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, performance restricted stock units, performance units and stock awards, included in the Company’s condensed consolidated statements of operations for the three and six months ended July 2, 2017 and July 3, 2016:



	Three Months Ended				Six Months Ended
	July 2, 2017		July 3, 2016		July 2, 2017		July 3, 2016
	(In thousands)
Cost of revenue	$	281	$	304	$	541	$	494
Research and development expenses	377		231		704		400
Selling, general and administrative expenses	6,183		5,294		10,522		8,781
Total stock-based compensation expense	$	6,841	$	5,829	$	11,767	$	9,675

The total income tax benefit recognized in the condensed consolidated statements of operations for stock-based compensation was $5.1 million and $8.0 million for the three and six months ended July 2, 2017, respectively. The total income tax benefit recognized in the condensed consolidated statements of operations for stock-based compensation was $5.3 million and $7.3 million for the three and six months ended July 3, 2016, respectively. Stock-based compensation costs capitalized as part of inventory were $0.4 million and $0.6 million as of July 2, 2017 and July 3, 2016, 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
	July 2, 2017		July 3, 2016
Risk-free interest rate	1.8	%	1.3	%
Expected dividend yield	0.5	%	0.6	%
Expected term	5 years		5 years
Expected stock volatility	22.4	%	25.2	%

The following table summarizes stock option activity for the six months ended July 2, 2017:



	Number of Shares		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term	Total Intrinsic Value
	(In thousands)				(In years)	(In millions)
Outstanding at January 1, 2017	2,287		$	37.64
Granted	451		53.54
Exercised	(432	)	30.64
Forfeited	(6	)	50.48
Outstanding at July 2, 2017	2,300		$	42.04	4.3	$	46.2
Exercisable at July 2, 2017	1,359		$	37.09	3.2	$	34.0

The weighted-average per-share grant-date fair value of options granted during the three and six months ended July 2, 2017 was $13.27 and $11.74, respectively. The weighted-average per-share grant-date fair value of options granted during the three and six months ended July 3, 2016 was $12.49 and $10.13, respectively. The total intrinsic value of options exercised during the three and six months ended July 2, 2017 was $9.1 million and $12.2 million, respectively. The total intrinsic value of options exercised during the three and six months ended July 3, 2016 was $10.3 million and $11.9 million, respectively. Cash received from option exercises for the six months ended July 2, 2017 and July 3, 2016 was $13.2 million and $9.0 million, respectively.

The total compensation expense recognized related to the Company’s outstanding options was $1.2 million and $2.4 million for the three and six months ended July 2, 2017, respectively, and $1.2 million and $2.3 million for the three and six months ended July 3, 2016, respectively.

There was $8.4 million of total unrecognized compensation cost related to nonvested stock options granted as of July 2, 2017. This cost is expected to be recognized over a weighted-average period of 2.1 years.

Restricted Stock Awards: The following table summarizes restricted stock award activity for the six months ended July 2, 2017:



	Number of Shares		Weighted- Average Grant- Date Fair Value
	(In thousands)
Nonvested at January 1, 2017	521		$	46.48
Granted	217		53.92
Vested	(204	)	45.57
Forfeited	(15	)	49.00
Nonvested at July 2, 2017	519		$	49.87

The fair value of restricted stock awards vested during the three and six months ended July 2, 2017 was $1.5 million and $9.3 million, respectively. The fair value of restricted stock awards vested during the three and six months ended July 3, 2016 was $0.9 million and $7.8 million, respectively. The total compensation expense recognized related to the Company’s outstanding restricted stock awards was $3.0 million and $5.4 million for the three and six months ended July 2, 2017, respectively, and $2.8 million and $4.9 million for the three and six months ended July 3, 2016, respectively.

As of July 2, 2017, there was $18.4 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 1.8 years.

Performance Restricted Stock Units: As part of the Company's executive compensation program, the Company granted 54,337 performance restricted stock units during the six months ended July 2, 2017, that will vest based on performance of the Company. The weighted-average per-share grant date fair value of performance restricted stock units granted during the six months ended July 2, 2017 was $52.78. During the six months ended July 2, 2017, no performance restricted stock units were forfeited. The total compensation expense recognized related to the performance restricted stock units was $0.2 million and $0.5 million for the three and six months ended July 2, 2017, respectively. As of July 2, 2017, there were 54,337 performance restricted stock units outstanding.

Performance Units: As part of the Company's executive compensation program, the Company granted 49,845 and 77,453 performance units during the six months ended July 2, 2017 and July 3, 2016, respectively. The weighted-average per-share grant-date fair value of performance units granted during the six months ended July 2, 2017 and July 3, 2016 was $52.69 and $42.47, respectively. During the six months ended July 2, 2017 and July 3, 2016, no performance units were forfeited. The total compensation expense recognized related to performance units was $1.7 million and $2.8 million for the three and six months ended July 2, 2017, respectively, and $1.1 million and $1.7 million for the three and six months ended July 3, 2016, respectively. As of July 2, 2017, there were 179,620 performance units outstanding and subject to forfeiture, with a corresponding liability of $5.7 million recorded in accrued expenses and other current liabilities.

Stock Awards: The Company’s stock award program provides non-employee directors an annual equity award. The Company granted 1,598 and 1,821 shares to each non-employee member of the Board during the six months ended July 2, 2017 and July 3, 2016, respectively. The weighted-average per-share grant-date fair value of the stock awards granted during the six months ended July 2, 2017 and July 3, 2016 was $62.56 and $54.91, respectively. The total compensation expense recognized related to these stock awards was $0.7 million for each of the six months ended July 2, 2017 and July 3, 2016.

Employee Stock Purchase Plan: During the six months ended July 2, 2017, the Company issued 18,483 shares of common stock under the Company's Employee Stock Purchase Plan at a weighted-average price of $64.73 per share. During the six months ended July 3, 2016, the Company issued 23,898 shares of common stock under the Company's Employee Stock Purchase Plan at a weighted-average price of $49.80 per share. At July 2, 2017, an aggregate of 0.9 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.