Stock-Based Compensation

Stock-based compensation expense for each employee and director is presented in the same statement of operations caption as their cash compensation. Stock-based compensation expense by statement of operations caption and the related income tax benefit were as follows:



	Three Months Ended March 31,
(In thousands)	2018		2017
Cost of sales	$	17	$	15
Research and development expenses	155		119
Selling, general and administrative expenses:
Employees	1,528		1,744
Outside directors	504		745
Total employee and director stock-based compensation expense	$	2,204	$	2,623

Income tax benefit	$	463	$	815

Stock Options

The assumptions we utilized in the Black-Scholes option pricing model and the resulting weighted average fair value of stock option grants were the following:



	Three Months Ended March 31,
	2018			2017
Weighted average fair value of grants	$	14.26		$	19.61
Risk-free interest rate	2.51		%	1.75		%
Expected volatility	33.09		%	34.25		%
Expected life in years	4.53			4.52

As of March 31, 2018, we expect to recognize $3.2 million of total unrecognized pre-tax stock-based compensation expense related to non-vested stock options over a remaining weighted-average life of 2.2 years.

Stock option activity was as follows:



	Number of Options (in 000's)		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in 000's)
Outstanding at December 31, 2017	520		$	42.56
Granted	119		44.95
Exercised	(20	)	21.95			$	464
Forfeited/canceled/expired	—		—
Outstanding at March 31, 2018 ⁽¹⁾	619		$	43.69	4.69	$	7,151
Vested and expected to vest at March 31, 2018⁽¹⁾	619		$	35.03	3.36	$	6,304
Exercisable at March 31, 2018 ⁽¹⁾	406		$	39.82	3.86	$	6,282

⁽¹⁾

The aggregate intrinsic value represents the total pre-tax value (the difference between our closing stock price on the last trading day of the first quarter of 2018 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had they all exercised their options on March 31, 2018. This amount will change based on the fair market value of our stock.

Restricted Stock

Non-vested restricted stock award activity was as follows:



	Shares (in 000's)		Weighted-Average Grant Date Fair Value
Non-vested at December 31, 2017	162		$	61.19
Granted	136		44.98
Vested	(44	)	63.34
Forfeited	(6	)	59.72
Non-vested at March 31, 2018	248		$	51.99

As of March 31, 2018, we expect to recognize $11.7 million of total unrecognized pre-tax stock-based compensation expense related to non-vested restricted stock awards over a weighted-average life of 2.2 years.