, 2016, respectively. The excess tax benefit recognized from stock compensation, classified as a financing cash activity, was $2.4 million in fiscal year 2015.
 
Stock Options:    The Company has granted options to purchase common shares at prices equal to the market price of the common shares on the date the option is granted. Conditions of vesting are determined at the time of grant. Options are generally exercisable in equal annual installments over a period of three years, and will generally expire seven years after the date of grant. Options replaced in association with business combination transactions are generally issued with the same terms of the respective plans under which they were originally issued.
 
The fair value of each option grant is estimated using the Black-Scholes option pricing model. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs. Expected volatility was calculated based on the historical and implied volatility of the Company’s stock. The average expected life was based on the contractual term of the option and historic exercise experience. The risk-free interest rate is based on United States Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant. The Company’s weighted-average assumptions used in the Black-Scholes option pricing model were as follows for the fiscal years ended:
 
 
January 1,
2017
 
January 3,
2016
 
December 28,
2014
Risk-free interest rate
1.7
%
 
1.3
%
 
1.5
%
Expected dividend yield
0.6
%
 
0.6
%
 
0.7
%
Expected lives
5 years

 
5 years

 
5 years

Expected stock volatility
25.2
%
 
26.5
%
 
30.9
%


The following table summarizes stock option activity for the fiscal year ended January 1, 2017:
 
 
January 1, 2017
 
Number
of
Shares
 
Weighted-
Average Exercise
Price
 
(Shares in thousands)
Outstanding at beginning of year
2,372

 
$
33.12

Granted
607

 
44.79

Exercised
(576
)
 
25.04

Canceled
(1
)
 
12.95

Forfeited
(115
)
 
45.50

Outstanding at end of year
2,287

 
$
37.64

Exercisable at end of year
1,342

 
$
32.46


 
The aggregate intrinsic value for stock options outstanding at January 1, 2017 was $33.4 million with a weighted-average remaining contractual term of 3.9 years. The aggregate intrinsic value for stock options exercisable at January 1, 2017 was $26.5 million with a weighted-average remaining contractual term of 2.6 years. At January 1, 2017, there were 2.3 million stock options that were vested, and expected to vest in the future, with an aggregate intrinsic value of $33.4 million and a weighted-average remaining contractual term of 3.9 years.
 
The weighted-average per-share grant-date fair value of options granted during fiscal years 2016, 2015 and 2014 was $10.20, $11.02, and $11.86, respectively. The total intrinsic value of options exercised during fiscal years 2016, 2015 and 2014 was $16.6 million, $25.9 million, and $22.0 million, respectively. Cash received from option exercises for fiscal years 2016, 2015 and 2014 was $14.4 million, $14.9 million, and $24.5 million, respectively. The total compensation expense recognized related to the Company’s outstanding options was $4.4 million in fiscal year 2016, $4.1 million in fiscal year 2015 and $4.9 million in fiscal year 2014.
 
There was $5.6 million of total unrecognized compensation cost related to nonvested stock options granted as of January 1, 2017. This cost is expected to be recognized over a weighted-average period of 1.8 years.
 
Restricted Stock Awards:    The Company has awarded shares of restricted stock and restricted stock units to certain employees and non-employee directors at no cost to them, which cannot be sold, assigned, transferred or pledged during the restriction period. The restricted stock and restricted stock units vest through the passage of time, assuming continued employment. The fair value of the award at the time of the grant is expensed on a straight line basis primarily in selling, general and administrative expenses over the vesting period, which is generally 3 years. These awards were granted under the Company’s 2009 Plan. Recipients of the restricted stock have the right to vote such shares and receive dividends.
 
The following table summarizes restricted stock award activity for the fiscal year ended January 1, 2017:
 
 
January 1, 2017
 
Number
of
Shares
 
Weighted-
Average
Grant-
Date Fair
Value
 
(Shares in thousands)
Nonvested at beginning of year
502

 
$
42.61

Granted
296

 
47.60

Vested
(214
)
 
39.23

Forfeited
(63
)
 
45.52

Nonvested at end of year
521

 
$
46.48


 
The fair value of restricted stock awards vested during fiscal years 2016, 2015 and 2014 was $8.4 million, $7.8 million, and $7.1 million, respectively. The total compensation expense recognized related to the restricted stock awards was $9.3 million in fiscal year 2016, $8.4 million in fiscal year 2015 and $6.8 million in fiscal year 2014.
 
As of January 1, 2017, there was $12.4 million of total unrecognized compensation cost, net of forfeitures, related to nonvested restricted stock awards. That cost is expected to be recognized over a weighted-average period of 1.4 years.
 
Performance Units:    The Company’s performance unit program provides a cash award based on the achievement of specific performance criteria. A target number of units are granted at the beginning of a three-year performance period. The number of units earned at the end of the performance period is determined by multiplying the number of units granted by a performance factor ranging from 0% to 200%. Awards are determined by multiplying the number of units earned by the stock price at the end of the performance period, and are paid in cash and accounted for as a liability based award. The compensation expense associated with these units is recognized over the period that the performance targets are expected to be achieved. The Company granted 72,164 performance units, 66,509 performance units, and 79,463 performance units during fiscal years 2016, 2015 and 2014, respectively. The weighted-average per-share grant-date fair value of performance units granted during fiscal years 2016, 2015 and 2014 was $42.79, $46.83, and $42.84, respectively. During fiscal years 2016, 2015 and 2014, 19,584, 8,860 and 35,954 performance units were forfeited, respectively. The total compensation expense related to performance units was $2.7 million, $4.0 million, and $1.6 million for fiscal years 2016, 2015 and 2014, respectively. As of January 1, 2017, there were 190,700 performance units outstanding subject to forfeiture, with a corresponding liability of $6.1 million recorded in accrued expenses and long-term liabilities.
 
Stock Awards:    The Company’s stock award program provides non-employee directors an annual equity award. For fiscal years 2016, 2015 and 2014 the award equaled the number of shares of the Company’s common stock which has an aggregate fair market value of $100,000 on the date of the award. The stock award is prorated for non-employee directors who serve for only a portion of the year. The compensation expense associated with these stock awards is recognized when the stock award is granted. In fiscal years 2016, 2015 and 2014, each non-employee director was awarded 1,821 shares, 1,953 shares, and 2,373 shares, respectively. The Company also granted 2,672 shares to new non-employee directors during fiscal year 2016. The weighted-average per-share grant-date fair value of stock awards granted during fiscal years 2016, 2015 and 2014 was $54.58, $51.01, and $42.14, respectively. In each of fiscal years 2016, 2015 and 2014, the total compensation expense recognized related to these stock awards was $0.8 million.

Employee Stock Purchase Plan:

In April 1999, the Company’s shareholders approved the 1998 Employee Stock Purchase Plan. In April 2005, the Compensation and Benefits Committee of the Board voted to amend the Employee Stock Purchase Plan, effective July 1, 2005, whereby participating employees have the right to purchase common stock at a price equal to 95% of the closing price on the last day of each six-month offering period. The number of shares which an employee may purchase, subject to certain aggregate limits, is determined by the employee’s voluntary contribution, which may not exceed 10% of the employee’s base compensation. During fiscal year 2016, the Company issued 49,578 shares of common stock under the Company’s Employee Stock Purchase Plan at a weighted-average price of $49.67 per share. During fiscal year 2015, the Company issued 78,294 shares under this plan at a weighted-average price of $47.08 per share. During fiscal year 2014, the Company issued 60,870 shares under this plan at a weighted-average price of $41.71 per share. At January 1, 2017 there remains available for sale to employees an aggregate of 0.9 million shares of the Company’s common stock out of the 5.0 million shares authorized by shareholders for issuance under this plan.