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 six months ended June 29, 2014 and June 30, 2013:



	Three Months Ended				Six Months Ended
	June 29, 2014		June 30, 2013		June 29, 2014		June 30, 2013
	(In thousands)
Cost of product and service revenue	$	337	$	307	$	671	$	620
Research and development expenses	220		211		360		426
Selling, general and administrative expenses	4,246		2,708		8,288		6,596
Total stock-based compensation expense	$	4,803	$	3,226	$	9,319	$	7,642

The total income tax benefit recognized in the condensed consolidated statements of operations for stock-based compensation was $1.8 million and $3.5 million for the three and six months ended June 29, 2014, respectively. 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. Stock-based compensation costs capitalized as part of inventory were $0.4 million and $0.3 million as of June 29, 2014 and June 30, 2013, respectively. The excess tax benefit recognized from stock compensation, classified as a financing cash activity, was zero for both the six months ended June 29, 2014 and June 30, 2013.

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 29, 2014		June 30, 2013
Risk-free interest rate	1.5	%	0.9	%
Expected dividend yield	0.7	%	0.8	%
Expected lives	5 years		5 years
Expected stock volatility	30.9	%	38.5	%

The following table summarizes stock option activity for the six months ended June 29, 2014:



	Number of Shares		Weighted- Average Price		Weighted-Average Remaining Contractual Term	Total Intrinsic Value
	(In thousands)				(In years)	(In millions)
Outstanding at December 29, 2013	3,494		$	23.34
Granted	511		43.06
Exercised	(814	)	23.89
Canceled	(4	)	20.97
Forfeited	(44	)	33.70
Outstanding at June 29, 2014	3,143		$	26.26	3.9	$	58.5
Exercisable at June 29, 2014	2,108		$	21.40	2.9	$	49.5
Vested and expected to vest in the future	3,099		$	26.15	3.9	$	58.0

The weighted-average per-share grant-date fair value of options granted during the three and six months ended June 29, 2014 was $11.80 and $11.84, respectively The weighted-average per-share grant-date fair value of options granted during the three and six months ended June 30, 2013 was $9.82 and $10.82, respectively. The total intrinsic value of options exercised during the three and six months ended June 29, 2014 was $11.1 million and $17.6 million, respectively. The total intrinsic value of options exercised during the three and six months ended June 30, 2013 was $1.0 million and $4.1 million, respectively. Cash received from option exercises for the six months ended June 29, 2014 and June 30, 2013 was $19.5 million and $7.3 million, respectively.

The total compensation expense recognized related to the Company’s outstanding options was $1.4 million and $2.9 million for the three and six months ended June 29, 2014, respectively, and $0.8 million and $2.1 million for the three and six months ended June 30, 2013, respectively.

There was $8.7 million of total unrecognized compensation cost, net of estimated forfeitures, related to nonvested stock options granted as of June 29, 2014. 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 29, 2014:



	Number of Shares		Weighted- Average Grant- Date Fair Value
	(In thousands)
Nonvested at December 29, 2013	649		$	29.24
Granted	235		42.61
Vested	(254	)	27.65
Forfeited	(38	)	33.12
Nonvested at June 29, 2014	592		$	34.98

The weighted-average per-share grant-date fair value of restricted stock awards granted during the three and six months ended June 29, 2014 was $43.19 and $42.61, respectively. 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 fair value of restricted stock awards vested during the three and six months ended June 29, 2014 was $0.2 million and $7.0 million, respectively. The fair value of restricted stock awards vested during the three and six months ended June 30, 2013 was $0.3 million and $7.2 million, respectively. The total compensation expense recognized related to the Company’s outstanding restricted stock awards was $1.9 million and $3.9 million for the three and six months ended June 29, 2014, respectively, and $1.7 million and $3.9 million for the three and six months ended June 30, 2013, respectively.

As of June 29, 2014, there was $14.0 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 79,463 and 98,056 performance units during the six months ended June 29, 2014 and June 30, 2013, 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 29, 2014 and June 30, 2013 was $42.84 and $34.06, respectively. The total compensation expense recognized related to these performance units was $0.7 million and $1.7 million for the three and six months ended June 29, 2014, respectively, and zero and $0.9 million for the three and six months ended June 30, 2013, respectively. As of June 29, 2014, there were 271,679 performance units outstanding and subject to forfeiture, with a corresponding liability of $4.4 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 2,373 shares and 3,263 shares to each non-employee member of the Board during the six months ended June 29, 2014 and June 30, 2013, respectively. The weighted-average per-share grant-date fair value of the stock awards granted during the six months ended June 29, 2014 and June 30, 2013 was $42.14 and $30.65, respectively. The total compensation expense recognized related to these stock awards was $0.7 million for each of the six months ended June 29, 2014 and June 30, 2013.

Employee Stock Purchase Plan: During the six months ended June 29, 2014, the Company issued 31,854 shares of common stock under the Company's Employee Stock Purchase Plan at a weighted-average price of $39.17 per share. 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 29, 2014, 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.