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Stockholders' Equity and Stock-Based Compensation | 12 Months Ended
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Sep. 30, 2017
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] |
Stockholders' Equity and Stock-Based Compensation | Stockholders' Equity and Stock-Based Compensation Stock Repurchase Program On November 11, 2013, the Company announced that its Board of Directors authorized the repurchase of up to $250 million of the Company’s outstanding common stock over a three-year period. During fiscal 2016, the Company repurchased 7.3 million shares of its common stock for total consideration of $250.0 million. This share repurchase authorization was fully utilized. On June 21, 2016, the Company's Board of Directors authorized the repurchase of up to an additional $500.0 million of the Company's outstanding common stock over the next five years. There were no repurchases of common stock made under this authorization during fiscal 2016. During fiscal 2017, the Company repurchased 5.3 million shares of its common stock for total consideration of $200.1 million. Stock-Based Compensation Equity Compensation Plans The Company has one share-based compensation plan pursuant to which awards are currently being issued—the 2008 amended and restated Equity Incentive Plan (“2008 Equity Plan”). The purpose of the 2008 Equity Plan is to provide stock options, restricted stock units and other equity interests in the Company to employees, officers, directors, consultants and advisors of the Company and any other person who is determined by the Board of Directors to have made (or is expected to make) contributions to the Company. The 2008 Equity Plan is administered by the Board of Directors of the Company, and a total of 31.5 million shares were reserved for issuance under this plan. As of September 30, 2017, the Company had 6.8 million shares available for future grant under the 2008 Equity Plan. The following presents stock-based compensation expense in the Company’s Consolidated Statements of Operations in fiscal 2017, 2016 and 2015:
|  | 2017 |  | 2016 |  | 2015
Cost of revenues |  | $ | 10.7 |  |  | $ | 10.5 |  |  | $ | 8.7 |
Research and development |  | 11.2 |  |  | 10.8 |  |  | 8.6 |
Selling and marketing |  | 11.9 |  |  | 10.9 |  |  | 8.8 |
General and administrative |  | 34.4 |  |  | 32.8 |  |  | 29.1 |
Restructuring and divestiture |  | — |  |  | 0.4 |  |  | 4.1 |
|  | $ | 68.2 |  |  | $ | 65.4 |  |  | $ | 59.3 |
Grant-Date Fair Value The Company uses a binomial model to determine the fair value of its stock options. The Company considers a number of factors to determine the fair value of options including the assistance of an outside valuation adviser. Information pertaining to stock options granted during fiscal 2017, 2016 and 2015 and related assumptions are noted in the following table:
|  | Years ended
September 30, 2017 |  | September 24, 2016 |  | September 26, 2015
Options granted (in millions) |  | 1.0 |  |  | 1.1 |  |  | 1.3 |
Weighted-average exercise price |  | $ | 38.07 |  |  | $ | 39.32 |  |  | $ | 27.68 |
Weighted-average grant date fair value |  | $ | 12.33 |  |  | $ | 12.91 |  |  | $ | 9.95 |
Assumptions: |  |  |  |  |  |
Risk-free interest rates |  | 1.8 | % |  | 1.6 | % |  | 1.7 | %
Expected life (in years) |  | 4.7 |  |  | 4.7 |  |  | 5.3 |
Expected volatility |  | 36.6 | % |  | 37.8 | % |  | 38.6 | %
Dividend yield |  | — |  |  | — |  |  | — |
The risk-free interest rate is based on a treasury instrument whose term is consistent with the expected life of the stock options. In projecting expected stock price volatility, the Company uses a combination of historical stock price volatility and implied volatility from observable market prices of similar equity instruments. The Company estimated the expected life of stock options based on historical experience using employee exercise and option expiration data. In connection with appointing Stephen P. MacMillan as its new President and Chief Executive Officer in December 2013, the Company granted approximately 0.1 million market stock units ("MSUs"). The MSUs vest in three separate tranches in an amount of 1/3 rd of the total amount of the award based on the Company’s stock price meeting certain defined average stock prices for 30 consecutive trading days. These MSUs were valued at an average of $18.65 per share using the Monte Carlo simulation model and each tranche had its own derived service period. The Company recognized compensation expense under the accelerated method as prescribed by ASC 718 in fiscal 2014 through a portion of fiscal 2015, and all tranches vested due to the defined average stock prices being met for the required period. In addition, per the terms of his employment agreement, the Company granted 0.2 million restricted stock units ("RSUs") to match Mr. MacMillan’s purchase of 0.2 million shares of the Company’s common stock on the open market in the second quarter of fiscal 2014. The RSUs cliff vest three years from the date of grant, and the Company accounted for this grant as a liability award pursuant to ASC 718 because this RSU award contained an additional vesting condition (the requirement that Mr. MacMillan retain the matching shares during the vesting period) that was not service, performance or market based. As such, this award was marked-to-market at each reporting period and vested during fiscal 2017 at which time the liability of $7.8 million was reclassified to additional paid-in-capital. Stock-Based Compensation Expense Attribution The Company uses the straight-line attribution method to recognize stock-based compensation expense for stock options and RSUs. The vesting term of stock options is generally four or five years with annual vesting of 25% and 20% per year, respectively, on the anniversary of the grant date, and RSUs generally vest over three or four years with annual vesting at 33% and 25% per year, respectively, on the anniversary of the grant date. Effective in the fourth quarter of fiscal 2016, the Company implemented a retirement provision providing for the continued vesting of equity awards granted after November 6, 2015 once an employee meets certain age and years of service criteria and retires from the Company. This provision from an accounting perspective may result in a shorter requisite service period for certain employees, resulting in accelerated stock-based compensation expense. Since this provision affected previously granted awards, it was accounted for as a modification and the Company recognized an additional $4.0 million of expense in the fourth quarter of fiscal 2016. The amount of stock-based compensation recognized during a period is based on the value of the portion of the awards that are ultimately expected to vest. ASC 718 requires forfeitures to be estimated at the time granted and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Based on an analysis of historical forfeitures, the Company has determined a specific forfeiture rate for certain employee groups and has applied forfeiture rates ranging from 0% to 7.0% as of September 30, 2017 depending on the specific employee group. This analysis is re-evaluated annually and the forfeiture rate will be adjusted as necessary. Ultimately, the actual stock-based compensation expense recognized will only be for those stock options and RSUs that vest. Stock-based compensation expense related to stock options was $12.2 million, $10.9 million, and $12.2 million in fiscal 2017, 2016 and 2015, respectively. Stock compensation expense related to stock units, including RSUs, performance stock units ("PSUs") and MSUs, was $51.6 million, $50.5 million, and $43.7 million in fiscal 2017, 2016 and 2015, respectively. The related tax benefit recorded in the Consolidated Statements of Income was $22.6 million, $23.1 million and $17.7 million in fiscal 2017, 2016 and 2015, respectively. Included within stock-based compensation expense in fiscal 2016 and 2015 is $0.4 million and $4.1 million, respectively, related to modification accounting, the acceleration of vesting of certain retention RSUs provided under their original terms upon termination, and the acceleration of vesting for certain options assumed in the Gen-Probe acquisition related to employees who were terminated in connection with the Company’s restructuring action to consolidate its Diagnostics operations. The original terms of the stock options assumed in the Gen-Probe acquisition provided for acceleration upon a change-in-control and termination within 18 months of the change-in-control. At September 30, 2017, there was $21.0 million and $54.6 million of unrecognized compensation expense related to stock options and RSUs, respectively, to be recognized over a weighted average period of 2.5 years and 1.8 years, respectively. Share Based Payment Activity The following table summarizes all stock option activity under the Company’s stock option plans for the year ended September 30, 2017:
|  | Number of Shares (in millions) |  | Weighted- Average Exercise Price |  | Weighted- Average Remaining Contractual Life (in Years) |  | Aggregate Intrinsic Value (in millions)
Options outstanding at September 24, 2016 |  | 6.1 |  |  | $ | 25.37 |  |  | 4.9 |  | $ | 80.1 |
Granted |  | 1.0 |  |  | 38.07 |  |  |  |  |
Canceled/ forfeited |  | (0.2 | ) |  | 30.59 |  |  |  |  |
Exercised |  | (1.4 | ) |  | 23.25 |  |  |  |  | $ | 25.9 |
Options outstanding at September 30, 2017 |  | 5.5 |  |  | $ | 28.15 |  |  | 5.4 |  | $ | 50.3 |
Options exercisable at September 30, 2017 |  | 2.6 |  |  | $ | 23.31 |  |  | 3.6 |  | $ | 34.8 |
Options vested and expected to vest at September 30, 2017 (1) |  | 5.4 |  |  | $ | 28.09 |  |  | 5.5 |  | $ | 50.0 |
(1) | This represents the number of vested stock options as of September 30, 2017 plus the unvested outstanding options at September 30, 2017 expected to vest in the future, adjusted for estimated forfeitures.
During fiscal 2016 and 2015, the total intrinsic value of options exercised (i.e., the difference between the market price on the date of exercise and the price paid by the employee to exercise the options) was $21.6 million and $42.0 million, respectively. A summary of the Company’s RSU activity during the year ended September 30, 2017 is presented below:
Non-vested Shares |  | Number of Shares (in millions) |  | Weighted-Average Grant-Date Fair Value
Non-vested at September 24, 2016 |  | 2.8 |  |  | $ | 29.40 |
Granted |  | 1.0 |  |  | 38.03 |
Vested |  | (1.2 | ) |  | 27.43 |
Forfeited |  | (0.3 | ) |  | 32.21 |
Non-vested at September 30, 2017 |  | 2.3 |  |  | $ | 34.06 |
The number of RSUs vested includes shares withheld on behalf of employees to satisfy minimum statutory tax withholding requirements. The Company pays the minimum statutory tax withholding requirement on behalf of its employees. During fiscal 2017, 2016 and 2015 the total fair value of RSUs vested was $38.5 million, $28.4 million and $27.2 million, respectively. The Company also granted 0.2 million and 0.2 million and 0.3 million PSUs during fiscal 2017, 2016, and 2015, respectively, to members of the Company's senior management team, which have a weighted-average grant date fair value of $38.84 and $39.72,and 26.58, respectively. Each recipient of the PSUs is eligible to receive between zero and 200% of the target number of shares of the Company’s common stock at the end of three year performance period provided the Company’s defined Return on Invested Capital metrics are achieved. These awards cliff-vest three years from the date of grant, and the Company is recognizing compensation expense ratably over the required service period based on its estimate of the number of shares will vest upon achieving the measurement criteria. If there is a change in the estimate of the number of shares that are probable of vesting, the Company will cumulatively adjust compensation expense in the period that the change in estimate is made. The Company also granted 0.1 million MSUs during fiscal 2017 to its senior management team. Each recipient of MSUs is eligible to receive between zero and 200% of the target number of shares of the Company’s common stock at the end of three year performance period based upon achieving a certain total shareholder return relative to a defined peer group. The MSUs were valued at $48.98 per share using the Monte Carlo simulation model. These awards cliff-vest three years from the date of grant, and the Company is recognizing compensation expense for the MSUs ratably over the service period. Employee Stock Purchase Plan In March 2012, the Company’s stockholders approved the Hologic, Inc. 2012 Employee Stock Purchase Plan (“2012 ESPP”), which provides for the granting of up to 2.5 million shares of the Company’s common stock to eligible employees. The 2012 ESPP plan period is semi-annual and allows participants to purchase the Company’s common stock at 85% of the lower of (i) the market value per share of the common stock on the first day of the offering period or (ii) the market value per share of the common stock on the purchase date. Stock-based compensation expense in fiscal 2017, 2016 and 2015 was $4.4 million, $4.0 million and $3.4 million, respectively. The Company uses the Black-Scholes model to estimate the fair value of shares to be issued as of the grant date using the following weighted average assumptions:
|  | September 30, 2017 |  | September 24, 2016 |  | September 26, 2015
Assumptions: |  |  |  |  |  |
Risk-free interest rates |  | 0.72 | % |  | 0.34 | % |  | 0.10 | %
Expected life (in years) |  | 0.5 |  |  | 0.5 |  |  | 0.5 |
Expected volatility |  | 24.9 | % |  | 27.2 | % |  | 27.4 | %
Dividend yield |  | — |  |  | — |  |  | — |

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=65895303&loc=d3e17540-113929 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=68057994&loc=d3e25284-112666 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SAB Topic 14) -URI http://asc.fasb.org/extlink&oid=27013229&loc=d3e301413-122809 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 + Details
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