7. Share Tracking Awards Plans

We previously issued awards under 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). We refer to the 2008 STAP and the 2011 STAP 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 measured as the increase in the closing price of our common stock between the dates of grant and exercise. STAP awards expire on the tenth anniversary of the grant date, and in most cases they vest in equal increments on each anniversary of the grant date over a four-year period. The STAP liability includes vested awards and awards that are expected to vest. We recognize expense for awards that are expected to vest during the vesting period. We discontinued the issuance of STAP awards in June 2015, when our shareholders approved the United Therapeutics Corporation 2015 Stock Incentive Plan (the 2015 Plan), a broad-based stock incentive plan enabling us to grant stock options and other forms of equity compensation to our employees. See Note 9—Stockholders’ Equity to these consolidated financial statements for information on the 2015 Plan.

The aggregate STAP liability balance was $220.3 million and $268.9 million at March 31, 2017 and December 31, 2016, respectively, of which $2.2 million and $74.1 million, respectively, has been classified as other non-current liabilities on our consolidated balance sheets based on their vesting terms. The decrease in STAP liability classified as other non-current liabilities is primarily due to a tranche of STAP awards with a fair value of $69.4 million at March 31, 2017 that is expected to vest within one year, and therefore is now classified as a current liability.

Estimating the fair value of STAP awards requires the use of certain inputs that can materially impact the determination of fair value and the amount of compensation expense (benefit) we recognize. Inputs used in estimating fair value 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 and the expected dividend yield. The fair value of outstanding STAP awards is measured at the end of each financial reporting period because the awards are settled in cash. As a result of the adoption of ASU 2016-09, we established an accounting policy election to account for forfeitures of share-based awards when they occur. Upon adoption, we recognized a cumulative-effect adjustment for the removal of the forfeiture estimate with respect to awards that were continuing to vest as of January 1, 2017. The adjustment resulted in an increase to our STAP liability of $8.4 million and a corresponding decrease to retained earnings of $5.4 million, which is net of tax. Refer to Note 2—Basis of Presentation—Recently Issued Accounting Standards.

The table below includes the weighted-average assumptions used to measure the fair value of the outstanding STAP awards:

	March 31, 2017		March 31, 2016
Expected volatility	36.3	%	37.4	%
Risk-free interest rate	1.4	%	0.9	%
Expected term of awards (in years)	2.4		3.2
Expected dividend yield	0.0	%	0.0	%

The closing price of our common stock was $135.38 and $111.43 on March 31, 2017 and March 31, 2016, respectively. The closing price of our common stock was $143.43 on December 31, 2016.

A summary of the activity and status of STAP awards during the three-month period ended March 31, 2017 is presented below:

	Number of Awards		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (in Years)	Aggregate Intrinsic Value (in millions)
Outstanding at January 1, 2017	5,113,838		$	91.51
Granted	—		—
Exercised	(463,183	)	75.15
Forfeited	(85,086	)	95.82

Outstanding at March 31, 2017	4,565,569		$	93.09	6.3	$	227.1

Exercisable at March 31, 2017	2,811,258		$	94.42	6.1	$	136.0

Unvested as of March 31, 2017	1,754,311		$	90.94	6.6	$	91.2

Share-based compensation benefit recognized in connection with STAP awards is as follows (in millions):

	Three Months Ended March 31,
	2017			2016
Cost of product sales	$	(1.7	)	$	(12.0	)
Research and development	(5.8		)	(37.4		)
Selling, general and administrative	(17.1		)	(98.5		)

Share-based compensation benefit before taxes	$	(24.6	)	$	(147.9	)
Related income tax expense	9.0			52.4

Share-based compensation benefit, net of taxes	$	(15.6	)	$	(95.5	)

Cash paid to settle STAP awards exercised during the three-month periods ended March 31, 2017 and March 31, 2016 was $32.4 million and $13.8 million, respectively.