Stock-Based Compensation

Stock Compensation Plans

In December 2016, the shareholders approved the establishment of the 2016 Omnibus Incentive Plan (the 2016 Plan), which provides for the issuance of a maximum of 6,000,000 shares of common stock. The 2016 Plan provides for the grant of incentive and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-related awards, and performance awards that may be settled in cash, stock, or other property. As of June 30, 2017, there were 6,000,000 shares of common stock available for issuance subject to awards under the 2016 Plan.

In April 2010, the shareholders approved the establishment of the 2010 Equity Incentive Plan (the 2010 Plan), which provides for the issuance of a maximum of 7,000,000 shares of common stock. The 2010 Plan provides for the grant of incentive and nonqualified stock options, stock appreciation rights, restricted stock, restricted stock units, other stock-related awards, and performance awards that may be settled in cash, stock, or other property. As of June 30, 2017, there were 2,781,925 shares of common stock available for issuance subject to awards under the 2010 Plan.

In May 2005, the shareholders approved the establishment of the 2005 Stock Incentive Plan (the 2005 Plan), which provides for the issuance of a maximum of 4,000,000 shares of common stock. The 2005 Plan provides for the grant of incentive and nonqualified stock options and other stock-based awards, including the grant of shares based upon certain conditions, the grant of securities convertible into common stock and the grant of stock appreciation rights. Restricted stock and other stock-based awards granted under the 2005 Plan may not exceed, in the aggregate, 4,000,000 shares of common stock. The 2005 Plan expired on March 31, 2015.

General Award Terms

We issue stock options and restricted stock units (RSUs) to our employees and outside directors, pursuant to shareholder-approved equity compensation plans. Option awards are granted with an exercise price equal to the market closing price of our stock on the trading day prior to the grant date. Those options generally vest over four years and expire within 7 or 10 years of grant. RSUs generally vest over four years. Historically, our practice has been to settle stock option exercises and RSU vesting through newly-issued shares.

Stock Compensation Accounting

Our stock-based compensation is accounted for as awards of equity instruments. Our policy is to issue new shares upon the exercise of stock awards. We use the "with-and-without" approach for determining if excess tax benefits are realized under ASC 718.

We utilize the Black-Scholes option valuation model for estimating the fair value of options granted. The Black-Scholes option valuation model incorporates assumptions regarding expected stock price volatility, the expected life of the option, the risk-free interest rate, dividend yield and the market value of our common stock. The expected stock price volatility is determined based on our stock's historic prices over a period commensurate with the expected life of the award. The expected life of an option represents the period for which options are expected to be outstanding as determined by historic option exercises and cancellations. The risk-free interest rate is based on the U.S. Treasury yield curve for notes with terms approximating the expected life of the options granted. The expected dividend yield is zero, based on our history and expectation of not paying dividends on common shares. We recognize compensation costs on a straight-line basis, net of estimated forfeitures, over the requisite service period for time-vested awards.

The weighted average estimated fair value of option awards granted during fiscal 2017, 2016 and 2015 was $13.16, $13.16, and $13.43, respectively.

We utilized the Black-Scholes option valuation model with the following weighted average assumptions:



	Year Ended June 30,
	2017		2016		2015
Risk-free interest rate	1.2	%	1.4	%	1.5	%
Expected dividend yield	None		None		None
Expected life (in years)	4.6		4.6		4.6
Expected volatility factor	31	%	34	%	35	%

The stock-based compensation expense and its classification in the accompanying consolidated statements of operations for fiscal 2017, 2016 and 2015 was as follows:



	Year Ended June 30,
	2017		2016		2015
	(Dollars in Thousands)
Recorded as expenses:
Cost of service and other	$	1,477	$	1,390	$	1,351
Selling and marketing	3,652		4,351		3,056
Research and development	5,806		3,423		3,881
General and administrative	7,865		6,563		6,296
Total stock-based compensation	$	18,800	$	15,727	$	14,584

A summary of stock option and RSU activity under all equity plans in fiscal 2017 is as follows:



	Stock Options							Restricted Stock Units
	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value (in 000's)		Shares		Weighted Average Grant Date Fair Value
Outstanding at June 30, 2016	1,314,142		$	32.47	7.23	$	12,340	493,332		$	41.06
Granted	482,982		46.31					532,656		46.59
Settled (RSUs)								(310,074	)	41.71
Exercised	(332,937	)	27.85
Cancelled / Forfeited	(110,629	)	39.40					(99,916	)	40.42
Outstanding at June 30, 2017	1,353,558		$	37.98	7.30	$	23,535	615,998		$	45.62
Exercisable at June 30, 2017	808,094		$	33.04	6.35	$	17,958
Vested and expected to vest at June 30, 2017	1,288,241		$	37.61	7.23	$	22,877	542,323		$	45.58

During fiscal 2017, 2016 and 2015, the weighted average grant-date fair value of RSUs granted was $46.59, $41.86 and $42.65, respectively. During fiscal 2017, 2016 and 2015 the total fair value of vested shares from RSU grants amounted to $16.6 million, $12.7 million and $16.1 million, respectively.

As of June 30, 2017, the total future unrecognized compensation cost related to stock options and RSUs was $6.1 million and $23.0 million, respectively, and are expected to be recorded over a weighted average period of 2.5 years and 2.6 years, respectively.

During fiscal 2017, 2016 and 2015 the weighted average exercise price of stock options granted was $46.31, $42.66 and $42.66. The total intrinsic value of options exercised during fiscal 2017, 2016 and 2015 was $7.9 million, $4.1 million and $8.2 million, respectively. We received $9.3 million, $3.9 million and $4.6 million in cash proceeds from option exercises during fiscal 2017, 2016 and 2015, respectively. We paid $5.8 million, $4.4 million and $5.7 million for withholding taxes on vested RSUs during fiscal 2017, 2016 and 2015, respectively.

At June 30, 2017, common stock reserved for future issuance or settlement under equity compensation plans was 10.8 million shares.