Share-Based Compensation

3 Months Ended

Mar. 31, 2016

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

We have a stockholder-approved stock incentive plan, the 2008 Stock Incentive Plan (Amended and Restated as of April 15, 2015) (Plan) that provides for the granting of options, restricted stock units (RSUs), performance stock units (PSUs) and other share-based awards to our employees, officers and non-employee directors. The Management Compensation and Development Committee of the Board of Directors (Compensation Committee) may determine the type, amount and terms, including vesting, of any awards made under the Plan.

During 2015, we increased our usage of PSUs and began issuing PSUs to certain executive officers that are payable in shares of our common stock at the end of a three years performance measurement period. The number of shares to be issued at the end of the measurement period will vary, based on performance, from 0% to 200% of the target number of PSUs granted, depending on the achievement of specified performance and market targets for non-GAAP revenue (37.5% weighting), non-GAAP earnings per share (37.5% weighting), and relative total shareholder return (25% weighting). All shares delivered upon PSU vesting are restricted from trading for one year and one day from the vesting date.

The grant date fair value for the portion of the PSUs related to non-GAAP revenue and non-GAAP earnings per share was estimated using the fair market value of our common stock on the grant date. The grant date fair value for the portion of the PSUs related to relative total shareholder return was estimated using the Monte Carlo valuation model.

The following table summarizes the components of share-based compensation expense in the Consolidated Statements of Income for the three-month periods ended March 31, 2016 and 2015:



	Three-Month Periods Ended March 31,
	2016		2015
Cost of goods sold (excluding amortization of acquired intangible assets)	$	9.0	$	6.7
Research and development	62.2		56.2
Selling, general and administrative	75.3		65.9
Total share-based compensation expense	146.5		128.8
Tax benefit related to share-based compensation expense	40.1		36.4
Reduction in income	$	106.4	$	92.4

The following table summarizes the activity for stock options, RSUs and PSUs for the three-month period ended March 31, 2016 (in millions unless otherwise noted):



	Stock Options		Restricted Stock Units		Performance- Based Restricted Stock Units (in thousands)
Outstanding at December 31, 2015	75.7		7.7		334
Changes during the Year:
Granted	2.9		0.1		94
Exercised / Released	(1.6	)	(0.2	)	—
Forfeited	(0.7	)	(0.1	)	(17	)
Outstanding at March 31, 2016	76.3		7.5		411

Total compensation cost related to unvested awards not yet recognized and the weighted-average periods over which the awards are expected to be recognized at March 31, 2016 were as follows (dollars in millions):



	Stock Options		Restricted Stock Units		Performance- Based Restricted Stock Units
Unrecognized compensation cost	$	611.1	$	265.1	$	22.3
Expected weighted-average period in years of compensation cost to be recognized	2.0		1.2		1.8