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Preferred and Common Shares and Share-Based Compensation | 9 Months Ended
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Oct. 01, 2021
Disclosure Of Compensation Related Costs Sharebased Payments [Abstract] |
Preferred and Common Shares and Share-Based Compensation | 12. Preferred and Common Shares and Share-Based Compensation Preferred Shares In May 2021, the Company’s shareholders approved a special resolution to amend the Company’s articles to authorize up to 7.0 million preferred shares for future issuance. The Company’s Board of Directors is authorized to designate and issue one or more series of preferred shares, fix the rights, preferences and designation, as deemed necessary or advisable, relating to the preferred shares, provided that no shares of any series may be entitled to more than one vote per share. As of October 1, 2021, no preferred shares had been issued and outstanding. Common Share Repurchases In October 2018, the Company’s Board of Directors approved a share repurchase plan (the “2018 Repurchase Plan”), authorizing the repurchase of $25.0 million worth of the Company’s common shares. In February 2020, the Company’s Board of Directors approved a new share repurchase plan (the “2020 Repurchase Plan”), authorizing the repurchase of an additional $50.0 million worth of the Company’s common shares. As of October 1, 2021, the Company had $59.5 million available for future share repurchases under these share repurchase plans. Share-Based Compensation Expense The table below summarizes share-based compensation expense recorded in the consolidated statements of operations (in thousands):
| Three Months Ended |  |  | Nine Months Ended |
| October 1, |  |  | October 2, |  |  | October 1, |  |  | October 2, |
| 2021 |  |  | 2020 |  |  | 2021 |  |  | 2020 |
Selling, general and administrative | $ | 4,360 |  |  | $ | 4,265 |  |  | $ | 13,123 |  |  | $ | 10,225 |
Research and development and engineering |  | 534 |  |  |  | 1,150 |  |  |  | 1,776 |  |  |  | 2,204 |
Cost of revenue |  | 631 |  |  |  | 1,589 |  |  |  | 2,305 |  |  |  | 3,185 |
Restructuring, acquisition, and related costs |  | 2,965 |  |  |  | 221 |  |  |  | 2,965 |  |  |  | 458 |
Total share-based compensation expense | $ | 8,490 |  |  | $ | 7,225 |  |  | $ | 20,169 |  |  | $ | 16,072 |
Share-based compensation expense reported in selling, general and administrative expenses included expenses related to restricted stock units and deferred stock units granted to the members of the Company’s Board of Directors of $1.1 million and $1.0 million during the nine months ended October 1, 2021 and October 2, 2020, respectively. On May 13, 2021, the Company’s shareholders approved the Amended and Restated 2010 Incentive Award Plan, which increased the number of shares authorized for issuance under the plan from 4,398,613 shares to 6,148,613 shares, extended the term of the plan through May 13, 2031, and included certain provisions that reflect good corporate governance practices. Restricted Stock Units and Deferred Stock Units The Company’s restricted stock units (“RSUs”) have generally been issued with vesting periods ranging from zero to five years and vest based solely on service conditions. Accordingly, the Company recognizes compensation expense on a straight-line basis over the requisite service period. The Company reduces the compensation expense by an estimated forfeiture rate which is based on anticipated forfeitures and historical forfeiture experience. Deferred stock units (“DSUs”) are granted to the members of the Company’s Board of Directors. Compensation expense associated with the DSUs is recognized in full on the date of grant, as the DSUs are fully vested and non-forfeitable upon grant. There were 91 thousand and 162 thousand DSUs outstanding as of October 1, 2021 and December 31, 2020, respectively. Outstanding DSUs are included in the calculation of weighted average basic shares outstanding for the respective periods. The table below summarizes activities relating to RSUs and DSUs issued and outstanding under the Company’s Amended and Restated 2010 Incentive Plan during the nine months ended October 1, 2021:
| Shares (In thousands) |  |  | Weighted Average Grant Date Fair Value |
Unvested at December 31, 2020 |  | 625 |  |  | $ | 58.79 |
Granted |  | 169 |  |  | $ | 136.85 |
Vested |  | (485 | ) |  | $ | 51.21 |
Forfeited |  | (20 | ) |  | $ | 103.20 |
Unvested at October 1, 2021 |  | 289 |  |  | $ | 113.94 |
Expected to vest as of October 1, 2021 |  | 272 |  |  |  |  |
The total fair value of RSUs and DSUs that vested during the nine months ended October 1, 2021 was $68.0 million based on the market price of the underlying shares on the date of vesting. Performance Stock Units The Company typically grants two types of annual performance-based stock awards to certain members of the executive management team: non-GAAP EPS performance-based restricted stock units (“EPS-PSUs”) and relative total shareholder return performance-based restricted stock units (“TSR-PSUs”). Both types of performance-based restricted stock units generally cliff vest on the first day following the end of the three-year performance period. The number of common shares to be issued upon settlement following vesting of the EPS-PSUs is determined based on the Company’s cumulative non-GAAP EPS over a three-year performance period against the performance targets established by the Company’s Board of Directors at the time of grant and will be in the range of zero to 200% of the target number of shares. The Company recognizes compensation expense ratably over the performance period based on the number of shares that are deemed probable of vesting at the end of the three-year performance cycle. This probability assessment is performed quarterly and the cumulative effect of a change in the estimated compensation expense, if any, is recognized in the consolidated statement of operations in the period in which such determination is made. The number of common shares to be issued upon settlement following vesting of the TSR-PSUs is determined based on the relative market performance of the Company’s common shares compared to the Russell 2000 Index over a three-year performance period using a payout formula established by the Company’s Board of Directors at the time of grant and will be in the range of zero to 200% of the target number of shares. The Company recognizes the related compensation expense based on the fair value of the TSR-PSUs, determined using the Monte Carlo valuation method as of the grant date, on a straight-line basis from the grant date to the end of the three-year performance period. Compensation expense will not be affected by the number of TSR-PSUs that will actually vest at the end of the three-year performance period. In February 2021, the Company granted operating cash flow performance-based restricted stock units (“OCF-PSUs”) to certain members of the executive management team. Upon completion of the requisite service periods, the OCF-PSUs will vest in two tranches if the Company achieves the cumulative operating cash flow performance target for fiscal years 2021 through 2023 as approved by the Company’s Compensation Committee as of the date of grant. The first fifty percent of the OCF-PSU grant will vest at the end of the four-year service period from the date of grant and the remaining fifty percent of the OCF-PSU grant will vest at the end of the five-year service period from the date of grant. The Company recognizes compensation expense ratably over the requisite service period based on the expectation that 100 percent of the OCF-PSUs are deemed probable of vesting. This probability assessment is performed quarterly and the cumulative effect of a change in the estimated compensation expense, if any, is recognized in the consolidated statement of operations in the period in which such determination is made. The table below summarizes the activities relating to the performance-based awards issued and outstanding under the Company’s Amended and Restated 2010 Incentive Plan during the nine months ended October 1, 2021:
| Shares (In thousands) |  |  | Weighted Average Grant Date Fair Value |
Unvested at December 31, 2020 |  | 142 |  |  | $ | 88.99 |
Granted |  | 67 |  |  | $ | 150.89 |
Performance adjustment |  | 28 |  |  | $ | 67.72 |
Vested |  | (75 | ) |  | $ | 64.25 |
Forfeited |  | — |  |  | $ | — |
Unvested at October 1, 2021 |  | 162 |  |  | $ | 122.26 |
Expected to vest as of October 1, 2021 |  | 177 |  |  |  |  |
The unvested PSUs are shown at target in the table above. As of October 1, 2021, the maximum number of common shares to be earned under these PSU grants was approximately 286 thousand shares. The performance adjustment shares and vested shares shown in the table above are for performance-based awards granted on February 22, 2018. These awards vested at 160% of target number of common shares during the nine months ended October 1, 2021 based on the achievement of cumulative Non-GAAP EPS and applicable relative TSR performance conditions during the performance period of fiscal years 2018 through 2020. The total fair value of PSUs that vested during the nine months ended October 1, 2021 was $9.3 million based on the market price of the underlying common shares on the date of vesting. The fair value of the TSR-PSUs at the date of grant was estimated using the Monte Carlo valuation method with the following assumptions:
| Nine Months Ended October 1, 2021 |
Grant-date stock price | $ | 138.23 |
Expected volatility |  | 42.44 | %
Risk-free interest rate |  | 0.22 | %
Expected annual dividend yield |  | — |
Fair value | $ | 166.64 |
Stock Options No stock options were granted during the nine months ended October 1, 2021. There were 60 thousand fully-vested stock options outstanding as of October 1, 2021.

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