We have three equity award plans for officers and certain other employees: the 2003 Stock Option Plan (2003 Plan), the 2007 Incentive Award Plan (2007 Plan) and the 2017 Incentive Award Plan (2017 Plan). The 2003 Plan authorized the grant of incentive stock options and non-qualified stock options to employees. The 2007 Plan authorized the grant of stock options, restricted stock, restricted stock units, stock appreciation rights and other types of equity awards to employees. We no longer grant equity under the 2003 Plan or 2007 Plan. From 2007 through 2016, all share-based compensation grants were from the 2007 Plan.

The 2017 Plan authorizes the grant to employees of stock options, stock appreciation rights, restricted stock, restricted stock units, and other types of equity awards. A total of 1,999,714 shares have been reserved for issuance of equity awards under the 2017 Plan and may be of either Class A or Class B common stock. At December 31, 2018, there were 1,584,834 shares available to be granted.

Under the above plans, Class A and Class B options are granted at prices not less than fair market value of the underlying common stock on the date of grant. Generally, options granted have a maximum term of 10 years and vest in increments of 20% per year over a five-year period on the yearly anniversary date of the grant. Stock awards issued under the 2007 Plan and 2017 Plan generally vest in increments of 20% per year over a five-year period on the yearly anniversary date of the grant.

Our 2011 Employee Stock Purchase Plan (2011 ESPP) provides that eligible employees may contribute up to 10% of their compensation up to $25,000 annually toward the quarterly purchase of our Class A common stock. The employees’ purchase price is 85% of the lesser of the fair market value of the stock on the first business day or the last business day of each calendar quarter.

The 2011 ESPP includes two components: a Code Section 423 Component that we intend to qualify as an “employee stock purchase plan” under Section 423 of the U.S. Internal Revenue Code of 1986, as amended (the “Code”) and a Non-423 Component, which authorizes the grant of purchase rights that does not qualify as an “employee stock purchase plan” under Section 423 of the Code. We have authorized the sale of 1,300,000 shares of Class A common stock under the 2011 ESPP.

Included in our share-based compensation expense is the cost related to stock option grants, ESPP stock purchases and restricted stock unit awards. Share-based compensation expense is allocated to Cost of goods sold, Research and development expense, and Selling, general and administrative expense in the Consolidated Statements of Income.

For 2018, 2017 and 2016, we recognized share-based compensation expense of $27.8 million, $23.4 million and $19.7 million, respectively. The income tax benefit related to share-based compensation expense was $4.4 million, $5.8 million and $5.1 million for 2018, 2017 and 2016, respectively. We did not capitalize any share-based compensation expense in inventory.

The tax benefit from share-based compensation vested or exercised during 2018, 2017 and 2016 was $5.4 million, $6.3 million, and $1.5 million, respectively. The actual tax benefit realized for the tax deductions from share-based compensation vested or exercised, including excess tax benefits that were recognized in stockholders’ equity, totaled $6.0 million in 2016.

For options and awards, we amortize the fair value on a straight-line basis. All stock compensation awards are amortized over the requisite service periods of the awards, which are generally the vesting periods. With the adoption in 2017 of ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting," we made a policy election to recognize forfeitures as they occur. Prior to 2017, we recognized compensation expense net of estimated forfeitures.



	Shares		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in millions)
Outstanding, December 31, 2017	407,480		$	120.39
Granted	33,000		$	326.15
Exercised	(44,600	)	$	93.63
Forfeited/expired	(22,240	)	$	169.93
Outstanding, December 31, 2018	373,640		$	138.81	4.90	$	38.0

Unvested, December 31, 2018	99,600		$	223.91	8.32	$	3.9
Exercisable, December 31, 2018	274,040		$	107.88	3.65	$	34.1

Intrinsic value for stock options is defined as the difference between the current market value and the exercise price. The total intrinsic value on the date of exercise of stock options exercised during 2018, 2017 and 2016 was approximately $8 million, $10 million and $1 million, respectively. The total fair value of options vested during 2018, 2017 and 2016 was $6.0 million, $4.2 million and $2.1 million, respectively.

Cash received from stock options exercised during 2018, 2017 and 2016 was $0.5 million, $1.6 million and $1.2 million, respectively.

As of December 31, 2018, there was $6.3 million of total unrecognized compensation cost from stock options. This amount is expected to be recognized in the future over a weighted-average period of approximately 3 years.

The weighted-average fair value of stock options granted was estimated using a Black-Scholes option-pricing model with the following weighted-average assumptions:



	Year Ended December 31,
	2018			2017			2016
Expected volatility	22		%	20		%	21		%
Risk-free interest rate	2.85		%	1.87		%	1.35		%
Expected life (in years)	7.6			7.2			7.4
Expected dividend	—			—			—
Weighted-average fair value of options granted	$	105.94		$	58.65		$	42.40

Volatility is based on the historical volatilities of our common stock for a period equal to the stock option’s expected life. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant. The expected life represents the number of years that we estimate, based primarily on historical experience, that the options will be outstanding prior to exercise. We do not anticipate paying any cash dividends in the future and therefore use an expected dividend yield of zero.

Restricted stock units, which are rights to receive shares of company stock, were granted from 2009 through 2016 under the 2007 Plan and since 2017 under the 2017 Plan. The fair value of a restricted stock unit is the market value as determined by the closing price of the stock on the day of grant.



	Restricted Stock Units		Weighted- Average Grant-Date Fair Value		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in millions)
Outstanding, December 31, 2017	473,000		$	172.76
Granted	185,755		$	326.15
Vested	(128,294	)	$	158.49
Forfeited	(56,011	)	$	182.15
Outstanding, December 31, 2018	474,450		$	235.57	2.11	$	110.2

The total fair value of restricted stock units vested in 2018, 2017 and 2016 was $40.0 million, $27.7 million and $18.7 million, respectively. As of December 31, 2018, there was approximately $102.4 million of total unrecognized compensation cost related to restricted stock units. This amount is expected to be recognized over a remaining weighted-average period of approximately 4 years.

The fair value of the employees’ purchase rights under the 2011 ESPP was estimated using a Black-Scholes model with the following weighted-average assumptions:



	Year Ended December 31,
	2018			2017			2016
Expected volatility	27		%	19		%	20		%
Risk-free interest rate	1.82		%	0.83		%	0.26		%
Expected life (in years)	0.24			0.24			0.25
Expected dividend	—			—			—
Weighted-average fair value
of purchase rights	$	55.04		$	38.86		$	27.36

The major assumptions are primarily based on historical data. Volatility is based on the historical volatilities of our common stock for a period equal to the expected life of the purchase rights. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of the grant. We do not anticipate paying any cash dividends in the future and therefore use an expected dividend yield of zero.

We sold 63,464 shares for $13.6 million, 74,409 shares for $13.0 million and 93,605 shares for $11.5 million under the 2011 ESPP to employees in 2018, 2017 and 2016, respectively. At December 31, 2018, 658,248 shares remain authorized and available for issuance under the 2011 ESPP.