Stock Options

In determining the fair value of the stock options, the Company makes a variety of assumptions and estimates, including volatility measures, expected yields and expected stock option lives. The fair value of each option grant was estimated on the date of grant using the Black-Scholes option pricing model. The Company uses implied volatility on its publicly-traded options as the basis for its estimate of expected volatility. The Company believes that implied volatility is the most appropriate indicator of expected volatility because it is generally reflective of historical volatility and expectations of how future volatility will differ from historical volatility. The expected life assumption for grants is based on historical experience for the population of non-qualified stock option exercises. The risk-free interest rate is the yield currently available on U.S. Treasury zero-coupon issues with a remaining term approximating the expected term used as the input to the Black-Scholes model. The relevant data used to determine the value of the stock options granted during the three months ended March 28, 2020 and March 30, 2019 are as follows:


	Three Months Ended
Options Issued and Significant Assumptions Used to Estimate Option Fair Values	March 28, 2020			March 30, 2019
Options issued in thousands		227			136
Risk-free interest rate		1.4	%		2.5	%
Expected life in years		6			5
Expected volatility		26.5	%		24.2	%
Expected dividends		—			—


	Three Months Ended
Weighted-Average Exercise Price and Fair Value of Options on the Date of Grant	March 28, 2020		March 30, 2019
Exercise price	$	216.08	$	232.08
Fair value	$	61.70	$	61.97

The following table summarizes stock option activity for the plans for the three months ended March 28, 2020 (in thousands, except per share data):


	Number of Shares			Exercise Price per Share		Weighted-Average Exercise Price per Share
Outstanding at December 31, 2019		1,455		$	61.63 to $238.52	$	158.61
Granted		227		$	203.37 to $ 235.06	$	216.08
Exercised		(81	)	$	61.63 to $208.47	$	125.76
Canceled		(55	)	$	128.93 to $ 208.47	$	170.12

Outstanding at March 28, 2020		1,546		$	99.47 to $ 215.62	$	168.25

Restricted Stock

During the three months ended March 28, 2020, the Company granted four thousand shares of restricted stock. The weighted-average fair value per share of these awards on the grant date was $235.06.

Restricted Stock Units

The following table summarizes the unvested restricted stock unit award activity for the three months ended March 28, 2020 (in thousands, except per share data):


	Shares			Weighted-Average Grant Date Fair Value per Share
Unvested at December 31, 2019		260		$	184.70
Granted		105		$	206.73
Vested		(85	)	$	161.44
Forfeited		(11	)	$	185.65

Unvested at March 28, 2020		269		$	200.61

Restricted stock units are generally granted annually in February and vest in equal annual installments over a five-year period.

Performance Stock Units

The Company’s performance stock units are equity compensation awards with a market vesting condition based on the Company’s Total Shareholder Return (“TSR”) relative to the TSR of the components of the S&P Health Care Index. TSR is the change in value of a stock price over time, including the reinvestment of dividends. The vesting schedule ranges from 0% to 200% of the target shares awarded.

Beginning with the 2020 grant, the vesting conditions for performance stock units now include a performance condition based on future sales growth.

In determining the fair value of the performance stock units, the Company makes a variety of assumptions and estimates, including volatility measures, expected yields and expected terms. The fair value of each performance stock unit grant was estimated on the date of grant using the Monte Carlo simulation model. The Company uses implied volatility on its publicly-traded options as the basis for its estimate of expected volatility. The Company believes that implied volatility is the most appropriate indicator of expected volatility because it is generally reflective of historical volatility and expectations of how future volatility will differ from historical volatility. The expected life assumption for grants is based on the performance period of the underlying performance stock units. The risk-free interest rate is the yield currently available on U.S. Treasury

zero-coupon

issues with a remaining term approximating the expected term used as the input to the Monte Carlo simulation model. The correlation coefficient is used to model the way in which each company in the S&P Health Care Index tends to move in relation to each other during the performance period. The relevant data used to determine the value of the performance stock units granted during the three months ended March 28, 2020 and March 30, 2019 are as follows:


	Three Months Ended
Performance Stock Units Issued and Significant Assumptions Used to Estimate Fair Values	March 28, 2020			March 30, 2019
Performance stock units issued (in thousands)		58			12
Risk-free interest rate		1.3	%		2.4	%
Expected life in years		2.9			2.8
Expected volatility		25.1	%		23.5	%
Average volatility of peer companies		26.1	%		26.2	%
Correlation coefficient		36.6	%		34.2	%
Expected dividends		—			—

The following table summarizes the unvested performance stock unit award activity for the three months ended March 28, 2020 (in thousands, except per share data):


	Shares			Weighted-Average Fair Value per Share
Unvested at December 31, 2019		105		$	233.11
Granted		58		$	190.45
Vested		(37	)	$	184.51
Forfeited		(3	)	$	281.39

Unvested at March 28, 2020		123		$	226.44