Stock-Based Compensation

6 Months Ended

Jul. 04, 2015

Stock-based compensation expense recognized under ASC Topic 718, Compensation – Stock Compensation (“ASC 718”), for employees and directors and the effect on our Condensed Consolidated Statements of Operations were as follows:



	Three Months Ended				Six Months Ended
(In thousands)	July 4, 2015		June 28, 2014		July 4, 2015		June 28, 2014
Cost of sales	$	217	$	208	$	444	$	398
Research, development, and engineering	801		700		1,661		1,339
Selling, general and administrative expenses	2,791		3,197		6,095		6,330
Total stock-based compensation expense	$	3,809	$	4,105	$	8,200	$	8,067

Stock-based compensation cost capitalized as part of inventory during the three month periods ended July 4, 2015 and June 28, 2014 was $0.1 million and $0.2 million, respectively. Stock-based compensation cost capitalized as part of inventory during the six month periods ended July 4, 2015 and June 28, 2014 was $0.3 million and $0.4 million, respectively.

As required by ASC 718, we estimate expected forfeitures and recognize compensation costs only for those equity awards expected to vest. As of July 4, 2015, there was $39.9 million of total unrecognized compensation cost related to non-vested stock-based compensation arrangements granted under our 1993 Stock Option Plan/Stock Issuance Plan, as amended (the “1993 Plan”). The costs related to stock options and restricted stock units are expected to be recognized over a weighted average period of 3.4 years.

The 1993 Plan provides for the grant of stock-based awards to our eligible employees, consultants and advisers and non-employee directors. As of July 4, 2015, there were 0.3 million shares reserved for future awards under the 1993 Plan.

We used the following weighted-average assumptions to estimate the fair value of our stock options granted:



	Three Months Ended		Six Months Ended
	July 4, 2015	June 28, 2014	July 4, 2015	June 28, 2014
Expected life (in years)	5.9	5.9	5.9	5.9
Risk-free interest rate	1.5%	1.7%	1.6%	1.6%
Volatility	43%	47%	44%	47%
Dividend yield	—%	—%	—%	—%

Our stock options granted during the three and six month periods ended July 4, 2015 and the corresponding period of 2014 were granted with vesting terms of 50 months.