Note 10: Share-Based Compensation

Total share-based compensation expense related to the Company's employee stock options, RSUs, stock grant awards and ESPP for the years ended December 31, 2017, 2016 and 2015 was comprised as follows (in millions):



	Year Ended December 31,
	2017		2016		2015
Cost of revenues	$	6.0	$	8.0	$	7.7
Research and development	12.5		11.1		9.2
Selling and marketing	11.7		9.8		8.5
General and administrative	39.6		27.2		21.5
Share-based compensation expense before income taxes	69.8		56.1		46.9
Related income tax benefits (1)	24.4		—		—
Share-based compensation expense, net of taxes	$	45.4	$	56.1	$	46.9

____________________


(1)	Recognition of related income tax benefits are the result of the adoption of ASU 2016-09 during the first quarter of 2017. Tax benefit is calculated using the federal statutory rate of 35%. See Note 3: ''Recent Accounting Pronouncements'' for more information.

At December 31, 2017, total unrecognized estimated share-based compensation expense, net of estimated forfeitures, related to non-vested stock options was less than $0.1 million, which is expected to be recognized over a weighted-average period of 3 months. At December 31, 2017, total unrecognized share-based compensation expense, net of estimated forfeitures, related to non-vested RSUs with time-based service conditions and performance-based vesting criteria was $76.1 million, which is expected to be recognized over a weighted-average period of 1.6 years. The total intrinsic value of stock options exercised during the year ended December 31, 2017 was $20.1 million. The Company received cash of $18.0 million and $23.6 million from the exercise of stock options and the issuance of shares under the ESPP, respectively. Upon option exercise, release of RSUs, stock grant awards, or completion of a purchase under the ESPP, the Company issues new shares of common stock.

Share-Based Compensation Information

The fair value per unit of each time based and performance based RSU and stock grant award is determined on the grant date and is equal to the Company's closing stock price on the grant date. There were no employee stock options granted during the years ended December 31, 2017, 2016 and 2015.

Share-based compensation expense is based on awards ultimately expected to vest. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. Pre-vesting forfeitures for RSUs were estimated to be approximately 5% for the years ended December 31, 2017, 2016 and 2015.

Plan Descriptions

On February 17, 2000, the Company adopted the 2000 SIP which provided key employees, directors and consultants with various equity-based incentives as described in the plan document. Prior to February 17, 2010, stockholders had approved amendments to the 2000 SIP which increased the number of shares of the Company's common stock reserved and available for grant to 30.5 million, plus an additional number of shares of the Company's common stock equal to 3% of the total number of outstanding shares of common stock effective automatically on January 1st of each year beginning January 1, 2005 and ending January 1, 2010. On February 17, 2010, the 2000 SIP expired and the Company ceased granting under the plan. Options granted pursuant to the 2000 SIP that remain outstanding continue to be exercisable or subject to vesting pursuant to the underlying option agreements.

On March 23, 2010, the Company adopted the Amended and Restated SIP, which was subsequently approved by the Company's stockholders at the annual stockholder meeting on May 18, 2010 and reapproved by the Company’s stockholders at the annual stockholder meeting on May 20, 2015. The Amended and Restated SIP provides key employees, directors and consultants with various equity-based incentives as described in the plan document. The Amended and Restated SIP is administered by the Board of Directors or a committee thereof, which is authorized to determine, among other things, the key employees, directors or consultants who will receive awards under the plan, the amount and type of award, exercise prices or performance criteria, if applicable, and vesting schedules. On May 15, 2012, stockholders approved certain amendments to the Amended and Restated SIP to increase the number of shares of common stock subject to all awards under the Amended and Restated SIP by 33.0 million. On May 17, 2017, stockholders approved certain amendments to the Amended and Restated SIP to increase the number of shares of common stock subject to all awards under the Amended and Restated SIP by 27.9 million to 87.0 million, exclusive of shares of common stock subject to awards that were previously granted pursuant to the 2000 SIP that have or will become available for grant pursuant to the Amended and Restated SIP.

Generally, the options granted under the 2000 SIP and Amended and Restated SIP vest over a period of three to four years and have a contractual term of 10 years and 7 years, respectively. Under both plans, certain outstanding options vest automatically upon a change of control, as defined in the respective plan document, provided the option holder is employed by the Company on the date of the change of control. Certain other outstanding options may also vest upon a change of control if the Board of Directors of the Company, at its discretion, provides for acceleration of the vesting of said options. Generally, upon the termination of an option holder's employment, all unvested options will immediately terminate and vested options will generally remain exercisable for a period of 90 days after the date of termination (one year in the case of death or disability).

Generally, RSUs granted under the 2000 SIP and the Amended and Restated SIP vest over three years or based on the achievement of certain performance criteria and are payable in shares of the Company's stock upon vesting.

As of December 31, 2017, there was an aggregate of 39.0 million shares of common stock available for grant under the Amended and Restated SIP.

Stock Options

A summary of stock option transactions for all stock option plans follows (in millions except per share and contractual term data):



	Year Ended December 31, 2017
	Number of Shares		Weighted-Average Exercise Price Per Share		Weighted Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value
Outstanding at December 31, 2016	3.3		$	7.75
Granted	—		—
Exercised	(2.2	)	8.13
Canceled	—		—
Outstanding at December 31, 2017	1.1		$	6.95	1.15	$	15.1

Exercisable at December 31, 2017	1.1		$	6.95	1.15	$	15.1

As of December 31, 2017, the Company had 1.1 million of outstanding stock options, representing stock options that previously vested and those which are expected to vest, with a weighted-average exercise price of $6.95. Information about the outstanding stock options with exercise prices less than or above $20.94 per share, the closing price of the Company's common stock at December 31, 2017, is as follows (number of shares in millions):



	Exercisable			Unexercisable			Total
Exercise Prices	Number of Shares	Weighted Average Exercise Price		Number of Shares	Weighted Average Exercise Price		Number of Shares	Weighted Average Exercise Price
Less than $20.94	1.1	$	6.95	—	$	—	1.1	$	6.95
Above $20.94	—	$	—	—	$	—	—	$	—
Total outstanding	1.1	$	6.95	—	$	—	1.1	$	6.95

Restricted Stock Units

A summary of the RSU transactions for the year ended December 31, 2017 follows (number of shares in millions):



	Number of Shares		Weighted-Average Grant Date Fair Value
Nonvested shares of RSUs at December 31, 2016	9.7		$	10.10
Granted	4.6		15.58
Achieved	1.2		9.01
Released	(5.4	)	9.81
Canceled	(0.3	)	12.16
Nonvested shares of RSUs at December 31, 2017	9.8		$	12.63

During 2017, the Company awarded 1.5 million RSUs to certain officers and employees of the Company that vest upon the achievement of certain performance criteria. The number of units expected to vest is evaluated each reporting period and compensation expense is recognized for those units for which achievement of the performance criteria is considered probable.

As of December 31, 2017, unrecognized compensation expense, net of estimated forfeitures related to non-vested RSUs granted under the Amended and Restated SIP with time-based and performance-based conditions, was $53.8 million and $22.3 million, respectively. For RSUs with time-based service conditions, expense is being recognized over the vesting period; for RSUs with performance criteria, expense is recognized over the period during which the performance criteria is expected to be achieved. Unrecognized compensation cost related to awards with certain performance criteria that are not expected to be achieved is not included here. Total compensation expense related to both performance-based and service-based RSUs was $62.2 million for the year ended December 31, 2017, which included $36.4 million for RSUs with time-based service conditions that were granted in 2017 and prior that are expected to vest.

Stock Grant Awards

During the year ended December 31, 2017, the Company granted 0.1 million shares of stock under stock grant awards to certain directors of the Company with immediate vesting at a weighted-average grant date fair value of $16.11 per share. Total compensation expense related to stock grant awards for the year ended December 31, 2017 was approximately $1.6 million.

Employee Stock Purchase Plan

On February 17, 2000, the Company adopted the ESPP. Subject to local legal requirements, each of the Company's eligible employees may elect to contribute up to 10% of eligible payroll applied towards the purchase of shares of the Company's common stock at a price equal to 85% of the fair market value of such shares as determined under the plan. Employees are limited to annual purchases of $25,000 under this plan. In addition, during each quarterly offering period, employees may not purchase stock exceeding the lesser of: (i) 500 shares; or (ii) the number of shares equal to $6,250 divided by the fair market value of the stock on the first day of the offering period. During the year ended December 31, 2017, employees purchased approximately 1.9 million shares under the ESPP. During the years ended December 31, 2016 and 2015, employees purchased approximately 1.8 million and 1.7 million shares, respectively, under the ESPP. Through May 2013, stockholders had approved amendments to the ESPP, which increased the number of shares of the Company's common stock issuable thereunder to 18.0 million shares. On May 20, 2015, stockholders approved an amendment to the Company’s ESPP which increased the number of shares reserved and available to be issued pursuant to the ESPP by 5.5 million to a total of 23.5 million. Again on May 17, 2017 stockholders approved an amendment to the Company’s ESPP which increased the number of shares reserved and available to be issued pursuant to the ESPP by 5.0 million to a total of 28.5 million. As of December 31, 2017, there were approximately 8.0 million shares available for issuance under the ESPP.