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, as well as shares of the Company’s common stock previously granted under the Amended and Restated 2001 Incentive Plan and the 2005 Incentive Plan that were cancelled or forfeited without the shares being issued, are authorized for stock option grants, restricted stock awards, performance units and stock grants as part of the Company’s compensation programs.

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 six months ended June 30, 2013 and July 1, 2012:



	Three Months Ended				Six Months Ended
	June 30, 2013		July 1, 2012		June 30, 2013		July 1, 2012
	(In thousands)
Cost of product and service revenue	$	307	$	304	$	620	$	580
Research and development expenses	211		185		426		361
Selling, general and administrative expenses	2,708		4,287		6,596		9,311
Total stock-based compensation expense	$	3,226	$	4,776	$	7,642	$	10,252

The total income tax benefit recognized in the condensed consolidated statements of operations for stock-based compensation was $1.0 million and $2.4 million for the three and six months ended June 30, 2013, respectively. The total income tax benefit recognized in the condensed consolidated statements of operations for stock-based compensation was $1.5 million and $3.4 million for the three and six months ended July 1, 2012, respectively. Stock-based compensation costs capitalized as part of inventory were $0.3 million as of both June 30, 2013 and July 1, 2012. The excess tax benefit recognized from stock awards, classified as a financing cash activity, was zero and $1.1 million for the six months ended June 30, 2013 and July 1, 2012, 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 and Six Months Ended
	June 30, 2013		July 1, 2012
Risk-free interest rate	0.9	%	0.6	%
Expected dividend yield	0.8	%	1.2	%
Expected lives	5 years		4 years
Expected stock volatility	38.5	%	38.7	%

The following table summarizes stock option activity for the six months ended June 30, 2013:



	Number of Shares		Weighted- Average Price		Weighted-Average Remaining Contractual Term	Total Intrinsic Value
	(In thousands)				(In years)	(In millions)
Outstanding at December 30, 2012	4,266		$	21.64
Granted	518		33.62
Exercised	(336	)	21.68
Canceled	(7	)	22.63
Forfeited	(299	)	22.39
Outstanding at June 30, 2013	4,142		$	23.08	3.7	$	40.4
Exercisable at June 30, 2013	2,960		$	20.81	2.8	$	35.3
Vested and expected to vest in the future	4,091		$	23.02	3.7	$	40.2

The weighted-average per-share grant-date fair value of options granted for the three and six months ended June 30, 2013 was $9.82 and $10.82, respectively. The weighted-average per-share grant-date fair value of options granted for the three and six months ended July 1, 2012 was $7.73 and $7.35, respectively. The total intrinsic value of options exercised for the three and six months ended June 30, 2013 was $1.0 million and $4.1 million, respectively. The total intrinsic value of options exercised for the three and six months ended July 1, 2012 was $0.9 million and $5.2 million, respectively. Cash received from option exercises for the six months ended June 30, 2013 and July 1, 2012 was $7.3 million and $11.7 million, respectively.

The total compensation expense recognized related to the Company’s outstanding options was $0.8 million and $2.1 million for the three and six months ended June 30, 2013, respectively, and $1.3 million and $2.5 million for the three and six months ended July 1, 2012, respectively.

There was $8.0 million of total unrecognized compensation cost, net of estimated forfeitures, related to nonvested stock options granted as of June 30, 2013. This cost is expected to be recognized over a weighted-average period of 2.1 years and will be adjusted for any future changes in estimated forfeitures.

Restricted Stock Awards: The following table summarizes restricted stock award activity for the six months ended June 30, 2013:



	Number of Shares		Weighted- Average Grant- Date Fair Value
	(In thousands)
Nonvested at December 30, 2012	781		$	24.71
Granted	272		33.70
Vested	(310	)	23.20
Forfeited	(50	)	28.92
Nonvested at June 30, 2013	693		$	28.61

The weighted-average per-share grant-date fair value of restricted stock awards granted during the three and six months ended June 30, 2013 was $32.34 and $33.70, respectively. The weighted-average per-share grant-date fair value of restricted stock awards granted during the three and six months ended July 1, 2012 was $25.55 and $25.83, respectively. The fair value of restricted stock awards vested for the three and six months ended June 30, 2013 was $0.3 million and $7.2 million, respectively. The fair value of restricted stock awards vested for the three and six months ended July 1, 2012 was $1.3 million and $4.2 million, respectively. The total compensation expense recognized related to the Company’s outstanding restricted stock awards was $1.7 million and $3.9 million for the three and six months ended June 30, 2013, respectively, and $2.2 million and $4.1 million for the three and six months ended July 1, 2012, respectively.

As of June 30, 2013, there was $12.9 million of total unrecognized compensation cost, net of forfeitures, related to nonvested restricted stock awards. That cost is expected to be recognized over a weighted-average period of 1.6 years.

Performance Units: The Company granted 98,056 and 122,675 performance units during the six months ended June 30, 2013 and July 1, 2012, 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 six months ended June 30, 2013 and July 1, 2012 was $34.06 and $26.18, respectively. The total compensation expense recognized related to these performance units was zero and $0.9 million for the three and six months ended June 30, 2013, respectively, and $0.6 million and $2.8 million for the three and six months ended July 1, 2012, respectively. As of June 30, 2013, there were 282,044 performance units outstanding and subject to forfeiture, with a corresponding liability of $4.5 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 3,263 shares and 3,580 shares to each non-employee member of the Board during the six months ended June 30, 2013 and July 1, 2012, respectively. The Company also granted 955 shares to a new non-employee member of the Board during the six months ended July 1, 2012. The weighted-average per-share grant-date fair value of the stock award granted during the six months ended June 30, 2013 and July 1, 2012 was $30.65 and $27.87, respectively. The total compensation expense recognized related to these stock awards was $0.7 million for each of the three and six months ended June 30, 2013 and July 1, 2012.

Employee Stock Purchase Plan: During the six months ended June 30, 2013, the Company issued 89,521 shares of common stock under the Company's Employee Stock Purchase Plan at a weighted-average price of $30.51 per share. At June 30, 2013, an aggregate of 1.1 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.