Stock Plans

3 Months Ended

Apr. 05, 2020

Share-based Payment Arrangement [Abstract]

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 option grants, restricted stock awards, performance restricted stock units, performance units and stock awards, included in the Company’s condensed consolidated statements of operations for the three months ended April 5, 2020 and March 31, 2019:



	Three Months Ended
	April 5, 2020		March 31, 2019
	(In thousands)
Cost of revenue	$	254	$	334
Research and development expenses	272		291
Selling, general and administrative expenses	2,524		5,472
Total stock-based compensation expense	$	3,050	$	6,097

The total income tax benefit recognized in the condensed consolidated statements of operations for stock-based compensation was $2.2 million and $4.2 million for the three months ended April 5, 2020 and March 31, 2019, respectively. Stock-based compensation costs capitalized as part of inventory was $0.3 million and $0.4 million as of each of April 5, 2020 and March 31, 2019, respectively.

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 Months Ended
	April 5, 2020		March 31, 2019
Risk-free interest rate	0.9	%	2.6	%
Expected dividend yield	0.3	%	0.3	%
Expected term	5 years		5 years
Expected stock volatility	23.8	%	22.8	%

The following table summarizes stock option activity for the three months ended April 5, 2020:



	Number of Shares		Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term	Total Intrinsic Value
	(In thousands)				(In years)	(In millions)
Outstanding at December 29, 2019	1,535		$	60.42
Granted	266		86.87
Exercised	(21	)	52.69
Forfeited	(30	)	85.13
Outstanding at April 5, 2020	1,750		$	64.10	3.7	$	24.0
Exercisable at April 5, 2020	1,296		$	56.01	2.7	$	23.9

The weighted-average per-share grant-date fair value of options granted during the three months ended April 5, 2020 and March 31, 2019 was $18.98 and $22.66, respectively. The total intrinsic value of options exercised during the three months ended April 5, 2020 and March 31, 2019 was $0.9 million and $8.8 million, respectively. Cash received from option exercises for the three months ended April 5, 2020 and March 31, 2019 was $1.1 million and $8.6 million, respectively.

The total compensation expense recognized related to the Company’s outstanding options was $1.0 million and $1.4 million for the three months ended April 5, 2020 and March 31, 2019, respectively.

There was $8.1 million of total unrecognized compensation cost related to nonvested stock options granted as of April 5, 2020. This cost is expected to be recognized over a weighted-average period of 2.3 years.

Restricted Stock Awards: The following table summarizes restricted stock award activity for the three months ended April 5, 2020:



	Number of Shares		Weighted- Average Grant- Date Fair Value
	(In thousands)
Nonvested at December 29, 2019	345		$	78.69
Granted	156		84.18
Vested	(165	)	70.80
Forfeited	(16	)	82.94
Nonvested at April 5, 2020	320		$	85.20

The fair value of restricted stock awards vested during the three months ended April 5, 2020 and March 31, 2019 was $11.6 million and $9.3 million, respectively. The total compensation expense recognized related to the Company’s outstanding restricted stock awards was $2.4 million and $2.7 million for the three months ended April 5, 2020 and March 31, 2019, respectively.

As of April 5, 2020, there was $23.1 million of total unrecognized compensation cost related to nonvested restricted stock awards. This cost is expected to be recognized over a weighted-average period of 2.1 years.

Performance Restricted Stock Units: As part of the Company's executive compensation program, the Company granted 89,986 performance restricted stock units during the three months ended April 5, 2020 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 the three months ended April 5, 2020 was $76.76. During the three months ended April 5, 2020, 19,860 performance restricted stock units were forfeited. The total compensation expense recognized related to performance restricted stock units was $0.6 million and $0.8 million for the three months ended April 5, 2020 and March 31, 2019, respectively. As of April 5, 2020, there were 131,842 performance restricted stock units outstanding.

Performance Units: No performance units were granted during the three months ended April 5, 2020. During the three months ended April 5, 2020, 1,948 performance units were forfeited. The total compensation (income) expense recognized related to performance units was $(1.0) million and $1.2 million for the three months ended April 5, 2020 and March 31, 2019, respectively. As of April 5, 2020, there were 31,207 performance units outstanding and subject to forfeiture, with a corresponding liability of $2.3 million recorded in accrued expenses and other current liabilities.

Stock Awards: The Company’s stock award program provides an annual equity award to non-employee directors. During the three months ended April 5, 2020, the Company awarded 376 shares to non-employee directors. The weighted-average per-share grant-date fair value of the stock awards granted during the three months ended April 5, 2020 was $76.33. The total compensation expense recognized related to the stock awards were minimal for each of the three months ended April 5, 2020 and March 31, 2019.

Employee Stock Purchase Plan: During the three months ended April 5, 2020, the Company issued 13,612 shares of common stock under the Company's Employee Stock Purchase Plan at a weighted-average price of $92.25 per share. During the three months ended March 31, 2019, the Company issued 18,562 shares of common stock under the Company's Employee Stock Purchase Plan at a weighted-average price of $74.62 per share. At April 5, 2020, an aggregate of 0.8 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.