7. Share Tracking Award Plans

We maintain the United Therapeutics Corporation Share Tracking Awards Plan, adopted in June 2008 (2008 STAP) and the United Therapeutics Corporation 2011 Share Tracking Awards Plan, adopted in March 2011 (2011 STAP). In 2012, we amended the 2008 STAP to prohibit future grants from the plan. Since both plans otherwise contain similar terms and conditions, we refer to these plans collectively as the "STAP" and awards granted and/or outstanding under either of these plans as "STAP Awards." STAP Awards convey the right to receive in cash an amount equal to the appreciation of our common stock, which is calculated as the positive difference between the closing price of our common stock on the date of exercise and the date of grant. Awards generally vest in equal increments on each anniversary of the date of grant over a four-year period and expire ten years from the grant date. The aggregate balance of the STAP liability at December 31, 2014 was $322.7 million, of which $40.6 million has been classified as non-current liabilities under the caption "Other Liabilities" on our consolidated balance sheets as these STAP Awards will vest in excess of one year. At December 31, 2014, 2.7 million STAP awards remained available for grant under the 2011 STAP. On January 30, 2014 our Board of Directors approved an additional 3.0 million increase in the number of available STAP awards under the 2011 STAP.

We estimate the fair value of STAP awards using the Black-Scholes-Merton valuation model. In estimating the fair value of STAP awards, we are required to use inputs that can materially impact the determination of fair value and the amount of compensation expense (benefit) to be recognized. These inputs include the price of our common stock, the expected volatility of the price of our common stock, the risk-free interest rate, the expected term of STAP awards, the expected forfeiture rate and the expected dividend yield.

A description of the key inputs, requiring estimates, used in determining the fair value of the awards is provided below:

Expected volatility—Volatility is a measure of the amount the price of our common stock has fluctuated (historical volatility) or is expected to fluctuate (expected volatility) during a period. We use historical volatility based on weekly price observations of our common stock during the period immediately preceding an award that is equal to its expected term up to a maximum period of five years. We believe the volatility in the price of our common stock over the preceding five years generally provides a reliable projection of future long-term volatility.

Risk-free interest rate—The risk-free interest rate is the average interest rate consistent with the yield available on a U.S. Treasury note with a term equal to the expected term of an award.

Expected term—The expected term reflects the estimated time period we expect an award to remain outstanding. For the year ended December 31, 2014, we used historical data to develop this input. Prior to 2014, we applied the simplified method to develop an estimate of the expected term. The change in methodologies for calculating the expected term of an award did not have a significant impact to our consolidated financial statements.

Expected forfeiture rate—The expected forfeiture rate is an estimated percentage of awards granted that are expected to be forfeited or canceled on an annual basis prior to becoming fully vested. We derive our estimate based on historical forfeiture experience for similar classes of employees.

Expected dividend yield—We do not pay cash dividends on our common stock and do not expect to do so in the future. Therefore, the dividend yield is zero.

The table below presents the assumptions used to measure the fair value of STAP Awards:

	As of December 31, 2014
	2014			2013			2012
Expected volatility		34.0	%		32.7	%		32.8	%
Risk-free interest rate		1.3	%		1.1	%		0.5	%
Expected term of awards (in years)		4.0			3.9			3.7
Expected forfeiture rate		9.3	%		10.1	%		8.7	%
Expected dividend yield		0.0	%		0.0	%		0.0	%

A summary of the status and activity of the STAP is presented below:

	Number of Awards			Weighted- Average Exercise Price		Weighted Average Remaining Contractual Term (Years)		Aggregate Intrinsic Value (in 000s)
Outstanding at January 1, 2014		8,734,901		$	52.75
Granted		1,604,525			95.39
Exercised		(2,315,093	)		48.01
Forfeited		(307,909	)		63.96

Outstanding at December 31, 2014		7,716,424		$	62.59		7.4	$	516,222


Exercisable at December 31, 2014		2,618,117		$	52.69		5.9	$	201,075


Expected to vest at December 31, 2014		4,615,370		$	67.89		8.2	$	284,296

The weighted average grant-date fair value of STAP awards granted during the years ended December 31, 2014, 2013 and 2012 was $33.82, $24.78 and $21.28, respectively.

Share-based compensation expense recognized in connection with the STAP is as follows (in thousands):

	Year Ended December 31,
	2014			2013			2012
Research and development	$	72,269		$	134,355		$	11,130
Selling, general and administrative		82,937			143,407			14,490
Cost of product sales		4,283			6,124			1,230

Share-based compensation expense before taxes		159,489			283,886			26,850
Related income tax benefit		(56,560	)		(106,693	)		(9,902	)

Share-based compensation expense, net of taxes	$	102,929		$	177,193		$	16,948


Share-based compensation capitalized as part of inventory	$	2,027		$	1,593		$	275

Cash paid to settle STAP exercises during the years ended December 31, 2014, 2013 and 2012 was $144.1 million, $55.9 million, and $31.8 million, respectively.