Share-Based Compensation

The Company's employee share-based compensation plans consist of its 2004 Stock Incentive Plan (the 2004 Plan) and the 1990 Employee Stock Purchase Plan (ESPP). The 2004 plan, as amended, has been approved to reserve a total of 4,750,000 shares of common stock for issuance to employees and directors of the Company. It allows for grants of stock options, stock appreciation rights, stock bonuses; RSUs including time-based, performance-based, and market-based RSU awards; and dividend equivalents. The ESPP, as approved, reserves 4,400,000 shares of common stock 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, up to a maximum of 500 shares per purchase date. 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on the first date of any ongoing offering, employees participating in any such ongoing offering will be automatically withdrawn from it and enrolled in the new offering.

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. RSU's grant the right to receive a set number of shares on the vest date, assuming all criteria have been met and continued service through the vest date. Time-based RSU's vest solely based on continued service through the vest date. Performance-based RSU's are earned based on specifically stated performance criteria in the grant agreement. Market-based RSUs must achieve the TSR measures based on the Company's stock performance relative to a stated index. See Note 2 "Summary of Significant Accounting Policies" for further discussion concerning the Company's policies for recognizing compensation expense for these awards.

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



(In thousands)	2017		2016		2015
Cost of sales	$	503	$	445	$	586
Selling, general and administration	5,197		3,004		2,847
Research, development and engineering	737		783		1,109
Share-based compensation expense	$	6,437	$	4,232	$	4,542

The total amount of net cash received from the stock plan awards was $0.5 million, $0.7 million and zero for 2017, 2016 and 2015, respectively. All stock plan awards are settled with newly issued shares.

No share-based compensation costs were capitalized during 2017, 2016 or 2015. As of April 1, 2017, the Company had $10.0 million of total unrecognized share-based compensation costs, net of estimated forfeitures, which are expected to be recognized over a weighted average period of 2.1 years.

Valuation Assumptions

The Black-Scholes pricing model is utilized to determine the fair value of SARs granted and ESPP issued. No SARs were granted in 2017.

The following weighted average assumptions were used in calculating the grant date fair value of SARs during the periods presented:



	2017		2016		2015
Risk-free interest rate	—	%	1.94	%	2.04	%
Expected dividend yield	—	%	—	%	4.6	%
Expected lives	0.0 years		7.4 years		7.0 years
Expected volatility	—	%	47	%	47	%

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



	2017		2016		2015
Risk-free interest rate	0.68	%	0.34	%	0.24	%
Expected dividend yield	—	%	—	%	3.2	%
Expected lives	1.1 years		1.1 years		1.1 years
Expected volatility	45	%	35	%	41	%

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 made quarterly cash dividends payments. Accordingly, the Company paid a dividend of $0.08 per outstanding common share in first three quarters of 2015. In the fourth quarter of 2015, the Board of Directors suspended the quarterly dividend payment and, as such, no dividends were paid in that quarter or any quarter of 2016 or 2017. 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 fair value of time-based RSUs and performance-based RSUs are measured on the grant date based on the market value of the Company's common stock. The market-based RSUs must achieve the TSR measures in order for the awards to vest, and the grant date fair value of the awards is calculated using a Monte Carlo simulation model. The assumptions used in the Monte Carlo simulation includes the risk free rate, expected divided yield, expected term, and possible future stock prices over the performance period based on historical stock and market prices.

At April 1, 2017, the Company had 7,345,334 shares of its common stock reserved for issuance under all of the above plans combined. Of those shares, 4,193,485 are subject to issuance under currently outstanding stock options, SARs and stock awards and 3,151,849 shares, including 285,414 shares available for issuance under the ESPP, and are available for future grants.

The total fair value of stock option and SARs awards granted and vested during the period, unvested restricted stock unit awards granted and vested during the period, the intrinsic value of stock options and SARs exercised during the period and the total grant date fair value were:



(In thousands, except per share data)	2017		2016		2015
Stock-Option and SAR Awards:
Grant date fair value per share	$	—	$	2.89	$	2.12
Total fair value of options and SARs granted	—		1,350		1,291
Total fair value of options and SARs vested	820		336		409
Total intrinsic value of options and SARs exercised	17		1		18
Unvested Restricted Stock Unit Awards:
Grant date fair value per share	6.71		5.52		6.80
Total fair value of awards granted	11,382		4,072		5,832
Total fair value of awards vested	3,693		4,324		7,532
Employee Stock Purchase Plan:
Grant date fair value per share	1.40		1.22		1.72
Total grant date fair value	473		394		559

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 29, 2014	1,898,409		$	15.27
Granted	634,523		6.91
Exercised	(8,250	)	7.26
Expired or forfeited	(295,636	)	18.30
Outstanding at March 28, 2015	2,229,046		$	12.52	4.45	$	—
Granted	467,000		5.63
Exercised	(2,500	)	6.71
Expired or forfeited	(537,946	)	16.53
Outstanding at April 2, 2016	2,155,600		$	10.03	5.35	$	904
Granted	—		—
Exercised	(22,500	)	6.23
Expired or forfeited	(191,097	)	19.20
Outstanding at April 1, 2017	1,942,003		$	9.17	4.82	$	634
Vested and expected to vest at April 1, 2017	1,928,853		$	9.20	4.80	$	619
Exercisable at April 1, 2017	1,385,837		$	10.39	3.62	$	167

Information with respect to unvested time-based 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 29, 2014	1,115,601		$	11.47
Awarded	459,295		6.33
Vested	(672,930	)	11.19
Forfeited	(66,125	)	9.82
Outstanding at March 28, 2015	835,841		$	8.90	1.91	$	5,149
Awarded	737,200		5.52
Vested	(360,349	)	11.75
Forfeited	(130,888	)	7.66
Outstanding at April 2, 2016	1,081,804		$	6.77	1.93	$	7,781
Awarded	1,051,445		6.63
Vested	(483,239	)	7.64
Forfeited	(42,093	)	6.67
Outstanding at April 1, 2017	1,607,917		$	6.41	2.04	$	11,168

Information with respect to unvested performance-based and market-based 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 29, 2014	396,533		$	10.33
Awarded	398,905		7.33
Vested⁽¹⁾	(234	)	—
Forfeited	(201,500	)	11.63
Outstanding at March 28, 2015	593,704		$	7.88	1.81	$	3,657
Awarded	—		—
Vested⁽¹⁾	(5,592	)	14.64
Forfeited	(187,125	)	10.84
Outstanding at April 2, 2016	400,987		$	6.93	1.00	$	2,928
Awarded	643,565		6.85
Vested⁽¹⁾	—		—
Forfeited	(400,987	)	6.93
Outstanding at April 1, 2017	643,565		$	6.85	2.43	$	4,409


(1)	Zero performance-based shares were earned in 2017, 2016 and 2015.

Grants during 2017 presented in the above tables include 248,565 market-based RSUs and 229,445 time-based RSUs granted to the Company's newly appointed President and CEO. Additionally, the company granted 152,000 time-based RSUs and 90,000 performance-based RSUs to the employees of the Company who were hired as part of the Visicon acquisition during fiscal 2017 (see Note 6 "Business Acquisitions").