SHAREHOLDERS’ EQUITY

Repurchase of Common Stock

The Company acquired and retired 180,000 shares of its common stock in the quarter ended October 3, 2015 at an average cost of $66.56 per share for a total use of cash of $12.0 million. The repurchases were under the 3.0 million share repurchase program approved by the Company's Board of Directors. There are approximately 2.3 million shares of our common stock available for repurchase under this program.

Share-Based Compensation

The majority of the Company’s annual share-based incentive awards are made in the fiscal second quarter.

The Company recognized approximately $3.5 million and $2.2 million in share-based compensation expense for the three months ended October 3, 2015 and September 27, 2014, respectively. Share-based compensation expense for the nine months ended October 3, 2015 and September 27, 2014, was $10.6 million and $8.5 million, respectively. The Company recognizes compensation expense on grants of share-based compensation awards on a straight-line basis over the vesting period of each award. The total excess income tax benefit recognized relating to share-based compensation for the nine months ended October 3, 2015 and September 27, 2014 was approximately $1.3 million and $1.2 million, respectively. As of October 3, 2015, total unrecognized compensation cost related to share-based compensation awards was approximately $27.5 million, net of estimated forfeitures, which the Company expects to recognize over a weighted average period of approximately 2.3 years.

Approximately 2.0 million shares were available for future grant under the 2013 Equity Incentive Plan at October 3, 2015.

Options and Stock Appreciation Rights

The Company uses several forms of share-based incentive awards, including non-qualified stock options, incentive stock options, and stock appreciation rights (“SAR's”). Options and SAR's generally vest over 5 years and expire 10 years from the grant date. All grants are made at prices equal to the fair market value of the stock on the grant date. The majority of the Company’s annual share-based incentive awards are made in the fiscal second quarter. For the nine months ended October 3, 2015 and September 27, 2014, expired and canceled shares were immaterial.

The table below presents share-based compensation activity for the nine months ended October 3, 2015 and September 27, 2014 (in millions):



	2015		2014
Total intrinsic value of share-based incentive awards exercised	$	4.0	$	5.0
Cash received from stock option exercises	2.5		1.8
Income tax benefit from the exercise of stock options	1.5		1.9
Total fair value of share-based incentive awards vested	4.8		5.3

The assumptions used in the Company's Black-Scholes valuation related to grants for options and SAR's were as follows:



	2015			2014			2013
Per share weighted average fair value of grants	$	27.16		$	28.01		$	23.01
Risk-free interest rate	1.9		%	2.0		%	1.1		%
Expected life (years)	7.0			7.0			7.0
Expected volatility	35.6		%	37.7		%	38.5		%
Expected dividend yield	1.2		%	1.2		%	1.2		%

The average risk-free interest rate is based on U.S. Treasury security rates in effect as of the grant date. The expected dividend yield is based on the projected annual dividend as a percentage of the estimated market value of the Company's common stock as of the grant date. The Company estimated the expected volatility using a weighted average of daily historical volatility of the Company's stock price over the expected term of the award. The Company estimated the expected term using historical data adjusted for the estimated exercise dates of unexercised awards.

Following is a summary of share-based incentive plan grant activity (options and SAR's) for the nine months ended October 3, 2015.



Number of Shares Under Options and SAR's	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (in millions)
Outstanding at January 3, 2015	1,488,832		$	59.34
Granted	206,500		78.15
Exercised	(121,208	)	43.82
Forfeited	(17,500	)	66.53
Outstanding at October 3, 2015	1,556,624		$	62.95	5.9	$	5.4
Exercisable at October 3, 2015	958,541		$	57.05	4.5	$	5.4

Compensation expense recognized related to Options and SAR's was $3.9 million for the nine months ended October 3, 2015.

As of October 3, 2015, there was $12.0 million of unrecognized compensation cost related to non-vested options and SAR's that is expected to be recognized as a change to earnings over a weighted average period of 3.3 years.

The amount of options expected to vest is materially consistent with those outstanding and not yet exercisable.

Restricted Stock Awards and Restricted Stock Units

Restricted stock awards ("RSA") and restricted stock units ("RSU") consist of shares or the rights to shares of the Company's stock. The awards are restricted such that they are subject to substantial risk of forfeiture and to restrictions on their sale or other transfer. As defined in the individual grant agreements, acceleration of vesting may occur under a change in control, or death, disability or normal retirement of the grantee.

Following is a summary of RSA award activity for the nine months ended October 3, 2015:



	Shares		Weighted Average Fair Value at Grant Date		Weighted Average Remaining Contractual Term (years)
Unvested RSAs at January 3, 2015	24,814		$	69.53	0.3
Granted	14,400		78.15
Vested	(24,814	)	69.53
Forfeited	—		—
Unvested RSAs October 3, 2015	14,400		$	78.15	0.6

RSAs vest on either the first (for RSAs granted in 2013 and later) or the third (for RSAs granted prior to 2013) anniversary of the grant date, provided the holder of the shares is continuously employed by or in the service of the Company until the vesting date. Compensation expense recognized related to the RSAs was $0.8 million for the nine months ended October 3, 2015.

As of October 3, 2015, there was $0.7 million of unrecognized compensation cost related to non-vested RSAs that is expected to be recognized as a charge to earnings over a weighted average period of 0.6 years.

Following is a summary of RSU award activity for the nine months ended October 3, 2015:



	Shares		Weighted Average Fair Value at Grant Date		Weighted Average Remaining Contractual Term (years)
Unvested RSUs at January 3, 2015	237,946		$	68.28	1.8
Granted	106,600		77.38
Vested	(67,701	)	63.86
Forfeited	(7,830	)	71.00
Unvested RSUs at October 3, 2015	269,015		$	72.91	2.0

RSU shares vest on the third anniversary of the grant date, provided the holder of the shares is continuously employed by the Company until the vesting date. Compensation expense recognized related to the RSUs was $4.6 million for the nine months ended October 3, 2015.

As of October 3, 2015, there was $11.1 million of unrecognized compensation cost related to non-vested RSUs that is expected to be recognized as a charge to earnings over a weighted average period of 2.0 years.

Performance Share Units

Performance share unit ("PSU") awards consist of shares or the rights to shares of the Company's stock which are awarded to employees of the Company. These shares are payable upon the determination that the Company achieved certain established performance targets and can range from 0% to 200% of the targeted payout based on the actual results. PSUs have a performance period of 3 years. As set forth in the individual grant agreements, acceleration of vesting may occur under a change in control, death or disability. There are no voting rights with these instruments until vesting occurs and a share of stock is issued. The PSU awards are valued using a Monte Carlo simulation method as of the grant date.

The assumptions used in the Company's Monte Carlo simulation related to grants for performance share units were as follows:



	October 3, 2015		September 27, 2014
Risk-free interest rate	1.0	%	0.9	%
Expected life (years)	3.0		3.0
Expected volatility	25.0	%	32.0	%
Expected dividend yield	1.2	%	1.1	%

Following is a summary of PSU award activity for the nine months ended October 3, 2015:



	Shares		Weighted Average Fair Value at Grant Date		Weighted Average Remaining Contractual Term (years)
Unvested PSUs at January 3, 2015	59,115		$	68.25	2.0
Granted	30,845		89.98
Vested	—		—
Forfeited	(2,065	)	70.97
Unvested PSUs October 3, 2015	87,895		$	75.81	2.1

Compensation expense for awards granted are recognized based on the targeted payout of 100.0%, net of estimated forfeitures. Compensation expense recognized related to PSUs was $1.3 million for the nine months ended October 3, 2015. Total unrecognized compensation expense for all PSUs granted as of October 3, 2015 is estimated to be $3.7 million recognized as a charge to earnings over a weighted average period of 2.1 years.