McKesson 2016 Annual Report Download - page 91

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
The following table provides data related to stock option activity:
Years Ended March 31,
(In millions, except per share data) 2016 2015 2014
Weighted-average grant date fair value per stock option $44.04 $35.49 $21.45
Aggregate intrinsic value on exercise $ 107 $ 153 $ 144
Cash received upon exercise $ 47 $ 76 $ 111
Tax benefits realized related to exercise $ 42 $ 60 $ 55
Total fair value of stock options vested $ 18 $ 20 $ 24
Total compensation cost, net of estimated forfeitures, related to unvested stock
options not yet recognized, pre-tax $ 20 $ 22 $ 29
Weighted-average period in years over which stock option compensation cost is
expected to be recognized 2 2 1
Restricted Stock Unit Awards
RSUs, which entitle the holder to receive at the end of a vesting term a specified number of shares of the
Company’s common stock, are accounted for at fair value at the date of grant. Total compensation expense for
RSUs under our stock plans is determined by the product of the number of shares that are expected to vest and
the grant date market price of the Company’s common stock. The Compensation Committee determines the
vesting terms at the time of grant. These awards generally vest in three to four years. We recognize expense for
RSUs on a straight-line basis over the requisite service period.
Non-employee directors receive an annual grant of RSUs, which vest immediately and are expensed upon
grant. The director may elect to receive the underlying shares immediately or defer receipt of the shares if they
meet director stock ownership guidelines. The shares will be automatically deferred for those directors who do
not meet the director stock ownership guidelines. At March 31, 2016, approximately 146 thousand RSUs for our
directors are vested.
PeRSUs are RSUs for which the number of RSUs awarded is conditional upon the attainment of one or
more performance objectives over a specified period. Each year, the Compensation Committee approves the
target number of PeRSUs representing the base number of awards that could be granted if performance goals are
attained. PeRSUs are accounted for as variable awards until the performance goals are reached at which time the
grant date is established. Total compensation expense for PeRSUs is determined by the product of the number of
shares eligible to be awarded and expected to vest, and the market price of the Company’s common stock,
commencing at the inception of the requisite service period. During the performance period, the compensation
expense for PeRSUs is re-computed using the market price and the performance modifier at the end of a
reporting period. At the end of the performance period, if the goals are attained, the awards are granted and
classified as RSUs and accounted for on that basis. We recognize compensation expense for these awards on a
straight-line basis over the requisite aggregate service period of generally four years.
TSRUs replaced PeRSUs for our executive officers beginning in 2015. The number of vested TSRUs is
assessed at the end of a three-year performance period and is conditioned upon attainment of a total shareholder
return metric relative to a peer group of companies. We use the Monte Carlo simulation model to measure the
fair value of TSRUs. TSRUs have a requisite service period of approximately three years. Expense is attributed
to the requisite service period on a straight-line basis based on the fair value of the TSRUs. For TSRUs that are
85