Share-Based Compensation

6 Months Ended

Sep. 29, 2018

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

14. Share-Based Compensation

The Company's share-based compensation consists of restricted stock unit awards with a service condition (time-based RSUs), restricted stock unit awards with a market performance condition (market-based RSUs), restricted stock unit awards with a performance condition other than market performance (performance-based RSUs), an employee stock purchase plan and stock-settled stock appreciation rights (SARs).

The fair value of time-based and performance-based restricted stock units (RSUs) are measured on the grant date based on the market value of the Company's common stock. The market-based RSUs must achieve the total shareholder return (TSR) measures in order for the awards to vest, and the grant date fair value of the awards is calculated using a Monte Carlo simulation model. The Company recognizes expense related to the fair value of the 1990 Employee Stock Purchase Plan (ESPP) and SARs using the Black-Scholes model to estimate the fair value of awards on the date of grant.

Except for performance-based RSUs, the Company recognizes compensation expense for all share-based compensation awards, net of estimated forfeitures, on a straight-line basis over the requisite service period of the award. Expense for performance-based RSUs is recognized based on the probability of achievement of the performance criteria. The compensation cost for market-based RSUs is recognized over the related service period, even if the market condition is never satisfied. The impact of adjustments related to awards where the requisite service period was not completed is reflected as an offset to current period shared-based compensation expense.

The Company granted a total of 276,715 time-based RSUs and 92,500 market-based RSUs during the first two quarters of fiscal 2019, but did not grant any SARs or performance-based RSUs. Grants for the second quarter of fiscal 2019 consisted of 37,715 time-based RSUs.

Share-based compensation expense under the stock incentive plans is included in the Company’s Condensed Consolidated Statements of Operations as follows:



	Fiscal quarter ended				Two fiscal quarters ended
(In thousands)	Sep 29, 2018		Sep 30, 2017		Sep 29, 2018		Sep 30, 2017
Cost of sales	$	122	$	77	$	228	$	144
Selling, general and administrative	1,279		1,070		2,427		2,131
Research, development and engineering	264		183		509		333
Total share-based compensation expense	$	1,665	$	1,330	$	3,164	$	2,608

The Company incurred $13 thousand of capitalizable share-based compensation costs during the two fiscal quarters of 2019. The capitalizable cost was incurred for internal labor hours allocated to the enterprise resource planning software and related systems implementation, which will support the Company's operating and financial function. No capitalized share-based compensation costs were incurred during the 2018 fiscal year. As of September 29, 2018, the Company had $10.9 million of total unrecognized share-based compensation costs, net of estimated forfeitures, which are expected to be recognized over a weighted average period of 2.0 years.

ELECTRO SCIENTIFIC INDUSTRIES INC 10-Q