7. STOCK-BASED COMPENSATION

As of June 30, 2016, the Company maintained two share-based employee compensation plans (the "OSI Plans"): the 2012 Incentive Award Plan ("2012 Plan") and the Amended and Restated 2006 Equity Participation Plan ("2006 Plan"). Upon stockholder approval of the 2012 Plan, the Company ceased to make grants under the 2006 Plan.

The Company recorded stock-based-compensation expense in the consolidated statement of operations as follows (in thousands):

	2014			2015			2016
Cost of goods sold	$	887		$	1,037		$	1,199
Selling, general and administrative		15,940			21,249			19,307
Research and development		156			215			253

Stock based compensation expense		16,983			22,501			20,759
Less: Related income tax benefit		(6,498	)		(8,552	)		(7,762	)

Stock based compensation expense, net	$	10,485		$	13,949		$	12,997

As of June 30, 2016, total unrecognized compensation cost related to share-based compensation grants were estimated at $0.8 million for stock options and $12.0 million for restricted stock and restricted stock units ("RSUs") under the OSI Plans. The Company expects to recognize these costs over a weighted-average period of 1.8 years with respect to the options and 2.0 years for grants of restricted stock and RSUs.

Employee Stock Purchase Plan—The Company has an employee stock purchase plan under which eligible employees may purchase a limited number of shares of Common Stock at a discount of up to 15% of the market value of such stock at pre-determined, plan-defined dates. During the three years ended June 30, 2014, 2015 and 2016, employees purchased 29,185, 65,706 and 60,375 shares, respectively. As of June 30, 2016, there were 893,119 shares of the Company's Common Stock available for issuance under the plan.

OSI Plans

In September 2012, the Company's Board of Directors approved the 2012 Plan, and in December 2012 the stockholders adopted the 2012 Plan. The 2012 Plan serves as the successor to the 2006 Plan. No new awards will be issued under the 2006 Plan as of the date of stockholder approval of the 2012 Plan. Outstanding awards under the 2006 Plan continue to be subject to the terms and conditions of the 2006 Plan.

Under the 2012 Plan, the Company is authorized to grant awards in the form of incentive options, nonqualified options, restricted stock awards, stock appreciation rights, RSUs, performance shares and stock bonuses, amongst other forms of equity, to qualified employees, directors and consultants.

Under the OSI Plans, the exercise price of nonqualified options and incentive stock options may not be less than the fair market value of the Company's Common Stock on the date of grant. The exercise price of nonqualified options and incentive stock options granted to individuals who own more than 10% of the Company's voting stock may not be less than 110% of the fair market value of the Company's Common Stock on the date of grant. Stock options granted under the OSI Plans typically vest over three years based on continued service. Restricted stock and RSUs typically vest over three to four years based on continued service. Certain restricted stock awards granted to senior management vest based on the achievement of pre-established performance criteria.

Stock Option Fair Value Estimation Assumptions. The Company estimates the fair value of its stock options at the date of grant using the Black-Scholes option-pricing valuation model. The Company's valuation model is affected by the Company's stock price as well as weighted average assumptions for a number of subjective variables described below.

Expected Dividend. Expected dividend is based on historical patterns and the Company's anticipated dividend payments over the expected holding period.

Risk-Free Interest Rate. The risk-free interest rate for stock options is based on U.S. Treasuries for a maturity matching the expected holding period.

Expected Volatility. Expected volatility is based on the Company's historical share price volatility matching the expected holding period. No single method of estimating volatility is proper under all circumstances and to the extent that a company can derive implied volatility based on the trading of its financial instruments on a public market, it may be appropriate to use both implied and historical volatility in its assumptions. The Company has certain financial instruments that are publicly traded from which the Company can derive the implied volatility. Therefore, the Company used implied and historical volatility for valuing its stock options. The Company believes that implied and historical volatility is a better indicator of expected volatility because it is generally reflective of both historical volatility and expectations of how future volatility will differ from historical volatility.

Expected Holding Period. The Company uses historical stock option exercise data to estimate the expected holding period.

Changes in assumptions can materially impact the estimated fair value of stock options. The weighted average assumptions used in the valuation model are presented in the table below.

	2014			2015			2016
Expected dividend		0	%		0	%		0	%
Risk-free interest rate		1.3	%		1.5	%		1.4	%
Expected volatility		33.0	%		31.0	%		31.0	%
Expected holding period (in years)		4.5			4.5			4.5

The following summarizes stock option activity for fiscal years 2014, 2015 and 2016:

	Number of Options			Weighted- Average Exercise Price		Weighted-Average Remaining Contractual Term		Aggregate Intrinsic Value (in thousands)
Outstanding at June 30, 2013		1,019,733			26.33
Granted		10,294			70.59
Exercised		(1,169	)		39.97
Expired or forfeited		(5,867	)		54.06

Outstanding at June 30, 2014		1,022,991			26.60
Granted		45,104			68.05
Exercised		(38,907	)		41.20
Expired or forfeited		(16,538	)		62.20

Outstanding at June 30, 2015		1,012,650			27.30
Granted		35,162			73.42
Exercised		(107,059	)		28.05
Expired or forfeited		(6,641	)		66.56

Outstanding at June 30, 2016		934,112			28.67		4.0 years	$	28,378


Exercisable at June 30, 2016		887,786		$	25.94		3.7 years	$	28,373

The per-share weighted-average grant-date fair value of stock options granted under the OSI Plans was $20.78, $19.26 and $20.66 for fiscal 2014, 2015 and 2016, respectively. The total intrinsic value of options exercised during fiscal 2016 was $6,077,000.

Restricted Stock Awards and Restricted Stock Units—A summary of restricted stock award and RSU activity for the periods indicated was as follows:

	Shares			Weighted- Average Fair Value
Nonvested at June 30, 2013		627,124		$	43.13
Granted		322,275			63.73
Vested		(283,091	)		39.40
Forfeited		(4,908	)		49.22

Nonvested at June 30, 2014		661,400		$	54.78
Granted		281,163			64.68
Vested		(262,221	)		42.75
Forfeited		(20,436	)		55.62

Nonvested at June 30, 2015		659,906		$	63.75
Granted		337,628			72.90
Vested		(417,896	)		65.36
Forfeited		(49,140	)		67.70

Nonvested at June 30, 2016		530,498		$	67.94

The per-share weighted average grant-date fair value of restricted stock and RSUs granted under the OSI Plans was $63.73, $64.68 and $72.90 for fiscal 2014, 2015 and 2016, respectively. The total fair value of shares vested during fiscal 2014, 2015 and 2016 was $11.2 million, $11.2 million and $27.3 million, respectively.

As of June 30, 2016, there were approximately 2.0 million shares available for grant under the 2012 Plan. Under the terms of the 2012 Plan, RSUs and restricted stock granted from the pool of shares available for grant reduce the pool by 1.87 shares for each award granted. RSUs and restricted stock forfeited and returned to the pool of shares available for grant increase the pool by 1.87 shares for each award forfeited.

The Company granted 160,922, 151,469 and 139,300 performance-based awards during fiscal 2014, 2015 and 2016, respectively. These performance-based restricted stock and RSU awards are contingent on the achievement of certain performance metrics. The payout can range from zero to 250% of the original number of shares or units awarded.