STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2015

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

STOCK-BASED COMPENSATION

STOCK-BASED COMPENSATION

Stock-based compensation expense related to awards issued under the Company's incentive compensation plans for the three and nine months ended September 30, 2015 and 2014 was as follows (in millions):

	Three Months Ended    September 30,				Nine Months Ended    September 30,
	2015		2014		2015		2014
Cost of sales	$	1.7	$	1.6	$	5.1	$	4.6
Selling, general, and administrative expenses	8.7		8.7		25.4		26.1
Research and development expenses	2.2		1.9		6.5		5.4
Total stock-based compensation expense	$	12.6	$	12.2	$	37.0	$	36.1

At September 30, 2015, the total remaining compensation cost related to nonvested stock options, restricted stock units, market-based restricted stock units, performance-based restricted stock units, and employee stock purchase plan ("ESPP") subscription awards amounted to $102.2 million, which will be amortized on a straight-line basis over the weighted-average remaining requisite service period of 32 months.

During the nine months ended September 30, 2015, the Company granted 0.9 million stock options at a weighted-average exercise price of $132.31 and 0.2 million shares of restricted stock units at a weighted-average grant-date fair value of $133.08. The Company also granted 34,000 shares of market-based restricted stock units at a weighted-average grant-date fair value of $138.66 and 21,000 shares of performance-based restricted stock units at a weighted-average grant-date fair value of $140.58. The market-based restricted stock units vest based on a combination of certain service and market conditions. The actual number of shares issued will be determined based on the Company’s total shareholder return relative to a selected industry peer group over a three-year performance period, and may range from 0% to 175% of the targeted number of shares granted. The performance-based restricted stock units vest based on the achievement of a certain regulatory development milestone related to the Company’s transcatheter mitral valve technologies.  The grants vest upon achievement of the milestone, but are forfeited if the milestone is not achieved within 30 months of the CardiAQ acquisition closing date.  The Company recognizes stock-based compensation expense associated with these performance-based restricted stock units if and when the Company concludes that it is probable that the performance condition will be achieved, net of estimated forfeitures.  The Company reassesses the probability of vesting at each quarter end and adjusts the stock-based compensation expense based on its probability assessment.  As of September 30, 2015, achievement of the milestone was deemed not yet probable and no expense has been recognized related to these awards.

Fair Value Disclosures

The fair value of the market-based restricted stock units was determined using a Monte Carlo simulation model, which uses multiple input variables to determine the probability of satisfying the market condition requirements. The weighted-average assumptions used to determine the fair value of the market-based restricted stock units granted during the nine months ended September 30, 2015 and 2014 included a risk-free interest rate of 1.0% and 0.9%, respectively, and an expected volatility rate of 31.0% and 31.7%, respectively.

The Black-Scholes option pricing model was used with the following weighted-average assumptions for options granted during the following periods:

Option Awards	Three Months Ended    September 30,						Nine Months Ended    September 30,
	2015			2014			2015			2014
Average risk-free interest rate	1.6		%	1.6		%	1.4		%	1.5		%
Expected dividend yield	None			None			None			None
Expected volatility	29.7		%	30.6		%	29.8		%	30.7		%
Expected term (years)	4.7			4.7			4.6			4.6
Fair value, per share	$	40.57		$	25.90		$	36.12		$	23.42

The Black-Scholes option pricing model was used with the following weighted-average assumptions for ESPP subscriptions granted during the following periods:

ESPP	Three Months Ended    September 30,						Nine Months Ended    September 30,
	2015			2014			2015			2014
Average risk-free interest rate	0.2		%	0.1		%	0.2		%	0.1		%
Expected dividend yield	None			None			None			None
Expected volatility	26.7		%	28.9		%	27.6		%	29.9		%
Expected term (years)	0.8			0.7			0.6			0.6
Fair value, per share	$	34.35		$	20.90		$	31.03		$	17.19