Stock Plans

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, as well as shares of the Company’s common stock previously granted under the Amended and Restated 2001 Incentive Plan and the 2005 Incentive Plan that were cancelled or forfeited without the shares being issued, are authorized for stock option grants, restricted stock awards, performance units and stock grants as part of the Company’s compensation programs (the “Plan”). The 2009 Plan is described in more detail in the Company’s definitive proxy statement filed with the SEC on March 20, 2009 and Note 18 to the Company’s audited consolidated financial statements filed with the 2010 Form 10-K.

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 income statements for the three and nine months ended October 2, 2011 and October 3, 2010:



	Three Months Ended				Nine Months Ended
	October 2, 2011		October 3, 2010		October 2, 2011		October 3, 2010
	(In thousands)
Cost of sales	$	243	$	276	$	750	$	751
Research and development expenses	138		136		432		344
Selling, general and administrative and other expenses	1,086		3,414		8,245		9,904
Continuing operations stock-based compensation expense	1,467		3,826		9,427		10,999
Discontinued operations stock-based compensation expense	—		142		—		684
Total stock-based compensation expense	$	1,467	$	3,968	$	9,427	$	11,683

The total income tax benefit recognized in the condensed consolidated income statements for stock-based compensation was $0.3 million and $3.0 million for the three and nine months ended October 2, 2011, respectively. The total income tax benefit recognized in the condensed consolidated income statements for stock-based compensation was $1.3 million and $3.9 million for the three and nine months ended October 3, 2010, respectively. Stock-based compensation costs capitalized as part of inventory were $0.4 million and $0.3 million as of October 2, 2011 and October 3, 2010, respectively. The excess tax benefit recognized from stock awards, classified as a financing cash activity, was $9.3 million and $0.1 million for the nine months ended October 2, 2011 and October 3, 2010, 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 Nine Months Ended
	October 2, 2011		October 3, 2010
Risk-free interest rate	1.9	%	1.8	%
Expected dividend yield	1.1	%	1.4	%
Expected lives	4 years		4 years
Expected stock volatility	38.1	%	37.5	%

The following table summarizes stock option activity for the nine months ended October 2, 2011:



	Number of Shares		Weighted- Average Price		Weighted-Average Remaining Contractual Term	Total Intrinsic Value
	(In thousands)				(In years)	(In millions)
Outstanding at January 2, 2011	6,983		$	21.86
Granted	582		26.74
Exercised	(1,133	)	20.90
Canceled	(1,219	)	30.40
Forfeited	(107	)	18.40
Outstanding at October 2, 2011	5,106		$	20.67	3.6	$	16.2
Exercisable at October 2, 2011	3,566		$	20.75	2.9	$	10.3
Vested and expected to vest in the future	4,644		$	20.67	3.6	$	14.7

The weighted-average per-share grant-date fair value of options granted for the three and nine months ended October 2, 2011 was $7.99 and $7.86, respectively. The weighted-average per-share grant-date fair value of options granted for the three and nine months ended October 3, 2010 was $5.52 and $5.99, respectively. The total intrinsic value of options exercised for the three and nine months ended October 2, 2011 was $0.05 million and $6.9 million, respectively. The total intrinsic value of options exercised for the three and nine months ended October 3, 2010 was $0.5 million and $3.0 million, respectively. Cash received from option exercises for the nine months ended October 2, 2011 and October 3, 2010 was $23.7 million and $15.2 million, respectively.

The total compensation expense recognized related to the Company’s outstanding options was $1.1 million and $3.3 million for the three and nine months ended October 2, 2011, respectively, and $1.4 million and $5.4 million for the three and nine months ended October 3, 2010, respectively.

There was $5.9 million of total unrecognized compensation cost, net of estimated forfeitures, related to nonvested stock options granted as of October 2, 2011. This cost is expected to be recognized over a weighted-average period of 1.9 fiscal 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 nine months ended October 2, 2011:



	Number of Shares		Weighted- Average Grant- Date Fair Value
	(In thousands)
Nonvested at January 2, 2011	578		$	21.77
Granted	440		26.68
Vested	(215	)	24.78
Forfeited	(88	)	24.52
Nonvested at October 2, 2011	715		$	23.56

The weighted-average per-share grant-date fair value of restricted stock awards granted during the three and nine months ended October 2, 2011 was $25.19 and $26.68, respectively. The weighted-average per-share grant-date fair value of restricted stock awards granted during the three and nine months ended October 3, 2010 was $20.88 and $21.20, respectively. The fair value of restricted stock awards vested for the three and nine months ended October 2, 2011 was $0.02 million and $5.3 million, respectively. No restricted stock awards vested during the three months ended October 3, 2010. The fair value of restricted stock awards vested for the nine months ended October 3, 2010 was $1.0 million. The total compensation expense recognized related to the Company’s outstanding restricted stock awards was $1.6 million and $4.6 million for the three and nine months ended October 2, 2011, respectively, and $1.4 million and $3.8 million for the three and nine months ended October 3, 2010, respectively.

As of October 2, 2011, there was $10.9 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 1.7 fiscal years.

Performance Units: The Company granted 89,828 performance units and 129,879 performance units during the nine months ended October 2, 2011 and October 3, 2010, 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 nine months ended October 2, 2011 and October 3, 2010 was $26.71 and $20.89, respectively. The total compensation recognized related to these performance units was a benefit of $1.2 million and an expense of $0.8 million for the three and nine months ended October 2, 2011, respectively, and an expense of $1.1 million and $1.7 million for the three and nine months ended October 3, 2010, respectively. As of October 2, 2011, 346,308 performance units were outstanding, all subject to forfeiture.

Stock Awards: The Company generally grants stock awards only to non-employee directors. The Company granted 3,544 shares and 4,337 shares to each non-employee member of the Board during the nine months ended October 2, 2011 and October 3, 2010, respectively. The weighted-average per-share grant-date fair value of stock awards granted during the nine months ended October 2, 2011 and October 3, 2010 was $28.22 and $23.06, respectively. No compensation expense was recognized related to these stock awards in each of the three months ended October 2, 2011 and October 3, 2010, respectively. The total compensation expense recognized related to these stock awards was $0.8 million in each of the nine months ended October 2, 2011 and October 3, 2010, respectively.

Employee Stock Purchase Plan: During the nine months ended October 2, 2011, the Company issued 36,592 shares of common stock under the Company’s Employee Stock Purchase Plan at a weighted-average price of $25.57 per share. At October 2, 2011, an aggregate of 1.3 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.