15)	Stock Based Compensation

In connection with the completion of the Newport Merger, the Company assumed:

•

all restricted stock units (“RSUs”) granted under any Newport equity plan that were outstanding immediately prior to the effective time of the Newport Merger, and as to which shares of Newport common stock were not fully distributed in connection with the closing of the Newport Merger, and

•

all stock appreciation rights granted under any Newport equity plan, whether vested or unvested, that were outstanding immediately prior to the effective time of the Newport Merger.

As of the effective time of the Newport Merger, based on a formula provided in the Merger Agreement, (a) the Newport RSUs were converted automatically into RSUs with respect to 360,674 shares of the Company’s common stock (the “Assumed RSUs”), and (b) the Newport stock appreciation rights were converted automatically into stock appreciation rights with respect to 899,851 shares of the Company’s common stock (the “Assumed SARs”).

Included in the total number of Assumed RSUs were 36,599 RSUs for outside directors that were part of the Newport Deferred Compensation Plan (the “DC Plan”), from which 19,137 underlying shares were released in May 2016. As of March 31, 2017, 17,462 RSUs remained outstanding under the DC Plan, and an additional 234 shares were added to the DC Plan due to reinvested dividends. These Assumed RSUs will not become issued shares until their respective release dates.

The shares of the Company’s common stock that are subject to the Assumed SARs and the Assumed RSUs are issuable pursuant to the Company’s 2014 Stock Incentive Plan (the “Plan”).

The 1,260,525 shares of the Company’s common stock that are issuable pursuant to the Assumed RSUs and the Assumed SARs under the Plan were registered under the Securities Act of 1933, as amended (the “Securities Act”), on a registration statement on Form S-8. These shares are in addition to the 18,000,000 shares of the Company’s common stock reserved for issuance under the Plan and previously registered under the Securities Act on a registration statement on Form S-8.

During the three months ended March 31, 2017, the Company granted 171,179 RSUs with a weighted average grant date fair value of $66.06. There were no SARs granted during the three months ended March 31, 2017.

The total stock-based compensation expense included in the Company’s consolidated statements of income and comprehensive income was as follows:


	Three Months Ended March 31, 2017		Three Months Ended March 31, 2016
Cost of revenues	$	930	$	440
Research and development expense		745		374
Selling, general and administrative expense		7,107		3,338

Total pre-tax stock-based compensation expense	$	8,782	$	4,152

At March 31, 2017, the total compensation expense related to unvested stock-based awards granted to employees, officers and directors under the Plan that had not been recognized was $23,759, net of estimated forfeitures. The future compensation expense is recognized on a straight-line basis over the requisite service period, net of estimated forfeitures except for retirement eligible employees in which the Company expenses the fair value of the grant in the period the grant is issued. The Company considers many factors when estimating expected forfeitures, including types of awards and historical experience. Actual results, and future changes in estimates, may differ substantially from the Company’s current estimates.

The following table presents the activity for RSUs under the Plan:


	Three Months Ended March 31, 2017
	Outstanding RSUs			Weighted Average Grant Date Fair Value
RSUs – beginning of period		1,325,516		$	34.38
Accrued dividend shares		47			66.20
Granted		171,179			66.06
Vested		(499,743	)		33.59
Forfeited or expired		(34,180	)		33.50

RSUs – end of period		962,819		$	40.46

The following table presents the activity for SARs under the Plan:


	Three Months Ended March 31, 2017
	Outstanding SARs			Weighted Average Grant Date Fair Value
SARs – beginning of period		599,334		$	28.10
Granted		—			—
Exercised		(120,206	)		25.81
Forfeited or expired		(9,563	)		25.58

SARs Outstanding – end of period		469,565		$	28.74

At March 31, 2017, the Company’s outstanding and exercisable SARs, the weighted-average base value, the weighted average remaining contractual life and the aggregate intrinsic value thereof, were as follows:


	Number of Shares		Weighted Average Base Value		Weighted Average Remaining Contractual Life (years)		Aggregate Intrinsic Value
SARs outstanding		469,565	$	28.74		3.9	$	18,787
SARs exercisable		398,868	$	28.32		3.7	$	16,127