Share-Based Compensation

9 Months Ended

Oct. 01, 2017

As of October 1, 2017, there were 850,580 stock options and 228,303 RSU and RSU MSP Awards outstanding. In addition, there were 769,710 shares available for grant under the 2014 Stock Option and Incentive Plan (the "2014 Plan") as of October 1, 2017.

During the nine months ended October 1, 2017, we granted 142,428 stock options compared with 210,633 stock options granted during the nine months ended October 2, 2016.

The average fair value of stock options granted during the first nine months of 2017 and 2016 was $19.36 and $11.91, respectively, and was estimated using the following weighted-average assumptions:



	October 1, 2017		October 2, 2016
Risk-free interest rate	1.7	%	1.2	%
Expected life (years)	4.5		4.5
Expected stock volatility	35.1	%	36.2	%
Expected dividend yield	0.3	%	0.4	%

For additional information regarding the historical issuance of stock options, refer to our Annual Report on Form 10-K for the year ended December 31, 2016.

During the nine months ended October 1, 2017 and October 2, 2016, we granted 56,948 and 87,629 RSU Awards with approximate fair values of $60.76 and $39.61 per RSU Award, respectively. During the first nine months of 2017 and 2016, we granted performance-based RSUs as part of the overall mix of RSU Awards. These performance-based RSUs include metrics for achieving Return on Invested Capital and Adjusted Operating Margin with target payouts ranging from 0% to 200%. Of the 56,948 RSU Awards granted during the nine months ended October 1, 2017, 31,369 are performance-based RSU Awards. This compares to 43,016 performance-based RSU Awards granted during the nine months ended October 2, 2016.

RSU MSPs totaling 26,726 and 20,130 with per unit discount amounts representing fair values of $20.13 and $12.83 were granted during the nine months ended October 1, 2017 and October 2, 2016, respectively.

Compensation expense related to our share-based plans for the nine months ended October 1, 2017 and October 2, 2016 was $2.7 million and $4.2 million, respectively. The primary reason for lower expense during 2017 relates to a change in estimate of $1.1 million for anticipated below-threshold achievement of performance-based RSUs granted in both February 2015 and February 2016. Compensation expense for both periods was recorded as selling, general and administrative expenses. As of October 1, 2017, there was $7.8 million of total unrecognized compensation costs related to our outstanding share-based compensation arrangements. That cost is expected to be recognized over a weighted average period of 2.0 years.

The weighted average contractual term for stock options outstanding and options exercisable as of October 1, 2017 was 5.6 years and 4.9 years, respectively. The aggregate intrinsic value of stock options exercised during the nine months ended October 1, 2017 was $0.4 million and the aggregate intrinsic value of stock options outstanding and options exercisable as of October 1, 2017 was $6.0 million and $3.3 million, respectively.

The aggregate intrinsic value of RSU Awards settled during the nine months ended October 1, 2017 was $1.6 million and the aggregate intrinsic value of RSU Awards outstanding and RSU Awards vested and deferred as of October 1, 2017 was $8.5 million and $0.1 million, respectively.

The aggregate intrinsic value of RSU MSPs settled during the nine months ended October 1, 2017 was $0.3 million and the aggregate intrinsic value of RSU MSPs outstanding as of October 1, 2017 was $1.4 million. There were no vested and deferred RSU MSPs as of October 1, 2017.

As of October 1, 2017, there were 31,097 Cash Settled Stock Unit Awards outstanding compared to 33,320 as of December 31, 2016. During the nine months ended October 1, 2017, the aggregate cash used to settle Cash Settled Stock Unit Awards was $0.3 million. As of October 1, 2017, we had $1.0 million of accrued expenses in current liabilities associated with these Cash Settled Stock Unit Awards compared with $1.0 million as of December 31, 2016. Cash Settled Stock Unit Award related compensation expense for the nine months ended October 1, 2017 and October 2, 2016 was $0.2 million and $0.7 million, respectively, and was recorded as selling, general, and administrative expenses. The lower expense in 2017 was due in part to a lower closing stock price as of October 1, 2017 compared to October 2, 2016.

- Definition

The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details.

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