7.	Stock-Based Compensation

On May 16, 2018, our shareholders approved our 2018 Stock Option and Stock Incentive Plan (the “2018 Plan” or the “Plan”), which supersedes our 2008 Stock Option and Stock Incentive Plan. All future stock compensation grants will be issued under the 2018 Plan. Under the terms of the Plan, our Board of Directors may grant up to 1,200,000 shares of common stock in the form of shares of restricted stock, restricted stock units, stock appreciation rights and stock options or combinations thereof to officers, directors, employees, important consultants and advisors. Grants under the Plan must be made within ten years of the date the Plan was approved. Stock options are exercisable upon the terms set forth in each grant agreement approved by the Board of Directors, but in no event more than ten years from the date of grant. Restricted stock and restricted stock units vest in accordance with the terms set forth in each applicable award agreement approved by our Board of Directors. At September 29, 2018, 1,184,305 shares were available for grant under the 2018 Plan.

Restricted Stock

We grant restricted stock to certain employees and members of our Board of Directors. The value of restricted stock issued is based on the fair value of our common stock on the grant date. Vesting of restricted stock is conditional based on continued employment or service for a specified period and, in certain circumstances, the attainment of financial goals. We retain the restricted stock, and any dividends paid thereon, until the vesting conditions have been met. For awards with a service condition only, compensation cost related to the stock is recognized on a straight-line basis over the vesting period. For awards that have a service condition and require the attainment of financial goals, compensation cost related to the stock is calculated based upon the probable outcome of the performance conditions on the date of grant and is recognized over the performance period. Compensation cost related to restricted stock was $2.5 million and $2.1 million for the thirty-nine weeks ended September 29, 2018 and September 30, 2017, respectively.

The following table summarizes our restricted stock activity for the thirty-nine weeks ended September 29, 2018:

	Shares			Weighted Average Price
Balance at December 30, 2017		153,727		$	59.96
Granted		80,872		$	72.19
Vested		(38,631	)	$	61.07
Cancelled		(6,237	)	$	75.59
Balance at September 29, 2018		189,731		$	64.43

As of September 29, 2018, there was $5.2 million of unrecognized compensation cost related to nonvested restricted stock, which is expected to be recognized over a weighted-average period of approximately 2.3 years.

Cash flows resulting from tax deductions in excess of the tax effect of compensation cost recognized in the financial statements are classified as operating cash flows. The excess tax benefit generated from restricted shares which vested in the thirty-nine weeks ended September 29, 2018 was less than $0.1 million and was credited to income tax expense. The excess tax benefit generated from restricted shares which vested in the thirty-nine weeks ended September 30, 2017 was $0.3 million and was credited to income tax expense.

Stock Options

We grant stock options to certain employees. We expense the grant-date fair value of stock options. Compensation cost is recognized on a straight-line basis over the vesting period for which related services are performed. The compensation cost charged against income was $0.4 million and $0.2 million for the thirty-nine weeks ended September 29, 2018 and September 30, 2017, respectively. The compensation costs were classified as Selling, general and administrative expense in the Consolidated Statements of Income. No cost was capitalized during the thirty-nine weeks ended September 29, 2018 and September 30, 2017.

We use the Black-Scholes option valuation model to estimate the fair value of stock options granted. Expected volatility and expected dividend yield are based on the actual historical experience of our common stock. The expected life represents the period of time that options granted are expected to be outstanding and was calculated using historical option exercise data. The risk-free rate was based on a U.S. Treasury security with terms equal to the expected time of exercise as of the grant date. During the thirty-nine weeks ended September 29, 2018 and September 30, 2017 we granted 69,014 and 58,024 stock options, respectively.

The following table summarizes our stock option activity for the thirty-nine weeks ended September 29, 2018:

	Shares			Weighted Average Exercise Price		Weighted Average Remaining Term (In years)		Aggregate Intrinsic Value
Balance at December 30, 2017		122,547		$	57.74
Granted		69,014		$	72.32
Exercised		(4,000	)	$	5.67
Balance at September 29, 2018		187,561		$	64.21		3.7	$	2,490,355
Options exercisable at September 29, 2018		47,079		$	51.55		2.6	$	1,220,858

There were 4,000 options exercised during the thirty-nine weeks ended September 29, 2018. There were 32,000 options exercised in the thirty-nine weeks ended September 30, 2017. As of September 29, 2018, there was $1.6 million of unrecognized compensation cost related to non-vested stock options, which is expected to be recognized over a weighted-average period of 2.9 years.

There was no cash generated from stock option exercises in the thirty-nine weeks ended September 29, 2018. The cash received from stock option exercises was $0.1 million in the thirty-nine weeks ended September 30, 2017.

There was no excess tax benefit generated from stock options exercised in the thirty-nine weeks ended September 29, 2018. There was $0.6 million of excess tax benefit generated from stock option exercises in the thirty-nine weeks ended September 30, 2017 and was credited to income tax expense.

Employee Stock Purchase Plan

In May 2017, our shareholders’ approved the Dorman Products, Inc. Employee Stock Purchase Plan (the “ESPP”), which makes available 1,000,000 shares of our common stock for sale to eligible employees. There were 7,382 shares purchased under this plan in the thirty-nine weeks ended September 29, 2018. During the thirty-nine weeks ended September 29, 2018, compensation cost under the Plan was $0.2 million.