SHARE-BASED EMPLOYEE COMPENSATION

Stock incentive plans — We offer share-based compensation plans to attract, retain and motivate key officers, employees and non-employee directors to work toward the financial success of the Company.

Our stock incentive plans are administered by the Compensation Committee of the Board of Directors and have been approved by the stockholders of the Company. The terms and conditions of our share-based awards are determined by the Compensation Committee for each award date and may include provisions for the exercise price, expirations, vesting, restriction on sales and forfeitures, as applicable. We issue new shares to satisfy stock issuances under our stock incentive plans.

Our Amended and Restated 2004 Stock Incentive Plan authorizes the issuance of up to 11,600,000 common shares in connection with the granting of stock options, stock appreciation rights, restricted stock purchase rights, restricted stock bonuses, restricted stock units or performance units to key employees, directors, and other designated employees. As of September 27, 2015, 2,590,664 shares of common stock were available for future issuance under this plan.

We also maintain a deferred compensation plan for non-management directors under which those who are eligible to receive fees or retainers may choose to defer receipt of their compensation. The deferred amounts are converted to stock equivalents. The plan requires settlement in shares of our common stock based on the number of stock equivalents and dividend equivalents at the time of a participant’s separation from the Board of Directors. This plan provides for the issuance of up to 350,000 shares of common stock in connection with the crediting of stock equivalents. As of September 27, 2015, 143,122 shares of common stock were available for future issuance under this plan.

We terminated our employee stock purchase plan (“ESPP”) on February 26, 2015. The ESPP plan was available for all eligible employees to purchase shares of common stock at 95% of the fair market value on the date of purchase. Employees could authorize us to withhold up to 15% of their base compensation during any offering period, subject to certain limitations.

Compensation expense — The components of share-based compensation expense recognized in each year are as follows (in thousands):



	2015		2014		2013
Stock options	$	2,782	$	2,660	$	5,075
Performance share awards	4,229		3,923		2,311
Nonvested stock awards	156		310		430
Nonvested stock units	4,989		3,247		3,356
Deferred compensation for directors	264		218		220
Total share-based compensation expense	$	12,420	$	10,358	$	11,392

Stock options — Prior to fiscal 2007, options granted had contractual terms of 10 or 11 years and employee options generally vested over a four-year period. Beginning fiscal 2007, option grants have contractual terms of seven years and employee options vest over a three-year period. Options may vest sooner for employees meeting certain age and years of service thresholds. All option grants provide for an option exercise price equal to the closing market value of the common stock on the date of grant.

The following is a summary of stock option activity for fiscal 2015:



	Shares		Weighted Average Exercise Price	Weighted Average Remaining Contractual Term (Years)	Aggregate Intrinsic Value (in thousands)
Options outstanding at September 28, 2014	1,189,570		$26.74
Granted	123,042		$73.53
Exercised	(708,096	)	$21.29
Forfeited	(10,168	)	$38.74
Options outstanding at September 27, 2015	594,348		$42.72	4.66	$	21,984
Options exercisable at September 27, 2015	285,820		$30.34	3.88	$	14,112
Options exercisable and expected to vest at September 27, 2015	594,348		$42.72	4.66	$	21,984

The aggregate intrinsic value in the table above is the amount by which the current market price of our stock on September 27, 2015 exceeds the exercise price.

We use a valuation model to determine the fair value of options granted which requires the input of highly subjective assumptions, including the expected volatility of the stock price. The following table presents the weighted-average assumptions used for stock option grants in each fiscal year, along with the related weighted-average grant date fair value:



	2015			2014			2013
Risk-free interest rate	1.78		%	2.05		%	1.09		%
Expected dividends yield	1.09		%	—		%	—		%
Expected stock price volatility	32.09		%	39.18		%	42.24		%
Expected life of options (in years)	6.00			6.50			6.50
Weighted-average grant date fair value	$	22.04		$	20.04		$	11.84

The risk-free interest rate was determined by a yield curve of risk-free rates based on published U.S. Treasury spot rates in effect at the time of grant and has a term equal to the expected life of the related options. The dividend yield assumption is based on the Company’s history and expectations of dividend payouts at the grant date. We declared our first dividend on May 9, 2014. The expected stock price volatility in all years represents the Company’s historical volatility. The expected life of the options represents the period of time the options are expected to be outstanding and is based on historical trends.

As of September 27, 2015, there was approximately $2.8 million of total unrecognized compensation cost, net of estimated forfeitures, related to stock options grants which is expected to be recognized over a weighted-average period of 1.3 years. The total intrinsic value of stock options exercised was $41.8 million, $42.4 million and $25.9 million in 2015, 2014 and 2013, respectively.

Performance share awards — Performance share awards, granted in the form of stock units, represent a right to receive a certain number of shares of common stock based on the achievement of corporate performance goals and continued employment during the vesting period. Performance share awards issued to executives vest at the end of a three-year period and vested amounts may range from 0% to as high as 150% of targeted amounts depending on the achievement of performance measures at the end of a three-year period. The expected cost of the shares is based on the fair value of our stock on the date of grant and is reflected over the vesting period with a reduction for estimated forfeitures. These awards may be settled in cash or shares of common stock at the election of the Company on the date of grant. It is our intent to settle these awards with shares of common stock.

The following is a summary of performance share award activity for fiscal 2015:



	Shares		Weighted- Average Grant Date Fair Value
Performance share awards outstanding at September 28, 2014	330,203		$25.69
Granted	40,594		$73.53
Issued	(189,584	)	$26.70
Forfeited	(5,362	)	$48.54
Performance adjustments	(12,937	)	$27.49
Performance share awards outstanding at September 27, 2015	162,914		$59.37

As of September 27, 2015, there was approximately $5.0 million of total unrecognized compensation cost related to performance share awards which is expected to be recognized over a weighted-average period of 1.5 years. The weighted-average grant date fair value of awards granted was $73.53, $47.29 and $27.49 in 2015, 2014 and 2013, respectively. The total fair value of awards that became fully vested during 2015, 2014 and 2013 was $3.5 million, $3.6 million and $1.0 million, respectively.

Nonvested stock awards — We previously issued nonvested stock awards (“RSAs”) to certain executives under our share ownership guidelines. Effective fiscal 2009, we no longer issue RSA awards and have replaced them with grants of nonvested restricted stock units. The RSAs vest, subject to the discretion of our Board of Directors in certain circumstances, upon retirement or termination based upon years of service. These awards are amortized to compensation expense over the estimated vesting period based upon the fair value of our common stock on the award date. At September 27, 2015, RSAs outstanding totaled 95,815 shares with a weighted average grant date fair value of $20.56 per share.

In fiscal 2015, there was no activity related to RSAs. As of September 27, 2015, there was approximately $0.2 million of total unrecognized compensation cost related to RSAs, which is expected to be recognized over a weighted-average period of 2.1 years.

Nonvested restricted stock units — Nonvested restricted stock units (“RSUs”) are generally issued to executives, non-management directors and certain other members of management and employees. Prior to fiscal 2011, RSUs were granted to certain Executive and Senior Vice Presidents pursuant to our share ownership guidelines. These awards vest upon retirement or termination based on years of service. As of September 27, 2015, 60,272 of such RSUs were outstanding.

Beginning fiscal 2011, we replaced the ownership share grants with time-vested RSUs for certain Vice Presidents and Officers that vest ratably over five years and have a 50% or 100% holding requirement on settled shares, which must be held until termination. As of September 27, 2015, 106,138 of such RSUs were outstanding. RSUs issued to non-management directors vest 12 months from the date of grant, or upon termination of board service if the director elects to defer receipt, and totaled 40,468 units outstanding as of September 27, 2015. RSUs issued to certain other employees either cliff vest or vest ratably over 3 years and totaled 126,095 units outstanding as of September 27, 2015. These awards are amortized to compensation expense over the estimated vesting period based upon the fair value of our common stock on the award date discounted by the present value of the expected dividend stream over the vesting period.

The following is a summary of RSU activity for fiscal 2015:



	Shares		Weighted- Average Grant Date Fair Value
Nonvested stock units outstanding at September 28, 2014	330,871		$33.73
Granted	93,570		$75.07
Released	(69,720	)	$34.44
Forfeited	(21,748	)	$46.83
Nonvested stock units outstanding at September 27, 2015	332,973		$44.34

As of September 27, 2015, there was approximately $6.8 million of total unrecognized compensation cost related to RSUs, which is expected to be recognized over a weighted-average period of 2.7 years. The weighted-average grant date fair value of awards granted was $75.07, $49.79 and $28.95 in 2015, 2014 and 2013, respectively. In 2015, 2014 and 2013, the total fair value of RSUs that vested and were released was $2.4 million, $3.5 million and $0.9 million, respectively.

Non-management directors’ deferred compensation — All awards outstanding under our directors’ deferred compensation plan are accounted for as equity-based awards and deferred amounts are converted into stock equivalents at the then-current market price of our common stock. During fiscal 2014 and 2013, 10,616 and 44,714 shares of common stock were issued in connection with director retirements having a fair value of $0.6 million and $1.4 million, respectively. No common stock was issued in connection with director retirements in 2015.

The following is a summary of the stock equivalent activity for fiscal 2015:



	Stock Equivalents	Weighted- Average Grant Date Fair Value
Stock equivalents outstanding at September 28, 2014	75,466	$23.44
Deferred directors’ compensation	2,761	$95.09
Dividend equivalents	931	$83.79
Stock equivalents outstanding at September 27, 2015	79,158	$26.64

Employee stock purchase plan — The following is a summary of shares issued pursuant to our ESPP in each fiscal year:



	2015		2014		2013
Common stock issued	1,371		4,055		7,144
Fair value of common stock issued	$	70.78	$	49.25	$	29.71