Stock-Based Compensation

Total stock-based compensation expense included in our Consolidated Statements of Operations is presented in the following table:



	Three Months Ended
(In thousands)	March 30, 2019		March 31, 2018
Cost of products sold	$	202	$	237
Research and development	1,125		1,207
Selling, general, and administrative	2,359		3,356
Total stock-based compensation	$	3,686	$	4,800

Market-Based and Performance-Based Stock Compensation

In fiscal years 2018 and 2019, we granted RSUs with a market condition to certain executives. The market condition is a comparison of the Company's relative Total Shareholder Return ("TSR") when compared to the TSR of a component of companies of the PHLX Semiconductor Sector Index over a measurement period. TSR is a measure of stock price appreciation plus dividends paid, if any, in the performance period. We determined and fixed the fair value of the awards with a market condition on the date of grant using a lattice-based option-pricing model. The valuation of these awards incorporated a Monte-Carlo simulation, and considered the likelihood that we would achieve the market condition.

In September 2018, we granted inducement awards outside of, but subject to the terms and conditions of the 2013 Incentive Plan to our incoming President and Chief Executive Officer. These awards included restricted stock units that vest and become payable upon satisfaction of certain market and performance conditions. The market and performance conditions include TSR and Adjusted EBITDA targets, respectively. The TSR-based awards vest and become payable over a three-year period based on the Company’s TSR relative to the PHLX Semiconductor Sector Index, with 100% of the units vesting at the 50th percentile, 250% of the units vesting at the 75th percentile achievement, zero vesting if relative TSR is below the 25th percentile, and vesting scaling linearly for achievement between the 25th and 75th percentile. The Adjusted EBITDA-based awards will vest and become payable based upon the Company’s generating specified “adjusted” EBITDA levels on a trailing four quarter basis in any two consecutive trailing four-quarter periods. We valued the RSUs with a performance condition using the market price on the day of grant.

In September 2018, we granted inducement awards outside of, but subject to the terms and conditions of the 2013 Incentive Plan to our incoming Corporate Vice President of Research and Development, and in September 2018 and January 2019, we granted awards from the 2013 Incentive Plan to certain executives. These awards included restricted stock units that would vest and become payable upon achievement of a target TSR. The awards vest and become payable over a three-year period based on the Company’s TSR relative to the PHLX Semiconductor Sector Index, with 100% of the units vesting at the 50th percentile, 200% of the units vesting at the 75th percentile achievement, zero vesting if relative TSR is below the 25th percentile, and vesting scaling linearly for achievement between the 25th and 75th percentile.

We recognize expense related to these stock option and RSU awards with a market or performance condition based on our estimate of the probability of the respective conditions being achieved. For these awards, we incurred stock compensation expense of approximately $0.9 million in the first quarter of fiscal 2019 and of approximately $0.3 million in the first quarter of fiscal 2018, which is recorded as a component of total stock-based compensation expense.

The following table summarizes the activity for our stock options and RSUs with a market or performance condition during the first three months of fiscal 2019:



(Shares in thousands)	Unvested		Vested	Total
Balance, December 29, 2018	909		—	909
Granted	265		—	265
Canceled	(98	)	—	(98	)
Balance, March 30, 2019	1,076		—	1,076