Employee Benefits and Share-Based Compensation

Stock based plans

For a detailed explanation of our stock plans and subsequent changes please refer to Note 16, Employee Benefits and Stock-Based Compensation, of our Annual Report on Form 10-K for the year ended December 31, 2014, filed with the SEC on March 30, 2015.

Share-based compensation expense

The following table sets forth the total share-based compensation expense recognized in our Condensed Consolidated Statements of Operations:



	Three months ended				Nine months ended
	September 30, 2015		September 30, 2014		September 30, 2015		September 30, 2014
	(In thousands)
Cost of product and service revenues	$	581	$	441	$	1,630	$	973
Research and development	587		407		1,472		1,156
Selling, general and administrative	2,798		2,313		8,165		6,481
Total share-based compensation expense	$	3,966	$	3,161	$	11,267	$	8,610

The following weighted average assumptions are used to value share options and Employee Stock Purchase Plan ("ESPP") shares issued pursuant to our equity incentive plans for the three and nine months ended September 30, 2015 and September 30, 2014:



	Three months ended				Nine months ended
	September 30, 2015		September 30, 2014		September 30, 2015		September 30, 2014
	(In thousands, except percentages)
Stock Option Plans
Expected life, years	5.04		4.81		5.04		4.80
Expected volatility, %	29.3	%	34.1	%	31.1	%	35.1	%
Risk free interest rate, %	1.73	%	1.70	%	1.63	%	1.56	%
Estimated forfeiture rate %	2.5	%	2.5	%	2.5	%	2.5	%
Dividend yield, %	—	%	—	%	—	%	—	%



	Three months ended				Nine months ended
	September 30, 2015		September 30, 2014		September 30, 2015		September 30, 2014
	(In thousands, except percentages)
Employee Stock Purchase Plan
Expected life, years	0.5-2.0		0.5-2.0		0.5-2.0		0.5-2.0
Expected volatility, %	25.79-34.36%		29.56-39.69%		25.79-37.53%		29.56-42.16%
Risk free interest rate, %	0.12-0.79%		0.03-0.53%		0.03-0.79%		0.03-0.53%
Estimated forfeiture rate %	—	%	—	%	—	%	—	%
Dividend yield, %	—	%	—	%	—	%	—	%

Stock option and restricted stock activity

Stock options activity

The following table summarizes the stock option activity under the Company’s equity incentive plans during the nine months ended September 30, 2015:



	Number of Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Years	Aggregate Intrinsic Value⁽¹⁾
	(In thousands, except per share data)
Stock Options
Outstanding at December 31, 2014	2,672		$	19.02	6.5
Granted	322		34.90
Exercised	(494	)	15.90
Expired	(2	)	15.72
Forfeited	(81	)	23.82
Outstanding at September 30, 2015	2,417		$	21.61	6.5	$	24,341
Exercisable at September 30, 2015	1,368		$	16.73	4.8	$	19,660
Vested and expected to vest at September 30, 2015 and thereafter	2,390		$	21.50	6.4	$	24,293

_________________________________________________


⁽¹⁾	Intrinsic value is calculated as the difference between the market value or closing price of our common stock as of the last trading day of the period as reported by the NASDAQ Global Select Market, and the exercise price of the option.

The weighted-average fair value per share of options granted during the three and nine months ended September 30, 2015, was $10.51 and $10.57, respectively, and the weighted-average fair value per share of options granted during the three and nine months ended September 30, 2014 was $8.51 and $8.78, respectively. The intrinsic value of options exercised during the three and nine months ended September 30, 2015 was $3.1 million and $9.7 million, respectively. The intrinsic value of options exercised during the three and nine months ended September 30, 2014 was $2.5 million and $10.4 million, respectively.

As of September 30, 2015, total unrecognized compensation cost related to unvested stock options was $9.0 million, which is expected to be recognized over a weighted-average vesting period of 2.7 years.

Restricted stock activity

Restricted stock activity under the Company’s equity incentive plans in the nine months ended September 30, 2015 is as follows:



	Number of Shares		Weighted-Average Grant Date Fair Value		Weighted-Average Remaining Years	Aggregate Intrinsic Value
	(In thousands, except per share data)
Restricted Stock Units (RSUs)
Outstanding at December 31, 2014	399		$	24.00	1.5
Granted	131		34.72
Vested	(99	)	21.51
Forfeited	(29	)	23.79
Outstanding and unvested at September 30, 2015	402		$	28.10	1.3	$	12,503
Expected to vest after September 30, 2015	392				1.2	$	12,181

The weighted-average grant date fair value per share of RSUs granted during the nine months ended September 30, 2015 and September 30, 2014 was $34.72 and and $25.16, respectively.

As of September 30, 2015, total unrecognized compensation expense related to RSUs was $9.3 million, which is expected to be recognized over the remaining weighted-average vesting period of 2.4 years.



	Number of Shares		Weighted-Average Grant Date Fair Value
	(In thousands, except per share data)
Restricted Stock Awards (RSAs)
Outstanding at December 31, 2014	36		$	26.47
Granted	37		36.05
Vested	(41	)	26.47
Forfeited	(1	)	27.65
Outstanding and unvested at September 30, 2015	31		$	35.95

The weighted-average grant date fair value per share of RSAs granted during the nine months ended September 30, 2015 was and $36.05.

As of September 30, 2015, total unrecognized compensation cost related to RSAs was $0.7 million, which is expected to be recognized over the remaining weighted-average vesting period of 0.7 years.

Performance-based restricted stock unit activity

Performance-based restricted stock activity under our equity incentive plans in the nine months ended September 30, 2015 is as follows:



	Number of Shares		Weighted-Average Grant Date Fair Value Per Unit
	(In thousands, except per share data)
Performance-based Restricted Stock Units (PSUs)
Outstanding at December 31, 2014	233		$	17.96
Granted	60		29.56
Vested	(70	)	18.91
Forfeited	(27	)	14.69
Outstanding and unvested at September 30, 2015	196		$	21.63

The weighted-average grant date fair value per share of PSUs granted during the nine months ended September 30, 2015 and September 30, 2014 was $29.56 and $14.36, respectively. The total fair value of PSUs that vested during the nine months ended September 30, 2015 and September 30, 2014 was $2.6 million and $2.1 million, respectively.

As of September 30, 2015, total unrecognized compensation cost related to PSUs was approximately $2.0 million, which is expected to be recognized over the remaining weighted-average period of 1.1 years.

Employee Stock Purchase Plan (ESPP) activity

The unrecognized compensation cost related to the shares to be purchased under our ESPP was approximately $2.1 million as of September 30, 2015, and is expected to be recognized over a weighted-average period of 0.1 years.

Summary of shares reserved for future issuance under equity incentive plans

We had the following ordinary shares reserved for future issuance under our equity incentive plans as of June 30, 2015:



	Number of Shares
	(In thousands)
Share options outstanding	2,417
Restricted share awards outstanding	629
Shares authorized for future issuance	4,402
ESPP shares available for future issuance	3,251
Total shares reserved for future issuance as of September 30, 2015	10,699