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Stockholders' Equity and Stock-Based Compensation | 9 Months Ended
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Sep. 28, 2019
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
Stockholders' Equity and Stock-Based Compensation | Note 13. Stockholders’ Equity and Stock-Based Compensation Options and Employee Stock Purchase Plan (“ESPP”) Awards The fair value of each option and ESPP award is estimated on the grant date using the Black-Scholes valuation model and the assumptions noted in the following table. The expected lives of options granted were calculated using the simplified method allowed by the Staff Accounting Bulletin No. 107, Share-Based Payment. The risk-free rates were based on the U.S Treasury rates in effect during the corresponding period of grant. The expected volatility was based on the historical volatility of the Company’s stock price. The dividend yield reflects that the Company has not paid any cash dividends since inception and does not intend to pay any cash dividends in the foreseeable future.
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 28, 2019 |  |  | September 29, 2018 |  |  | September 28, 2019 |  |  | September 29, 2018 |
Employee Stock Purchase Plan: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Expected life |  | 0.5 years |  |  | 0.5 years |  |  | 0.5 |  |  | 0.5 years |
Volatility |  | 44.4% |  |  | 52.5% |  |  | 41.3% - 44.4% |  |  | 39.1% |
Risk free interest rate |  | 2.10% |  |  | 2.14% |  |  | 2.10% - 2.51% |  |  | 1.86% |
Dividends |  | — |  |  | — |  |  | — |  |  | — |
No stock options were awarded during the nine months ended September 28, 2019 and September 29, 2018. A summary of activity of stock options during the nine months ended September 28, 2019 is as follows:
|  | Number of Shares Outstanding (Options) |  |  | Weighted Average Exercise Price |  |  | Weighted Average Remaining Contractual Term (Years) |  |  | Aggregate Intrinsic Value (in Thousands) |
Options |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Outstanding at December 29, 2018 |  |  | 83,394 |  |  | $ | 15.80 |  |  |  | 1.19 |  |  | $ | 988 |
Exercised |  |  | (71,365 | ) |  |  | 15.72 |  |  |  |  |  |  |  |  |
Cancelled |  |  | (25 | ) |  |  | 14.95 |  |  |  |  |  |  |  |  |
Outstanding at September 28, 2019 |  |  | 12,004 |  |  |  | 16.27 |  |  |  | 0.80 |  |  |  | 198 |
Exercisable at September 28, 2019 |  |  | 12,004 |  |  | $ | 16.27 |  |  |  | 0.80 |  |  | $ | 198 |
The aggregate intrinsic value in the above table represents the total pretax intrinsic value, based on the Company’s closing stock price of $32.38 and $27.65 as of September 28, 2019 and December 29, 2018, respectively, the last trading day of each period, which would have been received by the option holders had all option holders exercised their options as of such date. Restricted Stock Units (“RSUs”) Time-based RSUs are valued using the market value of the Company’s common stock on the date of grant, assuming no expectation of dividends paid. A summary of activity for RSUs during the nine months ended September 28, 2019 is as follows:
Summary of activity for RSUs |  | Number of RSUs |  |  | Weighted Average Fair Value |
Outstanding RSUs as of December 29, 2018 |  |  | 769,003 |  |  | $ | 31.39 |
Granted |  |  | 352,337 |  |  |  | 28.63 |
Released |  |  | (322,915 | ) |  |  | 28.86 |
Cancelled |  |  | (57,907 | ) |  |  | 32.37 |
Outstanding RSUs as of September 28, 2019 |  |  | 740,518 |  |  | $ | 31.10 |
Market-Based Performance Stock Units (“PSUs”) In addition to granting RSUs that vest on the passage of time only, the Company granted PSUs to certain executives. The PSUs vest in three tranches over one, two and three years based on the relative performance of the Company’s stock during those periods, compared to a peer group over the same period. If target stock price performance is achieved, 66.7% of the shares of the Company’s stock subject to the PSUs will vest and up to a maximum of 100% of the shares subject to the PSUs will vest if the maximum stock price performance is achieved for each tranche. A summary of activity for PSUs for the nine months ended September 28, 2019 is as follows:
Summary of activity for PSUs |  | Number of PSUs |  |  | Weighted Average Fair Value |
Outstanding PSUs as of December 29, 2018 |  |  | 112,163 |  |  | $ | 22.37 |
Granted |  |  | 43,429 |  |  |  | 19.09 |
Released |  |  | (16,066 | ) |  |  | 25.09 |
Cancelled |  |  | (1,138 | ) |  |  | 26.75 |
Outstanding PSUs as of September 28, 2019 |  |  | 138,388 |  |  | $ | 20.99 |
The preceding table reflects the maximum awards that can be achieved upon full vesting. Valuation of PSUs On the date of grant, the Company estimated the fair value of PSUs using a Monte Carlo simulation model. The assumptions for the valuation of PSUs are summarized as follows:
|  | 2019 Award |  |  | 2018 Award |
Grant Date Fair Value Per Share |  | $13.12-$23.75 |  |  | $20.73-$25.18 |
Weighted-average assumptions/inputs: |  |  |  |  |  |  |  |
Expected Dividend |  |  | — |  |  |  | — |
Range of risk-free interest rates |  | 2.45% |  |  | 2.39%-2.63% |
Range of expected volatilities for peer group |  | 22%-63% |  |  | 22%-66% |
Stock-based Compensation Expense Stock-based compensation expense for all share-based payment awards made to the Company’s employees and directors pursuant to the employee stock option and employee stock purchase plans by function were as follows (in thousands):
|  | Three Months Ended |  |  | Nine Months Ended |
|  | September 28, 2019 |  |  | September 29, 2018 |  |  | September 28, 2019 |  |  | September 29, 2018 |
Cost of products |  | $ | 326 |  |  | $ | 224 |  |  | $ | 858 |  |  | $ | 455 |
Cost of service |  |  | 235 |  |  |  | 223 |  |  |  | 629 |  |  |  | 564 |
Research and development |  |  | 813 |  |  |  | 744 |  |  |  | 2,324 |  |  |  | 1,727 |
Selling |  |  | 834 |  |  |  | 779 |  |  |  | 2,378 |  |  |  | 2,049 |
General and administrative |  |  | 1,191 |  |  |  | 1,242 |  |  |  | 3,524 |  |  |  | 3,434 |
Total stock-based compensation expense related to employee stock options and employee stock purchases |  | $ | 3,399 |  |  | $ | 3,212 |  |  | $ | 9,713 |  |  | $ | 8,229 |

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- Definition The entire disclosure for shareholders' equity and share-based payment arrangement. Includes, but is not limited to, disclosure of policy and terms of share-based payment arrangement, deferred compensation arrangement, and employee stock purchase plan (ESPP). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -URI http://asc.fasb.org/topic&trid=2208762 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 + Details
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