Share-Based Compensation

The Company recognizes expense related to the fair value of its share-based compensation awards using the Black-Scholes model to estimate the fair value of awards on the date of grant, except for unvested restricted stock unit awards, which are valued at the fair market value of the Company’s stock on the date of award. The Company recognizes compensation expense for all share-based compensation awards on a straight-line basis over the requisite service period of the award.

Stock Plans

In October 2004, the shareholders approved the adoption of the 2004 Stock Incentive Plan (the 2004 Plan) that replaced various stock compensation plans that were previously approved by the shareholders or the Board of Directors (the Replaced Plans), except with respect to options and other awards previously outstanding. Outstanding options and awards remained subject to the terms of the Replaced Plans under which they were originally granted. At that time, the shareholders also approved the reservation of 3,000,000 shares of common stock for issuance under the 2004 Plan. These shares are in addition to any shares of common stock that, at the time the 2004 Plan was approved by shareholders, were available for grant under the Replaced Plans or that may subsequently become available for grant under any of the Replaced Plans through the expiration, termination, forfeiture or cancellation of grants. In January 2005, the Board of Directors approved certain amendments to the 2004 Plan. These amendments prohibit grants of stock options or SARs with an exercise price less than fair market value, require that time-based restricted stock awards have a minimum vesting period of at least three years, with the subject shares vesting no more quickly than one-third annually over the three-year period, and expressly prohibit the reservation of additional shares under the 2004 Plan without shareholder approval. In October 2007, the shareholders approved an additional amendment to the 2004 Plan to permit awards to non-employee service providers and implement certain claw-back provisions.

The 2004 Plan allows for grants of stock options, stock appreciation rights, stock bonuses (including restricted stock units), restricted stock, performance-based awards and dividend equivalents. Stock options and SARs outstanding under the 2004 Plan and the Replaced Plans vest over variable periods determined at the grant date, generally with terms of immediate vesting or up to four years, and expire ten years from the date of grant. Options and SARs issued under the 2004 Plan and the Replaced Plans are exercisable at prices not less than fair market value on the date of the grant. The 2004 Plan prohibits repricing of options and SARs granted without prior shareholder approval. Certain restricted stock units awarded under the 2004 Plan vest based on performance criteria that are tied to the Company’s results of operations, personal performance criteria, and, in certain cases, length of service. Unvested restricted stock unit awards are credited with dividend equivalents in the form of additional unvested restricted stock units at the same time and in the same amount as dividends paid to shareholders of the Company. The dividend equivalents have the same vesting and terms as the underlying restricted stock unit award and are subject to forfeiture if related awards do not vest.

In September 1990, the shareholders approved the adoption of the 1990 Employee Stock Purchase Plan, as amended in September 1998, October 2003, October 2004, January 2008 and August 2009 (the ESPP), pursuant to which 3,400,000 shares of common stock have been reserved for issuance to participating employees. Eligible employees may elect to contribute up to 15 percent of their base wage and commissions during each pay period. The ESPP provides for separate overlapping twenty-four month offerings starting every three months. Each offering has eight purchase dates occurring every three months on designated dates. The offerings under the ESPP commence on February 15, May 15, August 15 and November 15 of each calendar year. Any eligible employee may participate in only one offering at a time and may purchase shares only through payroll deductions permitted under the ESPP. At the end of each three-month purchase period, the purchase price is determined and the accumulated funds are used to automatically purchase shares of common stock. The purchase price per share is equal to 85 percent of the lower of the fair market value of the common stock on (a) the first day of the offering period or (b) the date of purchase. The ESPP also provides that if the fair market value of the common stock on the first day of the new offering period is less than or equal to the fair market value of the common stock on the first date of any ongoing offering, employees participating in any such ongoing offering will be automatically withdrawn from it and enrolled in the new offering.

The Company granted SARs starting in the first quarter of 2010. SARs grant the right to receive shares of the Company’s stock equivalent to the increase in stock value of a specified number of shares over a specified period of time, divided by the stock price at the time of exercise. The Company uses the Black-Scholes model to estimate the fair value of SARs. Similar to options, SARs are recorded at the fair value of the award at grant date and the expense is recognized on a straight-line basis over the requisite service period of the award. The Company granted 63,853 SARs in 2014 and did not grant any SARs in 2013 and 2012.

Share-based compensation expense was included in the Company’s Consolidated Statements of Operations as follows:



(In thousands)	2014		2013		2012
Cost of sales	$	722	$	898	$	1,118
Selling, service and administration	4,213		5,330		8,244
Research, development and engineering	1,170		1,860		2,113
Total share-based compensation expense	$	6,105	$	8,088	$	11,475

Share-based compensation expense decreased in 2014 compared to 2013 was primarily due to decreased attainment of performance-based grants in 2014, award cancellations and to a lesser extent, fewer overall awards granted. The share-based compensation expense decrease in 2013 compared to 2012 was primarily driven by accelerated expense associated with the Chief Executive Officer’s retirement eligibility date in 2012 and decreased attainment of performance-based grants in 2013.

The total amount of net cash received from the stock plan awards was $0.7 million, $0.6 million and $3.0 million for 2014, 2013 and 2012, respectively. All stock plan awards are settled with newly issued shares.

No share-based compensation costs were capitalized during 2014. As of March 29, 2014, the Company had $8.6 million of total unrecognized share-based compensation costs, net of estimated forfeitures, which are expected to be recognized over a weighted average period of 1.8 years.

Valuation Assumptions

The Black-Scholes option pricing model is utilized to determine the fair value of SARs granted. The following weighted average assumptions were used in calculating the fair value of SARs during the periods presented:



	2014		2013		2012
Risk-free interest rate	1.88	%	1.63	%	1.86	%
Expected dividend yield	3.5	%	2.6	%	—	%
Expected lives	6.0 years		1.5 years		6.2 years
Expected volatility	45	%	47	%	45	%

The following weighted average assumptions were used to estimate the fair value of ESPP shares issued in the periods presented:



	2014		2013		2012
Risk-free interest rate	0.16	%	0.18	%	0.12	%
Expected dividend yield	3.3	%	3.0	%	2.3	%
Expected lives	1.1 years		1.1 years		1.1 years
Expected volatility	37	%	43	%	49	%

The risk-free interest rates used are based on the U.S. Treasury yields over the expected terms. In December 2011, the Board of Directors adopted a dividend policy under which the Company intends to pay quarterly cash dividends. Accordingly, the Company paid a dividend of $0.08 per outstanding common share in all four quarters of 2014 and 2013. There were no dividends declared or paid during 2011. The expected dividend yield used is derived using a mathematical formula which uses the expected Company annual dividend rate over the expected term divided by the fair value of the Company’s common stock at the grant date.

The expected term and forfeiture estimates for stock options and SARs are based on an analysis of actual exercise behavior. The expected term for the ESPP is the weighted average length of the purchase periods. The Company uses its historical volatility over the estimated expected term as the expected volatility.

At March 29, 2014, the Company had 7,094,483 shares of its common stock reserved for issuance under all of the above plans combined. Of those shares, 3,410,543 are subject to issuance under currently outstanding stock options, SARs and stock awards and 3,683,941 shares, including 269,888 shares available for issuance under the ESPP, are available for future grants. The weighted-average fair-value of share-based compensation awards, including stock option and SAR awards granted and vested during the period, unvested restricted stock unit awards granted during the period and the intrinsic value of stock options and SARs exercised during the period were:



(In thousands, except per share data)	2014		2013		2012
Stock-Option and SAR Awards:
Grant date fair value per share	$	2.94	$	4.82	$	8.49
Total fair value of options and SARs granted	$	188	$	25	$	1,646
Total fair value of options and SARs vested	$	1,305	$	2,050	$	1,845
Total intrinsic value of options and SARs exercised	$	183	$	230	$	1,170
Unvested Restricted Stock Unit Awards:
Grant date fair value per share	$	10.19	$	8.05	$	18.40
Total fair value of awards granted	$	6,865	$	7,026	$	8,985
Total fair value of awards vested	$	5,251	$	6,266	$	5,417
Employee Stock Purchase Plan:
Grant date fair value per share	$	2.61	$	3.22	$	3.85
Total grant date fair value	$	699	$	869	$	977

Share-Based Payment Award Activity

Information with respect to stock option and SAR activity was as follows:



	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value (In thousands)
Outstanding at March 30, 2013	2,773,788		$	17.98
Granted	63,853		9.24
Exercised	(46,350	)	7.26
Expired or forfeited	(892,882	)	23.67
Outstanding at March 29, 2014	1,898,409		$	15.27	3.76	$	1,275
Vested and expected to vest at March 29, 2014	1,889,406		$	15.29	3.74	$	1,271
Exercisable at March 29, 2014	1,712,556		$	15.41	3.31	$	1,234

Information with respect to unvested restricted stock unit awards activity was as follows:



	Shares		Weighted Average Grant Date Fair Value		Weighted Average Remaining Contractual Term (In years)	Aggregate Intrinsic Value (In thousands)
Outstanding at March 30, 2013	1,465,016		$	11.80
Awarded	679,450		10.19
Vested	(450,683	)	11.66
Forfeited	(181,650	)	11.52
Outstanding at March 29,2014	1,512,133		$	11.17	1.65	$	14,955