Note 16 – Equity-Based Compensation

Zebra has an equity-based compensation plan and an employee stock purchase plan under which shares of our common stock were available for future grants and sales. Zebra recognizes compensation costs using the straight-line method over the vesting period upon grant of up to 5 years.

Pre-tax equity-based compensation expense recognized in income was $8.8 million and $3.0 million for the three month periods ending April 4, 2015 and March 29, 2014, respectively. Tax related benefits of $3.1 million and $1.0 million were also recognized for the three month periods ending April 4, 2015 and March 29, 2014, respectively.

The company issued 175,261 and 123,019 shares in connection with stock based compensation and employee stock purchase programs during the three months ended April 4, 2015 and March 29, 2014 respectively.

The fair value of equity-based compensation is estimated on the date of grant using a binomial model. Volatility is based on an average of the implied volatility in the open market and the annualized volatility of Zebra stock prices over our entire stock history. Stock option grants in the table below include both stock options, all of which were non-qualified, and stock appreciation rights (SARs) that will be settled in Zebra stock. Restricted stock grants are valued at the market closing price on the grant date. The following table shows the weighted-average assumptions used for grants of SARs as well as the fair value of the grants based on those assumptions:


	Three Months Ended
	April 4, 2015			March 29, 2014
Expected dividend yield		0	%		0	%
Forfeiture rate		10.32	%		10.31	%
Volatility		34.92	%		32.00	%
Risk free interest rate		1.73	%		0.82	%
Range of interest rates		0.02% - 2.61	%		0.02% - 1.78	%
Expected weighted-average life		5.36 years			5.42 years
Fair value of SARs granted	$	70,234		$	85,149
Weighted-average grant date fair value of SARs granted (per underlying share)	$	28.82		$	65.75

Stock option activity was as follows:


	Three Months Ended April 4, 2015
Options	Shares			Weighted-Average Exercise Price		Weighted-Average remaining contractual term		Aggregate Intrinsic Value
Outstanding at beginning of year		415,960		$	40.19
Exercised		(133,981	)		44.36
Expired		(1,550	)		51.62

Outstanding at end of period		280,429		$	38.13		2.5 Years	$	13.6 million

Exercisable at end of period		280,429		$	38.13		2.5 Years	$	13.6 million

Intrinsic value of exercised options	$	5,709,000

SARs activity was as follows:


	Three Months Ended April 4, 2015
SARs	Shares			Weighted-Average Exercise Price		Weighted-Average remaining contractual term		Aggregate Intrinsic Value
Outstanding at beginning of year		1,292,142		$	42.20
Granted		2,437			85.82
Exercised		(32,159	)		34.34
Forfeited		(3,569	)		50.62

Outstanding at end of period		1,258,851		$	42.46		6.8 years	$	55.6 million

Exercisable at end of period		556,517		$	32.99		5.8 years	$	29.9 million

Intrinsic value of exercised SARs	$	1,688,000

Restricted stock award activity was as follows:


	Three Months Ended April 4, 2015
Restricted Stock Awards	Shares			Weighted-Average Grant Date Fair Value
Outstanding at beginning of year		691,621		$	60.06
Granted		2,053			85.82
Released		(4,239	)		42.56
Forfeited		(12,437	)		71.82

Outstanding at end of period		676,998		$	60.06

Performance share award activity was as follows:


	Three Months Ended April 4, 2015
Performance Share Awards	Shares			Weighted-Average Grant Date Fair Value
Outstanding at beginning of year		374,180		$	61.53
Released		1,703			85.82
Forfeited		(3,530	)		73.07

Outstanding at end of period		372,353		$	61.53

Restricted stock unit activity was as follows:


	Three Months Ended April 4, 2015
Restricted Stock Units	Shares
Outstanding at beginning of year		41,964
Released		(34	)
Forfeited		(1,305	)

Outstanding at end of period		40,625

Performance stock unit activity was as follows:


	Three Months Ended April 4, 2015
Performance Stock Units	Shares
Outstanding at beginning of year		10,345
Forfeited		(680	)

Outstanding at end of period		9,665

As of April 4, 2015 total unearned compensation costs related to Zebra’s equity based compensation plans was $45.7 million which will be amortized over the weighted average remaining service period of 1.7 years.

The fair value of the purchase rights issued to Zebra employees under the stock purchase plan is estimated using the following weighted-average assumptions for purchase rights granted. Expected lives of three months to one year have been used along with these assumptions.


	Three Months Ended
	April 4, 2015			March 29, 2014
Fair market value	$	77.41		$	54.08
Option price	$	73.54		$	51.38
Expected dividend yield		0	%		0	%
Expected volatility		23	%		33	%
Risk free interest rate		0.04	%		0.07	%