Note 16 – Share-Based Compensation

The Company has share-based compensation and employee stock purchase plans under which shares of the Company’s common stock are available for future grants and sales. The Company recognizes compensation costs using the straight-line method over the vesting period upon grant of up to five years.

Pre-tax share-based compensation expense recognized in the statements of operations was $26.4 million and $10.3 million for the nine-month periods ended October 3, 2015 and September 27, 2014, respectively. Tax related benefits of $8.9 million and $3.5 million were also recognized for the nine-month periods ended October 3, 2015 and September 27, 2014, respectively.

The Company issued 458,823 and 564,815 shares in connection with share-based compensation and employee stock purchase programs during the nine months ended October 3, 2015 and September 27, 2014 respectively.

The fair value of share-based compensation is estimated on the date of grant using a binomial model. Volatility is based on an average of the implied volatility in the open market and the annualized volatility of the Company’s stock prices over its entire stock history. Stock option grants in the table below include both stock options, all of which were non-qualified, and stock appreciation rights (SARs) that will be settled in the Company stock or cash. Restricted stock grants are valued at the market closing price on the grant date. The following table shows the weighted-average assumptions used for grants of SARs as well as the fair value of the grants based on those assumptions:


	Nine Months Ended
	October 3, 2015			September 27, 2014
Expected dividend yield		0	%		0	%
Forfeiture rate		10.24	%		10.32	%
Volatility		33.98	%		34.92	%
Risk free interest rate		1.53	%		1.73	%
Range of interest rates		0.02% - 2.14	%		0.02% - 2.61	%
Expected weighted-average life		5.32 years			5.36 years
Fair value of SARs granted	$	11,509,000		$	4,600,000
Weighted-average grant date fair value of SARs granted (per underlying share)	$	35.25		$	25.00

Stock option activity was as follows:


	Nine Months Ended October 3, 2015
Options	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at beginning of year		415,960		$	40.19
Exercised		(185,770	)		43.32
Expired		(1,550	)		51.62

Outstanding at end of period		228,640			37.56		2.2 Years	$	13.0 million

Exercisable at end of period		228,640			37.56		2.2 Years	$	13.0 million

Intrinsic value of exercised options	$	9,020,000

SAR activity was as follows:


	Nine Months Ended October 3, 2015
SARs	Shares			Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value
Outstanding at beginning of year		1,292,142		$	42.20
Granted		330,144			107.74
Exercised		(160,450	)		40.86
Forfeited		(25,694	)		71.72

Outstanding at end of period		1,436,142			56.89		7.0 years	$	58.5 million

Exercisable at end of period		756,193			36.00		5.6 years	$	44.3 million

Intrinsic value of exercised SARs	$	9,947,000

Restricted stock award activity was as follows:


	Nine Months Ended October 3, 2015
Restricted Stock Awards	Shares			Weighted-Average Grant Date Fair Value
Outstanding at beginning of year		691,621		$	60.06
Granted		183,345			107.84
Released		(246,673	)		51.69
Forfeited		(41,136	)		72.98

Outstanding at end of period		587,157			77.63

Performance share award activity was as follows:


	Nine Months Ended October 3, 2015
Performance Share Awards	Shares			Weighted-Average Grant Date Fair Value
Outstanding at beginning of year		374,180		$	61.33
Granted		109,848			75.97
Released		(120,000	)		38.67
Forfeited		(22,595	)		73.29

Outstanding at end of period		341,433			73.48

Restricted stock unit activity was as follows:


	Nine Months Ended October 3, 2015
Restricted Stock Units	Shares
Outstanding at beginning of year		41,964
Granted		11,623
Released		(8,653	)
Forfeited		(5,480	)

Outstanding at end of period		39,454

Performance stock unit activity was as follows:


	Nine Months Ended October 3, 2015
Performance Stock Units	Shares
Outstanding at beginning of year		10,345
Forfeited		(1,272	)

Outstanding at end of period		9,073

As of October 3, 2015 total unearned compensation costs related to the Company’s share-based compensation plans was $56.0 million which will be amortized over the weighted average remaining service period of 2.7 years.

The fair value of the purchase rights issued to the Company’s employees under the stock purchase plan is estimated using the following weighted-average assumptions for purchase rights granted. Expected lives of three months to one year have been used along with these assumptions.


	Nine Months Ended
	October 3, 2015			September 27, 2014
Fair market value	$	80.43		$	63.42
Option price	$	76.41		$	60.25
Expected dividend yield		0	%		0	%
Expected volatility		41	%		31	%
Risk free interest rate		0.03	%		0.06	%