EQUITY INCENTIVE PLANS

Share-Based Compensation Expense

The following table presents the details of the Company's share-based compensation expense (amounts in thousands):



	Year Ended March 31,
	2014			2013			2012
Cost of sales	$	7,340	⁽¹⁾	$	8,234	⁽¹⁾	$	5,648	⁽¹⁾
Research and development	24,554			22,178			14,719
Selling, general and administrative	21,893			27,603			17,922
Pre-tax effect of share-based compensation	53,787			58,015			38,289
Income tax benefit	5,722			9,038			4,889
Net income effect of share-based compensation	$	48,065		$	48,977		$	33,400

⁽¹⁾ During the year ended March 31, 2014, $7.4 million of share-based compensation expense was capitalized to inventory, and $7.3 million of previously capitalized share-based compensation expenses in inventory was sold. During the year ended March 31, 2013, $5.9 million of share-based compensation expense was capitalized to inventory, and $8.2 million of previously capitalized share-based compensation expense in inventory was sold. During the year ended March 31, 2012, $6.6 million of share-based compensation expense was capitalized to inventory, and $5.6 million of previously capitalized share-based compensation expense in inventory was sold.

The amount of unearned share-based compensation currently estimated to be expensed in the remainder of fiscal 2015 through fiscal 2019 related to unvested share-based payment awards at March 31, 2014 is $83.5 million. The weighted average period over which the unearned share-based compensation is expected to be recognized is approximately 2.01 years.

SMSC Acquisition-related Equity Awards

In connection with the acquisition of SMSC in fiscal 2013, the Company recognized $7.8 million in share-based compensation expense due to the accelerated vesting of outstanding equity awards upon termination of certain SMSC executive officers. Also, in connection with the acquisition of SMSC, the Company assumed certain unvested stock options, stock appreciation rights (SARs) and RSUs granted by SMSC. The assumed awards were measured at the acquisition date based on the estimated fair value, which was a total of $28.2 million. The Hull White II lattice model was used to value the assumed awards. A portion of that fair value, $6.9 million, which represented the preacquisition vested service provided by employees to SMSC, was included in the total consideration transferred as part of the acquisition. As of the acquisition date, the remaining portion of the fair value of those awards was $21.3 million, representing post-acquisition stock-based compensation expense that would be recognized as these employees provide service over the remaining vesting periods.

Combined Incentive Plan Information

RSU share activity under the 2004 Plan is set forth below:



	Number of Shares
Nonvested shares at April 1, 2011	5,241,306
Granted	1,627,191
Forfeited/expired	(184,926	)
Vested	(1,191,351	)
Nonvested shares at March 31, 2012	5,492,220
Granted	1,976,583
Assumed upon acquisition	523,043
Forfeited/expired	(370,196	)
Vested	(1,611,819	)
Nonvested shares at March 31, 2013	6,009,831
Granted	1,616,632
Forfeited/expired	(282,964	)
Vested	(1,813,465	)
Nonvested shares at March 31, 2014	5,530,034

The total intrinsic value of RSUs which vested during the years ended March 31, 2014, 2013 and 2012 was $74.6 million, $54.4 million and $43.7 million, respectively. The aggregate intrinsic value of RSUs outstanding at March 31, 2014 was $264.1 million, calculated based on the closing price of the Company's common stock of $47.76 per share on March 31, 2014. At March 31, 2014, the weighted average remaining expense recognition period was 2.07 years.

The weighted average fair value per share of the RSUs awarded is calculated based on the fair market value of the Company's common stock on the respective grant dates discounted for the Company's expected dividend yield. The weighted average fair value per share of RSUs awarded in fiscal 2014, 2013 and 2012 was $34.24, $29.92 and $30.48, respectively.

Stock option and SAR activity under the Company's stock incentive plans in the three years ended March 31, 2014 is set forth below:



	Number of Shares		Weighted Average Exercise Price per Share
Outstanding at April 1, 2011	5,496,924		$	25.21
Granted	—		—
Exercised	(2,129,260	)	25.53
Canceled	(6,667	)	25.05
Outstanding at March 31, 2012	3,360,997		25.00
Granted	—		—
Assumed upon acquisition	827,707		19.32
Exercised	(1,638,548	)	22.19
Canceled	(280,353	)	19.90
Outstanding at March 31, 2013	2,269,803		25.58
Granted	—		—
Exercised	(1,675,663	)	25.91
Canceled	(20,529	)	22.78
Outstanding at March 31, 2014	573,611		$	24.75

The total intrinsic value of options and SARs exercised during the years ended March 31, 2014, 2013 and 2012 was $25.5 million, $19.0 million and $26.7 million, respectively. This intrinsic value represents the difference between the fair market value of the Company's common stock on the date of exercise and the exercise price of each equity award.

The aggregate intrinsic value of options and SARs outstanding at March 31, 2014 was $13.2 million. The aggregate intrinsic value of options and SARS exercisable at March 31, 2014 was $12.4 million. The aggregate intrinsic values were calculated based on the closing price of the Company's common stock of $47.76 per share on March 31, 2014.

As of March 31, 2014 and 2013, the number of option and SARs shares exercisable was 543,435 and 1,922,644, respectively, and the weighted average exercise price per share was $25.03 and $26.77, respectively.