15. Share-Based Compensation

The Company's share-based compensation consists of stock-settled stock appreciation rights (SARs), restricted stock unit awards with a service condition (time-based RSUs), restricted stock unit awards with a performance condition (performance-based RSUs), restricted stock unit awards with a market performance condition (market-based RSUs) and an employee stock purchase plan.

The Company recognizes expense related to the fair value of SARs and the 1990 Employee Stock Purchase Plan (ESPP) using the Black-Scholes model to estimate the fair value of awards on the date of grant. The fair value of time-based and performance-based restricted stock units (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 total shareholder return (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.

Except for performance-based RSUs, the Company recognizes compensation expense for all share-based compensation awards, net of estimated forfeitures, on a straight-line basis over the requisite service period of the award. Expense for performance-based RSUs is recognized based on the probability of achievement of the performance criteria. The compensation cost for market-based RSUs is recognized over the related service period, even if the market condition is never satisfied.

The Company granted a total of 396,400 time-based RSUs and 197,400 market-based RSUs during the first two quarters of 2018, but did not grant any SARs or performance-based RSUs. Grants for the second quarter of 2018 consisted of 70,800 time-based RSUs.

Share-based compensation expense under the stock incentive plans is included in the Company’s Condensed Consolidated Statements of Operations as follows:



	Fiscal quarter ended				Two fiscal quarters ended
(In thousands)	Sep 30, 2017		Oct 1, 2016		Sep 30, 2017		Oct 1, 2016
Cost of sales	$	77	$	136	$	144	$	256
Selling, general and administrative	1,070		1,205		2,131		2,182
Research, development and engineering	183		177		333		371
Total share-based compensation expense	$	1,330	$	1,518	$	2,608	$	2,809

The Company does not have any capitalizable share-based compensation costs for the two fiscal quarters ended September 30, 2017 and October 1, 2016, respectively. As of September 30, 2017, the Company had $9.6 million of total unrecognized share-based compensation costs, net of estimated forfeitures, which are expected to be recognized over a weighted average period of 2.4 years.