Stock-Based Compensation

6 Months Ended

Jul. 01, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Total stock-based compensation expense included in our Consolidated Statements of Operations is presented in the following table:



	Three Months Ended				Six Months Ended
(In thousands)	July 1, 2017		July 2, 2016		July 1, 2017		July 2, 2016
Cost of products sold	$	180	$	166	$	408	$	425
Research and development	1,299		1,468		3,149		3,927
Selling, general and administrative	1,450		1,608		3,215		3,446
Total stock-based compensation	$	2,929	$	3,242	$	6,772	$	7,798

We granted stock options with a market condition to certain executives in fiscal years 2015 and 2016. The options have a two year vesting and vest between 0% and 200% of the target amount, based on the Company's relative Total Shareholder Return (TSR) when compared to the TSR of a component of companies of the PHLX Semiconductor Sector Index over a two year period. TSR is a measure of stock price appreciation plus dividends paid, if any, in the performance period. The fair values of the options were determined and fixed on the date of grant using a lattice-based option-pricing valuation model, which incorporates a Monte-Carlo simulation, and considered the likelihood that we would achieve the market condition.

Of these grants with a market condition, approximately 596,600 were outstanding and unvested at December 31, 2016. In the first quarter of fiscal 2017, approximately 91,500 grants vested, and approximately 183,200 were canceled due to the expiration of the vesting period for the 2015 tranche. During the second quarter of fiscal 2017, approximately 9,200 vested options were exercised, while 28,000 unvested options were canceled due to termination. A total of approximately 376,200 stock options were outstanding as of July 1, 2017, which includes the approximately 82,300 that vested but were not exercised. We incurred stock compensation expense related to these market condition awards of less than $0.1 million and approximately $0.3 million in the second quarter and first six months, respectively, of fiscal 2017 and less than $0.1 million and approximately $0.2 million in the second quarter and first six months, respectively, of fiscal 2016.