The Company’s share-based payments that result in compensation expense consist of stock option grants and restricted stock units (RSUs). As of September 29, 2019, the Company had 17,350,152 shares available for grant. Stock options are granted with an exercise price equal to the market value of the Company’s common stock at the grant date and generally vest over four or five years based upon continuous service and expire ten years from the grant date. RSUs generally vest upon three years of continuous employment or incrementally over such three-year period. Participants are not entitled to dividends on RSUs.



	Shares (in thousands)		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2018	13,789		$	31.73
Granted	2,879		51.22
Exercised	(1,475	)	21.53
Forfeited or expired	(726	)	41.79
Outstanding as of September 29, 2019	14,467		$	36.14	7.19	$	203,774
Exercisable as of September 29, 2019	5,714		$	25.33	5.73	$	134,913
Options vested or expected to vest as of September 29, 2019 (1)	13,116		$	34.90	7.04	$	199,066

(1) In addition to the vested options, the Company expects a portion of the unvested options to vest at some point in the future. Options expected to vest are calculated by applying an estimated forfeiture rate to the unvested options.



	Three-months Ended				Nine-months Ended
	September 29, 2019		September 30, 2018		September 29, 2019		September 30, 2018
Risk-free rate	2.7	%	2.9	%	2.7	%	2.9	%
Expected dividend yield	0.39	%	0.32	%	0.39	%	0.32	%
Expected volatility	37	%	39	%	37	%	39	%
Expected term (in years)	5.1		5.4		5.2		5.3

Generally, the current dividend yield is calculated by annualizing the cash dividend declared by the Company’s Board of Directors and dividing that result by the closing stock price on the grant date.

The expected volatility was based upon a combination of historical volatility of the Company’s common stock over the contractual term of the option and implied volatility for traded options of the Company’s stock.

The weighted-average grant-date fair values of stock options granted during the three-month periods ended September 29, 2019 and September 30, 2018 were $18.42 and $22.52, respectively. The weighted-average grant-date fair values of stock options granted during the nine-month periods ended September 29, 2019 and September 30, 2018 were $18.58 and $21.70, respectively.

The total intrinsic values of stock options exercised for the three-month periods ended September 29, 2019 and September 30, 2018 were $5,746,000 and $17,985,000, respectively. The total intrinsic values of stock options exercised for the nine-month periods ended September 29, 2019 and September 30, 2018 were $42,545,000 and $50,975,000, respectively. The total fair values of stock options vested for the three-month periods ended September 29, 2019 and September 30, 2018 were $1,213,000 and $997,000, respectively. The total fair values of stock options vested for the nine-month periods ended September 29, 2019 and September 30, 2018 were $32,072,000 and $27,557,000, respectively.

The fair values of RSUs granted were determined based upon the market value of the Company's common stock at the time of grant. The initial cost was then amortized over the period of vesting until the restrictions lapsed.



	Shares (in thousands)	Weighted-Average Grant Date Fair Value
Nonvested as of December 31, 2018	—	$	—
Granted	75	45.20
Vested	—	—
Forfeited or expired	—	—
Nonvested as of September 29, 2019	75	$	45.20

The weighted-average grant-date fair values of RSUs granted during the three-month and nine-month periods ended September 29, 2019 were $45.20. There were no RSUs vested for the three or nine-month periods ended September 29, 2019. There were no RSUs granted or vested in 2018.

The Company stratifies its employee population into two groups: one consisting of senior management and another consisting of all other employees. The Company currently applies an estimated annual forfeiture rate of 9% to all equity awards for senior management and a rate of 12% for all other employees. Each year during the first quarter, the Company revises its estimated forfeiture rate. This resulted in a decrease to compensation expense of $499,000 in 2019 and an increase to compensation expense of $1,283,000 in 2018.

As of September 29, 2019, total unrecognized compensation expense related to non-vested stock awards, including stock options and RSUs, was $59,708,000, which is expected to be recognized over a weighted-average period of 1.60 years.

The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended September 29, 2019 were $10,194,000 and $1,804,000, respectively, and for the three-month period ended September 30, 2018 were $9,143,000 and $1,654,000, respectively. The total stock-based compensation expense and the related income tax benefit recognized for the nine-month period ended September 29, 2019 were $33,442,000 and $5,839,000, respectively, and for the nine-month period ended September 30, 2018 were $31,339,000 and $5,608,000, respectively. No compensation expense was capitalized as of September 29, 2019 or December 31, 2018.

The following table presents the stock-based compensation expense by caption for each period presented on the Consolidated Statements of Operations (in thousands):



	Three-months Ended				Nine-months Ended
	September 29, 2019		September 30, 2018		September 29, 2019		September 30, 2018
Cost of revenue	$	334	$	544	$	1,114	$	1,898
Research, development, and engineering	3,616		3,197		11,633		11,166
Selling, general, and administrative	6,244		5,402		20,695		18,275
	$	10,194	$	9,143	$	33,442	$	31,339