Share-Based Compensation

12 Months Ended

Mar. 31, 2019

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

Share-Based Compensation Expense

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



	Year Ended March 31,
	2019		2018		2017
Cost of sales ⁽¹⁾	$	14.9	$	13.8	$	18.7
Research and development	72.0		42.5		46.8
Selling, general and administrative	62.3		36.9		62.6
Special (income) charges and other, net	17.2		—		—
Pre-tax effect of share-based compensation	166.4		93.2		128.1
Income tax benefit	35.5		28.3		44.2
Net income effect of share-based compensation	$	130.9	$	64.9	$	83.9

⁽¹⁾ During the year ended March 31, 2019, $17.2 million of share-based compensation expense was capitalized to inventory, and $14.9 million of previously capitalized share-based compensation expense in inventory was sold. During the year ended March 31, 2018, $11.9 million of share-based compensation expense was capitalized to inventory and $13.8 million of previously capitalized share-based compensation expense in inventory that was sold. During the year ended March 31, 2017, $11.3 million of share-based compensation expense was capitalized to inventory. The amount of share-based compensation included in cost of sales during fiscal 2017 included $14.5 million of previously capitalized share-based compensation expense in inventory was sold and $4.2 million of share-based compensation expense related to the Company's acquisition of Atmel that was not previously capitalized into inventory.

The amount of unearned share-based compensation currently estimated to be expensed in the remainder of fiscal 2020 through fiscal 2024 related to unvested share-based payment awards at March 31, 2019 is $253.4 million. The weighted average period over which the unearned share-based compensation is expected to be recognized is approximately 1.88 years.

Microsemi Acquisition-related Equity Awards

In connection with its acquisition of Microsemi on May 29, 2018, the Company assumed certain restricted stock units (RSUs), stock appreciation rights (SARs), and stock options granted by Microsemi. The assumed awards were measured at the acquisition date based on the estimated fair value, which was a total of $175.4 million. A portion of that fair value, $53.9 million, which represented the pre-acquisition vested service provided by employees to Microsemi, 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 $121.5 million, representing post-acquisition share-based compensation expense that will be recognized as these employees provide service over the remaining vesting periods. During the year ended March 31, 2019, the Company recognized $65.2 million of share-based compensation expense in connection with the acquisition of Microsemi, of which $3.5 million was capitalized into inventory and $17.2 million was due to the accelerated vesting of outstanding equity awards upon termination of certain Microsemi employees.

Atmel Acquisition-related Equity Awards

In connection with its acquisition of Atmel on April 4, 2016, the Company assumed certain RSUs granted by Atmel. The assumed awards were measured at the acquisition date based on the estimated fair value, which was a total of $95.9 million. A portion of that fair value, $7.5 million, which represented the pre-acquisition vested service provided by employees to Atmel, 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 $88.4 million, representing post-acquisition share-based compensation expense that will 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		Weighted Average Grant Date Fair Value
Nonvested shares at March 31, 2016	6,307,742		$	36.76
Granted	1,635,655		51.46
Assumed upon acquisition	2,059,524		46.57
Forfeited	(722,212	)	43.58
Vested	(2,861,253	)	38.60
Nonvested shares at March 31, 2017	6,419,456		42.06
Granted	1,267,536		77.26
Forfeited	(279,051	)	49.65
Vested	(1,735,501	)	38.00
Nonvested shares at March 31, 2018	5,672,440		50.79
Granted	1,951,408		77.83
Assumed upon acquisition	1,805,680		91.70
Forfeited	(408,242	)	73.36
Vested	(2,729,324	)	61.51
Nonvested shares at March 31, 2019	6,291,962		$	64.81

The total intrinsic value of RSUs which vested during the years ended March 31, 2019, 2018 and 2017 was $229.3 million, $146.0 million and $166.1 million, respectively. The aggregate intrinsic value of RSUs outstanding at March 31, 2019 was $522.0 million, calculated based on the closing price of the Company's common stock of $82.96 per share on March 29, 2019. At March 31, 2019, the weighted average remaining expense recognition period was 1.91 years.

Stock option and stock appreciation right (SAR) activity under the Company's stock incentive plans in the three years ended March 31, 2019 is set forth below:



	Number of Shares		Weighted Average Exercise Price per Share
Outstanding at March 31, 2016	913,508		$	33.00
Exercised	(437,906	)	34.34
Forfeited or expired	(42,485	)	34.26
Outstanding at March 31, 2017	433,117		31.51
Exercised	(131,666	)	31.75
Forfeited or expired	(17,111	)	34.73
Outstanding at March 31, 2018	284,340		31.21
Assumed upon acquisition	141,751		25.86
Exercised	(140,118	)	27.67
Forfeited or expired	(4,091	)	39.62
Outstanding at March 31, 2019	281,882		$	30.16

The total intrinsic value of options and SARs exercised during the years ended March 31, 2019, 2018 and 2017 was $8.3 million, $7.4 million and $9.6 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, 2019 was $14.9 million. The aggregate intrinsic value of options and SARS exercisable at March 31, 2019 was $14.8 million. The aggregate intrinsic values were calculated based on the closing price of the Company's common stock of $82.96 per share on March 29, 2019.

As of March 31, 2019 and March 31, 2018, the number of option and SAR shares exercisable was 278,591 and 224,022, respectively, and the weighted average exercise price per share was $30.03 and $29.96, respectively.

There were no stock options granted in the years ended March 31, 2019, 2018 and 2017.