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Stock-Based Compensation | 12 Months Ended
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Dec. 31, 2020
Share-based Payment Arrangement [Abstract] |
Stock-Based Compensation | Stock-Based Compensation Stock Plans The Company’s stock-based awards that result in compensation expense consist of stock options and restricted stock units (RSUs). As of December 31, 2020, the Company had 16,260,393 shares available for grant under its stock plans. Stock options are granted with an exercise price equal to the market value of the Company’s common stock at the grant date and generally vest over four or five years based on continuous employment and expire ten years from the grant date. RSUs generally vest upon three years of continuous employment or incrementally over such three-year period. Participants are not entitled to dividends on RSUs. Stock Options The following table summarizes the Company’s stock option activity:
| Shares (in thousands) |  | Weighted- Average Exercise Price |  | Weighted- Average Remaining Contractual Term (in years) |  | Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2019 | 12,899 |  |  | $ | 37.95 |  |  |  |  |
Granted | 1,245 |  |  | 54.68 |  |  |  |  |
Exercised | (4,565) |  |  | 27.54 |  |  |  |  |
Forfeited or expired | (609) |  |  | 50.28 |  |  |  |  |
Outstanding as of December 31, 2020 | 8,970 |  |  | $ | 44.73 |  |  | 7.11 |  | $ | 318,873 |
Exercisable as of December 31, 2020 | 3,135 |  |  | $ | 33.79 |  |  | 5.60 |  | $ | 145,735 |
Options vested or expected to vest as of December 31, 2020 (1) | 8,235 |  |  | $ | 44.08 |  |  | 7.01 |  | $ | 298,118 |
(1) In addition to the vested options, the Company expects a portion of the unvested options to vest at some point in the future. Options expected to vest are calculated by applying an estimated forfeiture rate to the unvested options. The fair values of stock options granted in each period presented were estimated using the following weighted-average assumptions:
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
Risk-free rate | 1.4 | % |  | 2.7 | % |  | 2.9 | %
Expected dividend yield | 0.41 | % |  | 0.39 | % |  | 0.35 | %
Expected volatility | 37 | % |  | 37 | % |  | 39 | %
Expected term (in years) | 6.0 |  | 5.3 |  | 5.4
Risk-free rate The risk-free rate was based on a treasury instrument whose term was consistent with the contractual term of the option. Expected dividend yield Generally, the current dividend yield is calculated by annualizing the cash dividend declared by the Company’s Board of Directors and dividing that result by the closing stock price on the grant date. Expected volatility The expected volatility was based on a combination of historical volatility of the Company’s common stock over the contractual term of the option and implied volatility for traded options of the Company’s stock. Expected term The expected term was derived from the binomial lattice model from the impact of events that trigger exercises over time. The weighted-average grant-date fair value of stock options granted was $19.62 in 2020, $18.62 in 2019, and $20.84 in 2018. The total intrinsic value of stock options exercised was $166,796,000 in 2020, $90,762,000 in 2019, and $52,629,000 in 2018. The total fair value of stock options vested was $45,998,000 in 2020, $38,974,000 in 2019, and $31,106,000 in 2018. Restricted Stock Units (RSUs) The following tables summarizes the Company's RSU activity:
| Shares (in thousands) |  | Weighted-Average Grant Date Fair Value
Nonvested as of December 31, 2019 | 150 |  |  | $ | 48.63 |
Granted | 446 |  |  | 52.09 |
Vested | — |  |  | — |
Forfeited or expired | (42) |  |  | 50.61 |
Nonvested as of December 31, 2020 | 554 |  |  | $ | 51.27 |
The weighted-average grant-date fair value of RSUs granted in 2019 was $48.61. There were no RSUs granted in 2018. There were no RSUs that vested in 2020, 2019, and 2018. Stock-Based Compensation Expense The Company stratifies its employee population into two groups: one consisting of senior management and another consisting of all other employees. The Company currently applies an estimated forfeiture rate of 7% to all unvested options for senior management and a rate of 12% for all other employees. Each year during the first quarter, the Company revises its forfeiture rate. This resulted in an increase to compensation expense of $1,787,000 in 2020, a decrease to compensation expense of $499,000 in 2019, and an increase to compensation expense of $1,283,000 in 2018. As of December 31, 2020, total unrecognized compensation expense related to non-vested stock-based awards, including stock options and RSUs, was $51,825,000, which is expected to be recognized over a weighted-average period of 1.7 years. The total stock-based compensation expense and the related income tax benefit recognized was $42,661,000, which includes credits of $1,401,000 relating to grants cancelled as a result of the Company's workforce reduction, and $6,569,000, respectively, in 2020, $45,589,000 and $7,756,000, respectively, in 2019, and $41,090,000 and $7,317,000, respectively, in 2018. No compensation expense was capitalized in 2020, 2019, or 2018. The following table presents the stock-based compensation expense by caption for each period presented on the Consolidated Statements of Operations (in thousands):
| Year Ended December 31,
| 2020 |  | 2019 |  | 2018
Cost of revenue | $ | 1,365 |  |  | $ | 1,504 |  |  | $ | 2,447 |
Research, development, and engineering | 13,387 |  |  | 15,748 |  |  | 14,578 |
Selling, general, and administrative | 27,909 |  |  | 28,337 |  |  | 24,065 |
| $ | 42,661 |  |  | $ | 45,589 |  |  | $ | 41,090 |

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