STOCK TRANSACTIONS AND STOCK-BASED COMPENSATION

Except in connection with the disposition of the Company's communications business to NetScout, neither the Company nor any “affiliated purchaser” repurchased any shares of Company common stock during the three or nine months ended October 2, 2015. Refer to Note 3 for discussion of the 26.0 million shares of Danaher common stock tendered to and repurchased by the Company in connection with the disposition of the Company's communications business to NetScout. On July 16, 2013, the Company's Board of Directors approved a repurchase program (the “Repurchase Program”) authorizing the repurchase of up to 20 million shares of the Company's common stock from time to time on the open market or in privately negotiated transactions. As of October 2, 2015, 20 million shares remained available for repurchase pursuant to the Repurchase Program.

For a full description of the Company’s stock-based compensation programs, reference is made to Note 17 of the Company’s financial statements as of and for the year ended December 31, 2014 included in the Company’s 2014 Annual Report on Form 10-K. As of October 2, 2015, approximately 22 million shares of the Company’s common stock were reserved for issuance under the 2007 Stock Incentive Plan.

In 2015, the Company introduced into its executive equity compensation program performance stock units (“PSUs”) that vest based on the Company’s total shareholder return ranking relative to the S&P 500 Index over a three-year performance period. As a result, effective in 2015 one-half of the annual equity awards granted to the Company's executive officers are granted as stock options, one-quarter are granted as restricted stock units (“RSUs”) and one-quarter are granted as PSUs. The PSUs are issued under the Company's 2007 Stock Incentive Plan.

In connection with the Pall Acquisition, the Company assumed certain outstanding RSUs that had been awarded to Pall employees under the Pall 2012 Stock Compensation Plan. The shares of Pall common stock issuable under such RSUs have been replaced with shares of Danaher common stock based on the exchange ratio used in the acquisition transaction. The Pall 2012 Stock Compensation Plan operates in a similar manner to the Company’s 2007 Stock Incentive Plan. No further equity awards will be issued under the Pall 2012 Stock Compensation Plan.

The following summarizes the assumptions used in the Black-Scholes Merton option pricing model (“Black-Scholes”) to value options granted during the nine months ended October 2, 2015:



Risk-free interest rate	1.6% - 2.2%
Weighted average volatility	24.4	%
Dividend yield	0.6	%
Expected years until exercise	5.5 - 8.0

The following summarizes the components of the Company’s continuing operations stock-based compensation expense ($ in millions):



	Three Months Ended						Nine Months Ended
	October 2, 2015			September 26, 2014			October 2, 2015			September 26, 2014
RSUs/PSUs:
Pre-tax compensation expense	$	29.3		$	19.9		$	65.1		$	51.3
Income tax benefit	(10.5		)	(6.0		)	(22.3		)	(14.9		)
RSU/PSU expense, net of income taxes	18.8			13.9			42.8			36.4
Stock options:
Pre-tax compensation expense	13.4			12.0			36.1			31.7
Income tax benefit	(4.3		)	(3.7		)	(11.6		)	(9.5		)
Stock option expense, net of income taxes	9.1			8.3			24.5			22.2
Total stock-based compensation:
Pre-tax compensation expense	42.7			31.9			101.2			83.0
Income tax benefit	(14.8		)	(9.7		)	(33.9		)	(24.4		)
Total stock-based compensation expense, net of income taxes	$	27.9		$	22.2		$	67.3		$	58.6

Stock-based compensation has been recognized as a component of selling, general and administrative expenses in the accompanying Consolidated Condensed Statements of Earnings. As of October 2, 2015, $187 million of total unrecognized compensation cost related to RSUs/PSUs is expected to be recognized over a weighted average period of approximately three years. As of October 2, 2015, $141 million of total unrecognized compensation cost related to stock options is expected to be recognized over a weighted average period of approximately three years. Future compensation amounts will be adjusted for any changes in estimated forfeitures.

The following summarizes option activity under the Company’s stock plans (in millions, except weighted exercise price and number of years):



	Options		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding as of December 31, 2014	24.3		$	48.92
Granted	3.1		87.79
Exercised	(5.0	)	36.39
Cancelled/forfeited	(1.0	)	66.64
Outstanding as of October 2, 2015	21.4		$	56.65	6	$	645.6
Vested and expected to vest as of October 2, 2015 ⁽¹⁾	20.2		$	55.73	6	$	626.7
Vested as of October 2, 2015	11.0		$	42.34	4	$	485.8


⁽¹⁾	The “Expected to vest” options are the net unvested options that remain after applying the forfeiture rate assumption to total unvested options.

The aggregate intrinsic value in the table above represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading day of the third quarter of 2015 and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their options on October 2, 2015. The amount of aggregate intrinsic value will change based on the price of the Company’s common stock.

The aggregate intrinsic value of options exercised during the nine months ended October 2, 2015 and September 26, 2014 was $245 million and $95 million, respectively. Exercise of options during the first nine months of 2015 and 2014 resulted in cash receipts of $169 million and $79 million, respectively. The Company realized a tax benefit of $27 million and $79 million in the three and nine months ended October 2, 2015, respectively, related to the exercise of employee stock options. The net income tax benefit in excess of the expense recorded for financial reporting purposes (the “excess tax benefit”) has been recorded as an increase to additional paid-in capital and is reflected as a financing cash inflow in the accompanying Consolidated Condensed Statements of Cash Flows.

The following summarizes information on unvested RSU and PSU activity (in millions, except weighted average grant-date fair value):



	Number of RSUs/PSUs		Weighted Average Grant-Date Fair Value
Unvested as of December 31, 2014	4.9		$	61.64
Granted	2.0		86.68
Vested	(1.1	)	54.51
Forfeited	(0.6	)	67.69
Unvested as of October 2, 2015	5.2		$	71.99

The Company realized a tax benefit of $13 million and $34 million in the three and nine months ended October 2, 2015, respectively, related to the vesting of RSUs. The excess tax benefit attributable to RSUs has been recorded as an increase to additional paid-in capital and is reflected as a financing cash inflow in the accompanying Consolidated Condensed Statements of Cash Flows.

In connection with the exercise of certain stock options and the vesting of RSUs previously issued by the Company, a number of shares sufficient to fund statutory minimum tax withholding requirements has been withheld from the total shares issued or released to the award holder (though under the terms of the applicable plan, the shares are considered to have been issued and are not added back to the pool of shares available for grant). During the first nine months of 2015, 503 thousand shares with an aggregate value of $44 million were withheld to satisfy the requirement. The withholding is treated as a reduction in additional paid-in capital in the accompanying Consolidated Condensed Statement of Stockholders’ Equity.