STOCK-BASED COMPENSATION

The Company recognizes the grant-date fair value of stock-based compensation as compensation expense using the straight-line attribution approach over the service period for which the stock-based compensation is expected to vest. The following table summarizes the amount of stock-based compensation included in the condensed consolidated statements of operations:



	Three Months Ended December 31,						Nine Months Ended December 31,
(in thousands)	2014			2015			2014			2015
Cost of revenues	$	685		$	811		$	1,888		$	2,469

Research, development and engineering	2,068			2,286			5,934			7,264
Selling, general and administrative	4,677			4,620			13,300			14,866
Stock-based compensation included in operating expenses	6,745			6,906			19,234			22,130
Total stock-based compensation	7,430			7,717			21,122			24,599
Income tax benefit	(2,188		)	(2,238		)	(6,216		)	(7,202		)
Total stock-based compensation, net of tax	$	5,242		$	5,479		$	14,906		$	17,397

Stock Options

The following is a summary of the Company’s stock option activity during the nine months ended December 31, 2015:



	Options Outstanding
	Number of Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life	Aggregate Intrinsic Value
	(in thousands)		(in dollars)		(in years)	(in thousands)
Outstanding at March 31, 2015	1,558		$	36.59
Options granted	287		$	53.55
Options exercised	(224	)	$	30.79
Options forfeited or expired	(36	)	$	46.66
Outstanding at December 31, 2015	1,585		$	40.25	4.0	$	14,910
Vested or expected to vest at December 31, 2015	1,544		$	39.95	3.9	$	14,881
Exercisable at December 31, 2015	1,091		$	35.52	3.1	$	14,279

The total intrinsic value of options exercised during the nine months ended December 31, 2015 and 2014 was $5.6 million and $11.6 million, respectively. Intrinsic value is defined as the amount by which the fair value of the underlying stock exceeds the exercise price at the time of option exercise. The total cash received as a result of stock option exercises during the nine months ended December 31, 2015 was $6.9 million, net of taxes.

As of December 31, 2015, total unrecognized compensation cost related to unvested stock options was $4.5 million, which is expected to be recognized over a weighted average period of 2.1 years.

Restricted Stock

Restricted stock consists of awards of restricted stock and restricted stock units ("RSUs"). The following is a summary of the Company’s restricted stock activity during the nine months ended December 31, 2015:



	Number of Shares		Weighted Average Grant Date Fair Value
	(in thousands)
Non-vested at March 31, 2015	1,290		$	42.67
Restricted stock granted	656		$	54.98
Restricted stock vested	(561	)	$	41.77
Restricted stock forfeited	(65	)	$	46.66
Non-vested at December 31, 2015	1,320		$	48.98

The weighted average grant-date fair value of awards of restricted stock is based on the quoted market price of the Company's common stock on the date of grant. The weighted average grant-date fair value of restricted stock granted during the nine months ended December 31, 2015 and 2014 was $54.98 and $45.16, respectively. The total fair value of restricted stock that vested during the nine months ended December 31, 2015 and 2014 was $23.4 million and $17.0 million, respectively.

As of December 31, 2015, total unrecognized compensation cost related to unvested restricted stock was $42.0 million, which is expected to be recognized over a weighted average period of 1.7 years.

Valuation Assumptions

The Company estimates the fair value of stock options and Employee Stock Purchase Plan (“ESPP”) shares using a Black-Scholes option valuation model. At the date of grant, the Company estimated the fair value of each stock option grant and purchase right granted under the ESPP using the following weighted average assumptions:



	Three Months Ended December 31,						Nine Months Ended December 31,
Employee Stock Options	2014			2015			2014			2015
Expected volatility	28.4		%	26.7		%	28.4		%	27.0		%
Risk-free interest rate	1.4		%	1.5		%	1.4		%	1.4		%
Expected dividend yield	1.2		%	1.1		%	1.3		%	1.1		%
Expected life (in years)	4.2			4.2			4.2			4.2
Weighted-average grant date fair value	$	11.53		$	11.21		$	10.33		$	11.39
ESPP⁽¹⁾
Expected volatility							24.8		%	21.9		%
Risk-free interest rate							0.1		%	0.3		%
Expected dividend yield							1.3		%	1.1		%
Expected life (in years)							0.5			0.5
Weighted-average grant date fair value							$	10.13		$	11.73

⁽¹⁾No purchase rights were granted under the ESPP during the three months ended December 31, 2015 and 2014.