Stock Plans

12 Months Ended

Dec. 29, 2019

Share-based Payment Arrangement [Abstract]

Stock-Based Compensation:

The Company’s 2019 Incentive Plan (the “2019 Plan”) authorizes the issuance of incentive stock options intended to qualify under Section 422 of the Internal Revenue Code of 1986, as amended, non-statutory stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-based awards and cash awards as part of the Company’s compensation programs. The 2019 Plan was approved by the Company’s Board on January 24, 2019 and by the Company’s shareholders on

April 23, 2019. The 2019 Plan replaced the Company’s 2009 Incentive Plan (the “2009 Plan”), under which the Company’s common stock was made available for stock option grants, restricted stock awards, performance restricted stock units, performance units and stock awards as part of the Company’s compensation programs. Upon shareholder approval of the 2019 Plan, 6.25 million shares of the Company’s common stock, as well as shares of the Company’s common stock previously granted under the 2009 Plan that expire, terminate or are otherwise surrendered, canceled, forfeited or repurchased by the Company at their original issuance price subject to a contractual repurchase right, became available for grant under the 2019 Plan. Awards granted under the 2009 Plan prior to its expiration remain outstanding. As part of the Company’s compensation programs, the Company also offers shares of its common stock under its Employee Stock Purchase Plan.

The following table summarizes total pre-tax compensation expense recognized related to the Company’s stock options, restricted stock, restricted stock units, performance restricted stock units, performance units and stock grants, net of estimated forfeitures, included in the Company’s consolidated statements of operations for fiscal years 2019, 2018 and 2017:



	December 29, 2019		December 30, 2018		December 31, 2017
	(In thousands)
Cost of product and service revenue	$	1,620	$	1,466	$	1,254
Research and development expenses	1,061		1,359		1,389
Selling, general and administrative expenses	28,833		25,942		22,778
Total stock-based compensation expense	$	31,514	$	28,767	$	25,421

The total income tax benefit recognized in the consolidated statements of operations for stock-based compensation was $11.6 million in fiscal year 2019, $13.6 million in fiscal year 2018 and $14.5 million in fiscal year 2017. Stock-based compensation costs capitalized as part of inventory were $0.3 million as of each of December 29, 2019 and December 30, 2018. Stock compensation expense from acceleration of vesting of certain stock awards to the Company's former Chief Executive Officer was $7.7 million for fiscal year 2019.

Stock Options: The Company has granted options to purchase common shares at prices equal to the market price of the common shares on the date the option is granted. Conditions of vesting are determined at the time of grant. Options are generally exercisable in equal annual installments over a period of three years, and will generally expire seven years after the date of grant. Options replaced in association with business combination transactions are generally issued with the same terms of the respective plans under which they were originally issued.

The fair value of each option grant is estimated using the Black-Scholes option pricing model. The fair value is then amortized on a straight-line basis over the requisite service periods of the awards, which is generally the vesting period. Use of a valuation model requires management to make certain assumptions with respect to selected model inputs. Expected volatility was calculated based on the historical and implied volatility of the Company’s stock. The average expected life was based on the contractual term of the option and historic exercise experience. The risk-free interest rate is based on United States Treasury zero-coupon issues with a remaining term equal to the expected life assumed at the date of grant. The Company’s weighted-average assumptions used in the Black-Scholes option pricing model were as follows for the fiscal years ended:



	December 29, 2019		December 30, 2018		December 31, 2017
Risk-free interest rate	2.5	%	3.0	%	2.0	%
Expected dividend yield	0.3	%	0.4	%	0.4	%
Expected lives	5 years		5 years		5 years
Expected stock volatility	22.8	%	20.7	%	22.4	%

The following table summarizes stock option activity for the fiscal year ended December 29, 2019:



	Number of Shares		Weighted- Average Exercise Price
	(Shares in thousands)
Outstanding at beginning of year	1,765		$	52.91
Granted	304		93.66
Exercised	(415	)	47.60
Canceled	(3	)	75.52
Forfeited	(116	)	78.71
Outstanding at end of year	1,535		$	60.42
Exercisable at end of year	954		$	48.65

The aggregate intrinsic value for stock options outstanding at December 29, 2019 was $56.2 million with a weighted-average remaining contractual term of 3.8 years. The aggregate intrinsic value for stock options exercisable at December 29, 2019 was $46.2 million with a weighted-average remaining contractual term of 2.9 years. At December 29, 2019, there were 1.5 million stock options that were vested, and expected to vest in the future, with an aggregate intrinsic value of $56.2 million and a weighted-average remaining contractual term of 3.8 years.

The weighted-average per-share grant-date fair value of options granted during fiscal years 2019, 2018 and 2017 was $22.63, $17.56, and $11.83, respectively. The total intrinsic value of options exercised during fiscal years 2019, 2018 and 2017 was $19.1 million, $35.0 million, and $17.6 million, respectively. Cash received from option exercises for fiscal years 2019, 2018 and 2017 was $19.7 million, $24.8 million, and $18.0 million, respectively. The total compensation expense recognized related to the Company’s outstanding options was $6.7 million in fiscal year 2019, $5.4 million in fiscal year 2018 and $4.7 million in fiscal year 2017.

There was $6.3 million of total unrecognized compensation cost related to nonvested stock options granted as of December 29, 2019. This cost is expected to be recognized over a weighted-average period of 1.8 years.

Restricted Stock Awards: The Company has awarded shares of restricted stock and restricted stock units to certain employees and non-employee directors at no cost to them, which cannot be sold, assigned, transferred or pledged during the restriction period. The restricted stock and restricted stock units vest through the passage of time, assuming continued employment. The fair value of the award at the time of the grant is expensed on a straight line basis primarily in selling, general and administrative expenses over the vesting period, which is generally 3 years. These awards were granted under the Company’s 2009 Plan. Recipients of the restricted stock have the right to vote such shares and receive dividends.

The following table summarizes restricted stock award activity for the fiscal year ended December 29, 2019:



	Number of Shares		Weighted- Average Grant- Date Fair Value
	(Shares in thousands)
Nonvested at beginning of year	465		$	61.72
Granted	163		94.80
Vested	(218	)	55.20
Forfeited	(65	)	76.72
Nonvested at end of year	345		$	78.69

The fair value of restricted stock awards vested during fiscal years 2019, 2018 and 2017 was $12.0 million, $10.4 million, and $10.6 million, respectively. The total compensation expense recognized related to the restricted stock awards was $12.7 million in fiscal year 2019, $11.7 million in fiscal year 2018 and $10.3 million in fiscal year 2017.

As of December 29, 2019, there was $14.8 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 1.4 years.

Performance Restricted Stock Units: As part of the Company's executive compensation program, the Company granted 76,218 and 39,133 performance restricted stock units during fiscal years 2019 and 2018, respectively, that will vest based on performance of the Company. The weighted-average per-share grant date fair value of performance restricted stock units granted during fiscal years 2019 and 2018 was $92.95 and $80.31, respectively. During fiscal year 2019, 18,777 performance restricted stock units were forfeited. The total compensation expense recognized related to the performance restricted stock units was $5.9 million in fiscal year 2019 and $3.2 million in fiscal year 2018. As of December 29, 2019, there were 145,114 performance restricted stock units outstanding.

Performance Units: The Company’s performance unit program provides a cash award based on the achievement of specific performance criteria. A target number of units are granted at the beginning of a three-year performance period. The number of units earned at the end of the performance period is determined by multiplying the number of units granted by a performance factor ranging from 0% to 200%. Awards are determined by multiplying the number of units earned by the stock price at the end of the performance period, and are paid in cash and accounted for as a liability based award. The compensation expense associated with these units is recognized over the period that the performance targets are expected to be achieved. No performance units were granted during the fiscal year 2019. The Company granted 37,281 performance units and 49,845 performance units during fiscal years 2018 and 2017, respectively. The weighted-average per-share grant-date fair value of performance units granted during fiscal years 2018 and 2017 was $73.23 and $52.69, respectively. During fiscal years 2019, 2018 and 2017, 10,116 performance units, zero performance units and 15,139 performance units were forfeited, respectively. The total compensation expense related to performance units was $5.6 million, $7.7 million, and $8.7 million for fiscal years 2019, 2018 and 2017, respectively. As of December 29, 2019, there were 71,213 performance units outstanding subject to forfeiture, with a corresponding liability of $10.4 million recorded in accrued expenses and long-term liabilities.

Stock Awards: The Company’s stock award program provides an annual equity award to non-employee directors. For fiscal years 2019, 2018 and 2017, the award equaled the number of shares of the Company’s common stock which has an aggregate fair market value of $100,000 on the date of the award. The stock award is prorated for non-employee directors who serve for only a portion of the year. The compensation expense associated with these stock awards is recognized when the stock award is granted. In fiscal years 2019, 2018 and 2017, the Company awarded 7,301 shares, 11,088 shares, and 12,006 shares, respectively, to non-employee directors. The weighted-average per-share grant-date fair value of stock awards granted during fiscal years 2019, 2018 and 2017 was $95.84, $72.17, and $63.14, respectively. The total compensation expense recognized related to these stock awards was $0.7 million in fiscal year 2019 and $0.8 million in each of fiscal years 2018 and 2017.

Employee Stock Purchase Plan:

In April 1999, the Company’s shareholders approved the 1998 Employee Stock Purchase Plan. In April 2005, the Compensation and Benefits Committee of the Board voted to amend the Employee Stock Purchase Plan, effective July 1, 2005, whereby participating employees have the right to purchase common stock at a price equal to 95% of the closing price on the last day of each six-month offering period. The number of shares which an employee may purchase, subject to certain aggregate limits, is determined by the employee’s voluntary contribution, which may not exceed 10% of the employee’s base compensation. During fiscal year 2019, the Company issued 33,843 shares of common stock under the Company’s Employee Stock Purchase Plan at a weighted-average price of $82.25 per share. During fiscal year 2018, the Company issued 21,321 shares under this plan at a weighted-average price of $69.57 per share. During fiscal year 2017, the Company issued 36,769 shares under this plan at a weighted-average price of $67.09 per share. At December 29, 2019 there remains available for sale to employees an aggregate of 0.8 million shares of the Company’s common stock out of the 5.0 million shares authorized by shareholders for issuance under this plan.