CAPITAL STOCK

Stock Plans

The 2005 Long-Term Incentive Compensation Plan (the “2005 Incentive Compensation Plan”) permits the award of non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, deferred stock/restricted stock units, other stock units and performance shares to the Company’s key employees, officers and directors. The 2005 Incentive Compensation Plan is administered by the Compensation Committee of the Board of Directors (the “Committee”) consisting of three independent members of our Board of Directors.

The maximum number of shares available for award under the 2005 Incentive Compensation Plan is 19,824,920. The maximum number of shares that may be issued pursuant to incentive stock options may not exceed 500,000. Any shares that are subject to the award of stock options shall be counted against this limit as one (1) share for every one (1) share issued. Any shares that are subject to awards other than stock options shall be counted against this limit as 3.02 shares for every one (1) share granted. The total shares available for future grant as of April 2, 2016 was 6,037,933.

Stock-Based Compensation

Compensation cost related to stock-based transactions is recognized in the consolidated financial statements based on fair value. The total amount of stock-based compensation expense, which is recorded on a straight line basis, was as follows:



(In thousands)	2016	2015	2014
Selling, general and administrative expenses	$5,183	$11,251	$10,507
Research and development	1,060	1,706	1,545
Cost of goods sold	706	1,138	1,030
	$6,949	$14,095	$13,082

We did not recognize an income tax benefit associated with our stock-based compensation arrangements for the fiscal year ended April 2, 2016. We recognized an income tax benefit associated with our stock-based compensation arrangements of $4.5 million and $4.3 million for the fiscal years ended March 28, 2015 and March 29, 2014, respectively. There was no excess cash tax benefit classified as a financing cash inflow in fiscal 2016 and the excess cash tax benefit classified as a financing cash inflow in fiscal 2015 and 2014 was $1.6 million and $2.4 million, respectively.

Stock Options

Options are granted to purchase ordinary shares at prices as determined by the Committee, but in no event shall such exercise price be less than the fair market value of the common stock at the time of the grant. Options generally vest in equal installments over a four year period for employees and one year from grant for non-employee directors. Options expire not more than 7 years from the date of the grant. The grant-date fair value of options, adjusted for estimated forfeitures, is recognized as expense on a straight line basis over the requisite service period, which is generally the vesting period. Forfeitures are estimated based on historical experience.

A summary of stock option activity for the fiscal year ended April 2, 2016 is as follows:



	Options Outstanding (shares)		Weighted Average Exercise Price per Share		Weighted Average Remaining Life (years)	Aggregate Intrinsic Value ($000’s)
Outstanding at March 28, 2015	3,761,666		$	33.90	4.02	$	37,067
Granted	409,047		32.50
Exercised	(491,546	)	28.55
Forfeited/Canceled	(727,984	)	37.98
Outstanding at April 2, 2016	2,951,183		$	33.59	3.34	$	9,684

Exercisable at April 2, 2016	2,288,166		$	33.22	2.59	$	8,428

Vested or expected to vest at April 2, 2016	2,847,285		$	33.56	3.21	$	9,432

The total intrinsic value of options exercised was $4.5 million, $5.6 million, and $11.7 million during fiscal 2016, 2015, and 2014, respectively.

As of April 2, 2016, there was $4.5 million of total unrecognized compensation cost related to non-vested stock options. This cost is expected to be recognized over a weighted average period of 2.83 years.

The fair value was estimated using the Black-Scholes option-pricing model based on the weighted average of the high and low stock prices at the grant date and the weighted average assumptions specific to the underlying options. Expected volatility assumptions are based on the historical volatility of our common stock over the expected term of the option. The risk-free interest rate was selected based upon yields of U.S. Treasury issues with a term equal to the expected life of the option being valued. The expected life of the option was estimated with reference to historical exercise patterns, the contractual term of the option and the vesting period.

The assumptions utilized for option grants during the periods presented are as follows:



	April 2, 2016			March 28, 2015			March 29, 2014
Volatility	22.8		%	22.5		%	24.8		%
Expected life (years)	4.9			4.9			4.9
Risk-free interest rate	1.4		%	1.5		%	1.3		%
Dividend yield	0.0		%	0.0		%	0.0		%
Fair value per option	$	7.40		$	7.91		$	10.15

Restricted Stock Units

Restricted Stock Units ("RSUs") generally vest in equal installments over a four year period for employees and one year from grant for non-employee directors. The grant-date fair value of RSUs, adjusted for estimated forfeitures, is recognized as expense on a straight-line basis over the requisite service period, which is generally the vesting period. The fair market value of RSUs is determined based on the market value of the Company’s shares on the date of grant.

A summary of RSU activity for the fiscal year ended April 2, 2016 is as follows:



	Shares		Weighted Average Grant Date Fair Value
Unvested at March 28, 2015	357,547		$	36.73
Granted	278,260		33.19
Vested	(112,333	)	36.07
Forfeited	(142,603	)	36.72
Unvested at April 2, 2016	380,871		$	34.33

The weighted-average grant-date fair value of RSUs granted and total fair value of RSUs vested were as follows:



(In thousands, except per share data)	April 2, 2016		March 28, 2015		March 29, 2014
Grant-date fair value per RSU	$	33.19	$	34.89	$	42.24
Fair value of RSUs vested	$	36.07	$	36.62	$	32.70

As of April 2, 2016, there was $9.5 million of total unrecognized compensation cost related to non-vested restricted stock units. This cost is expected to be recognized over a weighted average period of 2.46 years.

Performance Stock Units

The grant date fair value of Performance Stock Units ("PSUs"), adjusted for estimated forfeitures, is recognized as expense on a straight line basis from the grant date through the end of the performance period. The value of these PSUs is based on relative shareholder return (total shareholder return for the Company as compared to total shareholder return of the PSU peer group), measured over a three year performance period. The PSU peer group consists of companies comprising the Standard & Poor's Health Care Equipment Index (the "Index"). Depending on the Company's relative performance during the performance period, a recipient of the award is entitled to receive a number of ordinary shares equal to a percentage, ranging from 0% to 200%, of the award granted. As a result, we may issue up to 204,672 shares related to these awards. If the Company’s total shareholder return for the performance period is negative, then any share payout will be capped at 100% of the target award, regardless of the Company's performance relative to the Index.

A summary of PSU activity for the fiscal year ended April 2, 2016 is as follows:



	Shares		Weighted Average Grant Date Fair Value
Unvested at March 28, 2015	129,130		$	35.09
Granted	80,145		29.20
Vested	—		—
Forfeited	(106,939	)	34.22
Unvested at April 2, 2016	102,336		$	31.38

The Company uses the Monte Carlo model to estimate the probability of satisfying the performance criteria and the resulting fair value of PSU awards. The assumptions used in the Monte Carlo model for PSUs granted during each year were as follows:



	April 2, 2016		March 28, 2015
Expected stock price volatility	22.27	%	20.08	%
Peer group stock price volatility	31.95	%	31.52	%
Correlation of returns	26.27	%	30.52	%

The weighted-average grant-date fair value of PSUs granted was $29.20 and $35.09 in fiscal 2016 and 2015, respectively.

As of April 2, 2016, there was $2.7 million of total unrecognized compensation cost related to non-vested performance share units. This cost is expected to be recognized over a weighted average period of 2.21 years.

Market Stock Units

The grant date fair value of Market Stock Units ("MSUs"), adjusted for estimated forfeitures, is recognized as expense on a straight line basis from the grant date through the end of the performance period. The value of these MSUs is based the performance of Haemonetics’ stock through March 31, 2017. If Haemonetics' stock is below a minimum threshold price of $50 per share during the relevant measurement period, the holders receive no market share units. If the stock achieves certain price levels, the holders are eligible to receive up to three times the “target” amount of market share units. As a result, we may issue up to 458,904 shares at a stock price of $85 per share or higher in connection with these grants.

A summary of MSU activity for the fiscal year ended April 2, 2016 is as follows:



	Shares		Weighted Average Grant Date Fair Value
Unvested at March 28, 2015	287,682		$	33.90
Granted	33,550		10.21
Vested	—		—
Forfeited	(168,264	)	37.42
Unvested at April 2, 2016	152,968		$	24.84

The Company uses the Monte Carlo model to determine the fair value of each market stock unit. The assumptions used in the Monte Carlo model for MSUs granted during each year were as follows:



	April 2, 2016		March 28, 2015		March 29, 2014
Volatility	24.0	%	21.2	%	20.2	%
Expected life (years)	1.7		2.8		3.7
Risk-free interest rate	0.5	%	0.8	%	0.9	%
Dividend yield	0.0	%	0.0	%	0.0	%

The weighted-average grant-date fair value of MSUs granted was $10.21, $7.44 and $36.36 in fiscal 2016, 2015 and 2014, respectively.

As of April 2, 2016, there was $1.8 million of total unrecognized compensation cost related to non-vested market stock units. This cost is expected to be recognized over a weighted average period of 1.0 years.

Employee Stock Purchase Plan

The Company has an Employee Stock Purchase Plan (the “Purchase Plan”) under which a maximum of 1,400,000 shares (subject to adjustment for stock splits and similar changes) of common stock may be purchased by eligible employees. Substantially all of our full-time employees are eligible to participate in the Purchase Plan.

The Purchase Plan provides for two “purchase periods” within each of our fiscal years, the first commencing on November 1 of each year and continuing through April 30 of the next calendar year, and the second commencing on May 1 of each year and continuing through October 31 of such year. Shares are purchased through an accumulation of payroll deductions (of not less than 2% or more than 15% of compensation, as defined) for the number of whole shares determined by dividing the balance in the employee’s account on the last day of the purchase period by the purchase price per share for the stock determined under the Purchase Plan. The purchase price for shares is the lower of 85% of the fair market value of the common stock at the beginning of the purchase period, or 85% of such value at the end of the purchase period.

The fair values of shares purchased under the Employee Stock Purchase Plan are estimated using the Black-Scholes single option-pricing model with the following weighted average assumptions:



	April 2, 2016		March 28, 2015		March 29, 2014
Volatility	21.1	%	23.7	%	22.9	%
Expected life (months)	6		6		6
Risk-free interest rate	0.2	%	0.1	%	0.1	%
Dividend Yield	0.0	%	0.0	%	0.0	%

The weighted average grant date fair value of the six-month option inherent in the Purchase Plan was approximately $7.80, $7.09, and $8.25 during fiscal 2016, 2015, and 2014, respectively.