SHARE-BASED ARRANGEMENTS

General

The Company accounts for stock options, restricted stock awards, restricted stock units and performance shares as equity awards and measures the cost of all share-based payments, including stock options, at fair value on the grant date and recognizes this cost in the statement of operations. The Company also has an employee stock purchase plan which is accounted for as a liability award.

Compensation expense for stock options, restricted stock awards and restricted stock units is recognized on a straight-line basis over the vesting period of the awards. Share-based compensation expense recorded for the three-month fiscal periods ended March 30, 2018 and March 31, 2017, was $1.5 million and $1.4 million, respectively.

From time-to-time, the Company has issued stock awards with market and performance based conditions. Currently, there are three awards with these conditions that have not been settled. The number of shares earned under an award granted in 2014 has been determined at a 139.9% achievement level, representing 1,506 shares to be delivered in 2019. The remaining shares for the awards granted in 2015 and 2016 have not yet been determined; however, assuming a 100% achievement level, the number of shares would be 2,165. The Company measures the cost of these awards based on their grant date fair value to the extent of the probable number of shares to be earned upon vesting. Amortization of this cost is recorded on a straight-line basis over the requisite service period. Throughout the course of the requisite service period, the Company monitors the level of achievement compared to the target and adjusts the number of shares expected to be earned, and the related compensation expense recorded thereafter, to reflect the updated most probable outcome. Compensation expense for these awards for the three-month fiscal periods ended March 30, 2018, and March 31, 2017, was not material.

Stock option activity was as follows:



	For the Three Months Ended
	March 30, 2018
	Options		Weighted - average exercise price
Options outstanding at beginning of period	925,385		$	40.43
Granted	199,510		$	62.46
Exercised	(70,575	)	$	36.39
Forfeited or expired	(12,184	)	$	42.13
Options outstanding at March 30, 2018	1,042,136		$	44.90

15. SHARE-BASED ARRANGEMENTS (CONTINUED)

The fair value of each option award is estimated on the date of grant using the Black-Scholes option valuation model. The following table indicates the weighted-average assumptions used in estimating fair value:



	For the Three Months Ended
	March 30, 2018			March 31, 2017
Expected option term (years)	4.9			5.0
Expected volatility	18.1		%	19.9		%
Risk-free interest rate	2.6		%	1.9		%
Expected dividend yield	1.5		%	1.6		%
Per share fair value of options granted		$10.65			$8.61

Restricted stock award and restricted stock unit activity was as follows:



	For the Three Months Ended
	March 30, 2018
	Restricted Stock		Weighted- average grant date fair value
Restricted Stock outstanding at beginning of period	154,882		$	44.50
Granted	42,490		$	62.46
Vested	(42,361	)	$	42.64
Forfeited or expired	(1,742	)	$	45.41
Restricted Stock outstanding at March 30, 2018	153,269		$	49.98

Plan Amendments

On April 18, 2018, the shareholders of the Company approved the amendment and restatement of the 2013 Management Incentive Plan (“the 2013 Plan”). The amendment increased the number of authorized shares by 2,250,000 shares. As of March 30, 2018, 245,429 shares were available for grant under the plan. As a result of the amendment, a total of 2,495,429 shares would have been available for issuance under the plan as of that date.

Also on April 18, 2018, the shareholders of the Company approved the amendment and restatement of the Kaman Corporation Employee Stock Purchase Plan (“ESPP”). The amendment increased the number of shares of common stock available under the ESPP by 500,000 shares. As of March 30, 2018, 156,822 share were available for purchase under the plan. As a result of the amendment, a total of 656,822 shares would have been available for purchase under the plan.