Stock Plans

In addition to the Company's Employee Stock Purchase Plan, the Company utilizes one stock-based compensation plan, the 2009 Incentive Plan (the “2009 Plan”). Under the 2009 Plan, 10.0 million shares of the Company's common stock are authorized for stock option grants, restricted stock awards, performance units and stock grants as part of the Company’s compensation programs. In addition to shares of the Company’s common stock originally authorized for issuance under the 2009 Plan, the 2009 Plan includes shares of the Company’s common stock previously granted under the Amended and Restated 2001 Incentive Plan and the 2005 Incentive Plan that were canceled or forfeited without the shares being issued.

The following table summarizes total pre-tax compensation expense recognized related to the Company’s stock options, restricted stock, restricted stock units, performance units and stock grants, net of estimated forfeitures, included in the Company’s condensed consolidated statements of operations for the three and nine months ended October 4, 2015 and September 28, 2014:



	Three Months Ended				Nine Months Ended
	October 4, 2015		September 28, 2014		October 4, 2015		September 28, 2014
	(In thousands)
Cost of product and service revenue	$	323	$	386	$	964	$	1,056
Research and development expenses	119		39		419		400
Selling, general and administrative expenses	3,848		2,025		11,100		10,313
Total stock-based compensation expense	$	4,290	$	2,450	$	12,483	$	11,769

The total income tax benefit recognized in the condensed consolidated statements of operations for stock-based compensation was $1.4 million and $4.1 million for the three and nine months ended October 4, 2015, respectively. The total income tax benefit recognized in the condensed consolidated statements of operations for stock-based compensation was $0.8 million and $4.2 million for the three and nine months ended September 28, 2014, respectively. Stock-based compensation costs capitalized as part of inventory were $0.4 million as of both October 4, 2015 and September 28, 2014.

Stock Options: The fair value of each option grant is estimated using the Black-Scholes option pricing model. The Company’s weighted-average assumptions used in the Black-Scholes option pricing model were as follows:



	Three and Nine Months Ended
	October 4, 2015		September 28, 2014
Risk-free interest rate	1.3	%	1.5	%
Expected dividend yield	0.6	%	0.7	%
Expected term	5 years		5 years
Expected stock volatility	26.5	%	30.9	%

The following table summarizes stock option activity for the nine months ended October 4, 2015:



	Number of Shares		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term	Total Intrinsic Value
	(In thousands)				(In years)	(In millions)
Outstanding at December 28, 2014	2,828		$	26.11
Granted	490		46.25
Exercised	(751	)	17.42
Canceled	(3	)	22.49
Forfeited	(83	)	31.43
Outstanding at October 4, 2015	2,481		$	32.54	3.8	$	42.4
Exercisable at October 4, 2015	1,599		$	26.48	2.7	$	37.0
Vested and expected to vest in the future	2,413		$	32.28	3.7	$	41.9

The weighted-average per-share grant-date fair value of options granted during the three and nine months ended October 4, 2015 was $11.44 and $11.00, respectively. The weighted-average per-share grant-date fair value of options granted during the three and nine months ended September 28, 2014 was $12.78 and $11.86, respectively. The total intrinsic value of options exercised during the three and nine months ended October 4, 2015 was $0.7 million and $22.6 million, respectively. The total intrinsic value of options exercised during the three and nine months ended September 28, 2014 was $1.9 million and $19.6 million, respectively. Cash received from option exercises for the nine months ended October 4, 2015 and September 28, 2014 was $13.1 million and $20.9 million, respectively.

The total compensation expense recognized related to the Company’s outstanding options was $1.2 million and $3.2 million for the three and nine months ended October 4, 2015, respectively, and $1.0 million and $3.9 million for the three and nine months ended September 28, 2014, respectively.

There was $6.8 million of total unrecognized compensation cost related to nonvested stock options granted as of October 4, 2015. This cost is expected to be recognized over a weighted-average period of 1.9 years.

Restricted Stock Awards: The following table summarizes restricted stock award activity for the nine months ended October 4, 2015:



	Number of Shares		Weighted- Average Grant- Date Fair Value
	(In thousands)
Nonvested at December 28, 2014	558		$	35.51
Granted	224		46.63
Vested	(232	)	30.55
Forfeited	(30	)	40.38
Nonvested at October 4, 2015	520		$	42.23

The weighted-average per-share grant-date fair value of restricted stock awards granted during the three and nine months ended October 4, 2015 was $48.77 and $46.63, respectively. The weighted-average per-share grant-date fair value of restricted stock awards granted during the three and nine months ended September 28, 2014 was $45.42 and $42.69, respectively. The fair value of restricted stock awards vested during the three and nine months ended October 4, 2015 was $0.2 million and $7.1 million, respectively. The fair value of restricted stock awards vested during the three and nine months ended September 28, 2014 was $0.1 million and $7.1 million, respectively. The total compensation expense recognized related to the Company’s outstanding restricted stock awards was $2.2 million and $6.5 million for the three and nine months ended October 4, 2015, respectively, and $1.6 million and $5.5 million for the three and nine months ended September 28, 2014, respectively.

As of October 4, 2015, there was $12.7 million of total unrecognized compensation cost related to nonvested restricted stock awards. That cost is expected to be recognized over a weighted-average period of 1.5 years.

Performance Units: The Company granted 66,509 and 79,463 performance units during the nine months ended October 4, 2015 and September 28, 2014, respectively, as part of the Company’s executive incentive program. The weighted-average per-share grant-date fair value of performance units granted during the nine months ended October 4, 2015 and September 28, 2014 was $46.83 and $42.84, respectively. During the nine months ended October 4, 2015 and September 28, 2014, 8,860 and 19,667 performance units were forfeited, respectively. The total compensation expense recognized related to performance units was $0.8 million and $2.1 million for the three and nine months ended October 4, 2015, respectively, and a reversal of an expense of $0.2 million and an expense of $1.6 million for the three and nine months ended September 28, 2014, respectively. As of October 4, 2015, there were 201,415 performance units outstanding and subject to forfeiture, with a corresponding liability of $4.0 million recorded in accrued expenses and other current liabilities.

Stock Awards: The Company generally grants stock awards only to non-employee members of the Board. The Company granted 1,953 shares and 2,373 shares to each non-employee member of the Board during the nine months ended October 4, 2015 and September 28, 2014, respectively. The Company also granted 544 shares to a new non-employee member of the Board during the three months ended March 29, 2015. The weighted-average per-share grant-date fair value of the stock awards granted during the nine months ended October 4, 2015 and September 28, 2014 was $51.01 and $42.14, respectively. The total compensation expense recognized related to these stock awards was $0.7 million for each of the nine months ended October 4, 2015 and September 28, 2014.

Employee Stock Purchase Plan: During the nine months ended October 4, 2015, the Company issued 54,374 shares of common stock under the Company's Employee Stock Purchase Plan at a weighted-average price of $45.41 per share. During the nine months ended September 28, 2014, the Company issued 60,870 shares of common stock under the Company's Employee Stock Purchase Plan at a weighted-average price of $41.71 per share. At October 4, 2015, an aggregate of 1.0 million shares of the Company’s common stock remained available for sale to employees out of the 5.0 million shares authorized by shareholders for issuance under this plan.