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Stock-Based Compensation Expense | 3 Months Ended
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Apr. 04, 2021
Share-based Payment Arrangement [Abstract] |
Stock-Based Compensation Expense | Stock-Based Compensation Expense Stock Plans The Company’s stock-based awards that result in compensation expense consist of stock options and restricted stock units ("RSUs"). As of April 4, 2021, the Company had 15,650,000 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 upon continuous service 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 for the three-month period ended April 4, 2021:
| Shares (in thousands) |  | Weighted- Average Exercise Price |  | Weighted- Average Remaining Contractual Term (in years) |  | Aggregate Intrinsic Value (in thousands)
Outstanding as of December 31, 2020 | 8,970 |  |  | $ | 44.73 |  |  |  |  |
Granted | 421 |  |  | 90.50 |  |  |  |  |
Exercised | (897) |  |  | 38.82 |  |  |  |  |
Forfeited or expired | (42) |  |  | 48.68 |  |  |  |  |
Outstanding as of April 4, 2021 | 8,452 |  |  | $ | 47.62 |  |  | 7.11 |  | $ | 312,675 |
Exercisable as of April 4, 2021 | 3,824 |  |  | $ | 38.18 |  |  | 5.92 |  | $ | 176,405 |
Options vested or expected to vest as of April 4, 2021 (1) | 7,733 |  |  | $ | 46.78 |  |  | 7.00 |  | $ | 292,344 |
(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:
| Three-months Ended |  |
| April 4, 2021 |  | March 29, 2020 |  |  |  |
Risk-free rate | 1.3 | % |  | 1.6 | % |  |  |  |
Expected dividend yield | 0.27 | % |  | 0.43 | % |  |  |  |
Expected volatility | 39 | % |  | 37 | % |  |  |  |
Expected term (in years) | 5.7 |  | 6.0 |  |  |  |
Risk-free rate The risk-free rate was based upon 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 upon 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 values of stock options granted during the three-month periods ended April 4, 2021 and March 29, 2020 were $33.63 and $18.46, respectively. The total intrinsic values of stock options exercised for the three-month periods ended April 4, 2021 and March 29, 2020 were $42,327,000 and $14,454,000, respectively. The total fair values of stock options vested for the three-month periods ended April 4, 2021 and March 29, 2020 were $35,600,000 and $36,664,000, respectively. Restricted Stock Units (RSUs) The following table summarizes the Company's RSUs activity for the three-month period ended April 4, 2021:
| Shares (in thousands) |  | Weighted-Average Grant Date Fair Value
Nonvested as of December 31, 2020 | 554 |  |  | $ | 51.27 |
Granted | 245 |  |  | 89.86 |
Vested | (2) |  |  | 50.94 |
Forfeited or expired | (15) |  |  | 52.22 |
Nonvested as of April 4, 2021 | 782 |  |  | $ | 63.33 |
The weighted-average grant-date fair values of RSUs granted during the three-month periods ended April 4, 2021 and March 29, 2020 were $89.86 and $50.94, respectively. There were 2,000 RSUs that vested during the three-month period ended April 4, 2021 and no RSUs that vested during the three-month period ended March 29, 2020. Stock-Based Compensation Expense The Company segments its employee population into two groups: one consisting of senior management and another consisting of all other employees. The Company currently applies an estimated annual forfeiture rate of 8% to all stock-based awards for senior management and a rate of 12% for all other employees. Each year during the first quarter, the Company revises its forfeiture rate based on updated estimates of employee turnover. This resulted in a decrease to compensation expense of $255,000 in 2021 and an increase to compensation expense of $1,787,000 in 2020. As of April 4, 2021, total unrecognized compensation expense related to non-vested equity awards, including stock options and RSUs, was $69,821,000, which is expected to be recognized over a weighted-average period of 2.0 years. The total stock-based compensation expense and the related income tax benefit recognized for the three-month period ended April 4, 2021 were $12,009,000 and $1,813,000, respectively, and for the three-month period ended March 29, 2020, were $14,790,000 and $2,564,000, respectively. No compensation expense was capitalized as of April 4, 2021 or December 31, 2020. The following table presents the stock-based compensation expense by caption for each period presented on the Consolidated Statements of Operations (in thousands):
| Three-months Ended |  |
| April 4, 2021 |  | March 29, 2020 |  |  |  |
Cost of revenue | $ | 248 |  |  | $ | 354 |  |  |  |  |
Research, development, and engineering | 4,003 |  |  | 5,366 |  |  |  |  |
Selling, general, and administrative | 7,758 |  |  | 9,070 |  |  |  |  |
| $ | 12,009 |  |  | $ | 14,790 |  |  |  |  |

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- Definition The entire disclosure for compensation costs, including compensated absences accruals, compensated absences liability, deferred compensation arrangements and income statement compensation items. Deferred compensation arrangements may include a description of an arrangement with an individual employee, which is generally an employment contract between the entity and a selected officer or key employee containing a promise by the employer to pay certain amounts at designated future dates, usually including a period after retirement, upon compliance with stipulated requirements. This type of arrangement is distinguished from broader based employee benefit plans as it is usually tailored to the employee. Disclosure also typically includes the amount of related compensation expense recognized during the reporting period, the number of shares (units) issued during the period under such arrangements, and the carrying amount as of the balance sheet date of the related liability. + References Reference 1: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 710 -URI http://asc.fasb.org/topic&trid=2127225 Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Publisher FASB -Name Accounting Standards Codification -Topic 710 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6409950&loc=d3e20396-108366 + Details
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