5. STOCK-BASED COMPENSATION

The following table summarizes the stock-based compensation expense related to stock options, performance stock units (PSUs), restricted stock units (RSUs) and restricted stock for the three and nine months ended September 30, 2017 and 2016, which was recognized as follows:

	Three Months Ended						Nine Months Ended
	September 30,						September 30,
(In thousands)	2017			2016			2017			2016
Stock-based compensation expense included in cost of sales	$	97		$	88		$	281		$	282
Selling, general and administrative expense		994			765			3,018			2,322
Research and development expense		743			639			2,274			1,997
Stock-based compensation expense included in operating expenses		1,737			1,404			5,292			4,319
Total stock-based compensation expense		1,834			1,492			5,573			4,601
Tax benefit for expense associated with non-qualified options, PSUs, RSUs and restricted stock		(402	)		(218	)		(1,215	)		(643	)
Total stock-based compensation expense, net of tax	$	1,432		$	1,274		$	4,358		$	3,958

Stock Options

The following table is a summary of our stock options outstanding as of December 31, 2016 and September 30, 2017 and the changes that occurred during the nine months ended September 30, 2017:

(In thousands, except per share amounts)	Number of Stock Options			Weighted Avg. Exercise Price		Weighted Avg. Remaining Contractual Life In Years		Aggregate Intrinsic Value
Stock options outstanding, December 31, 2016		6,338		$	22.14		5.63	$	16,972
Stock options granted		—		$	—
Stock options exercised		(358	)	$	18.44
Stock options forfeited		(54	)	$	17.49
Stock options expired		(90	)	$	27.31
Stock options outstanding, September 30, 2017		5,836		$	22.33		4.92	$	20,669
Stock options vested and expected to vest, September 30, 2017		5,836		$	22.33		4.92	$	20,669
Stock options exercisable, September 30, 2017		4,311		$	24.02		3.99	$	10,845

The aggregate intrinsic values in the table above represent the total pre-tax intrinsic value (the difference between the closing price of our stock on the last trading day of the quarter and the exercise price, multiplied by the number of in-the-money stock options) that would have been received by the option holders had all option holders exercised their options on September 30, 2017. The aggregate intrinsic value will change based on the fair market value of our stock.

The total pre-tax intrinsic value of options exercised during the three and nine months ended September 30, 2017 was $1.1 million and $1.6 million, respectively.

As of September 30, 2017, there was $4.0 million of unrecognized compensation expense related to unvested stock options, which is expected to be recognized over an average remaining recognition period of 1.7 years.

The fair value of our stock options is estimated using the Black-Scholes model. The determination of the fair value of stock options on the date of grant using the Black-Scholes model is affected by our stock price, as well as assumptions regarding a number of complex and subjective variables that may have a significant impact on the fair value estimate.

There were no stock options granted during the three or nine months ended September 30, 2017. The weighted-average assumptions and value of options granted during the three and nine months ended September 30, 2016 were as follows:

	Three Months Ended			Nine Months Ended
	September 30,			September 30,
	2016			2016
Expected volatility		34.55	%		34.66	%
Risk-free interest rate		1.20	%		1.28	%
Expected dividend yield		1.83	%		1.88	%
Expected life (in years)		6.21			6.24
Weighted-average estimated value	$	5.64		$	5.50

PSUs, RSUs and restricted stock

The following table is a summary of our PSUs, RSUs and restricted stock outstanding as of December 31, 2016 and the changes that occurred during the nine months ended September 30, 2017:

(In thousands, except per share amounts)	Number of Shares			Weighted Avg. Grant Date Fair Value
Unvested PSUs, RSUs and restricted stock outstanding, December 31, 2016		519		$	20.51
PSUs, RSUs and restricted stock granted		526		$	22.23
PSUs, RSUs and restricted stock vested		(4	)	$	18.00
PSUs, RSUs and restricted stock forfeited		(21	)	$	20.88
Unvested PSUs, RSUs and restricted stock outstanding, September 30, 2017		1,020		$	21.40

The fair value of our PSUs with market conditions is calculated using a Monte Carlo Simulation valuation method. The fair value of RSUs and restricted stock is equal to the closing price of our stock on the date of grant. During the first quarter of 2017, the Compensation Committee of the Board of Directors approved a PSU grant of 0.5 million shares that contain performance conditions. The fair value of these performance-based PSU awards was equal to the closing price of our stock on the date of grant.

As of September 30, 2017, there was $7.1 million of unrecognized compensation expense related to unvested market-based PSUs, RSUs and restricted stock, which is expected to be recognized over an average remaining recognition period of 2.8 years. In addition, there was $11.5 million of unrecognized compensation expense related to unvested performance-based PSUs, which will be recognized over the requisite service period of three years as achievement of the performance objective becomes probable. For the three and nine months ended September 30, 2017, no compensation expense was recognized related to these performance-based PSU awards.