SHARE-BASED COMPENSATION PLANS

The Company has various share-based compensation programs (the “Plans”) under which awards, including non-qualified stock options, RSUs and other share-based awards, may be granted or shares of Class A Common Stock may be purchased. As of March 31, 2014, approximately 16.5 million shares of the Company's Class A Common Stock were reserved and available to be granted pursuant to these Plans.

Prior to June 12, 2013, the Company’s Plans were accounted for under liability plan accounting, as they allowed for cash settlement or contained put features that allowed the holders to sell shares to the Company for cash. On June 12, 2013, the Plans were amended, and the terms were restated in order to eliminate the put features and transition issued and outstanding shares as of June 12, 2013 to equity plan accounting.

Total share-based compensation expense for the three months ended March 31, 2014 and 2013 of $12.2 and $61.6, and total share-based compensation expense for the nine months ended March 31, 2014 and 2013 of $35.7 and $106.7, respectively, is included in Selling, general and administrative expenses in the Condensed Consolidated Statements of Operations.

As of March 31, 2014, the total unrecognized share-based compensation expense related to unvested stock options and restricted and other share awards is $44.1 and $44.7, respectively. The unrecognized share-based compensation expense related to unvested stock options and restricted and other share awards is expected to be recognized over a weighted-average period of 2.14 and 3.78 years, respectively.

Nonqualified Stock Options

Prior to June 12, 2013, the Company’s nonqualified and tandem stock option plans allowed all option holders to exercise their vested options for cash or for shares of Common Stock. These options were granted to eligible employees as specified in the terms of the plans. For these liability awards, the fair value of the award which determined the measurement of the liability on the balance sheet was re-measured at each reporting period. Fluctuations in the fair value of the liability awards were recorded as increases or decreases in share-based compensation expense until the award was settled. Subsequent to June 12, 2013, the share-based compensation expense recognized on nonqualified stock options is based upon the fair value on June 12, 2013.

The fair value of the Company’s outstanding stock option liability on June 12, 2013 and March 31, 2013 were estimated using the Black-Scholes valuation model with the following assumptions:



	June 12,		March 31,
	2013		2013
Expected life of option	4.03 years		3.18 years
Risk-free interest rate	0.84	%	0.49	%
Expected volatility	32.53	%	32.68	%
Expected dividend yield	0.86	%	0.88	%

Expected life of option—The expected life of the option represents the period of time (years) that options granted are expected to be outstanding, which the Company calculates using a formula based on the vesting term and the contractual life of the respective option.

Risk-free interest rate—The Company bases the risk-free interest rate on the implied yield available on a U.S. Treasury note with a term equal to the expected term of the underlying options, which ranged from 0.11% to 1.30% as of June 12, 2013 and from 0.08% to 1.03% as of March 31, 2013.

Expected volatility—The Company calculates expected volatility based on median volatility for peer companies using 7.5 years of daily stock price history.

Expected dividend yield—The Company used an expected dividend yield of 0.86% and 0.88% as of June 12, 2013 and March 31, 2013, respectively, which is based upon the Company’s expectation to pay dividends over the contractual term of the options.

Prior to June 12, 2013, all options related to share-based compensation plans were granted at the estimated fair value of Common Stock, which was determined based upon, in each instance, an evaluation by management with assistance from a major investment banking firm. The valuation of shares was based on (i) an aggregate value Earnings Before Interest, Taxes, Depreciation and Amortization (“EBITDA”) benchmark of future earnings and (ii) a price earnings growth rate benchmark, with a comparison to peer group companies and market multiples. Additionally, the Company applied a theoretical liquidity discount of 10% to the valuation associated with the illiquidity of the Common Stock due to the absence of a public market for the stock and certain restrictions from the transfer of stock in a private entity.

Nonqualified stock options generally become exercisable 5 years from the date of the grant and have a 5-year exercise period from the date the grant becomes fully vested for a total contractual life of 10 years.

The Company’s outstanding nonqualified stock options as of March 31, 2014 and activity during the nine months then ended are presented below:



	Shares (in millions)		Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term
Outstanding at July 1, 2013	28.2		$	9.05
Exercised	(1.8	)	6.75
Forfeited or expired	(1.6	)	9.46
Outstanding at March 31, 2014	24.8		$	9.19
Vested and expected to vest at March 31, 2014	22.6		$	9.13	$	132.3	5.75
Exercisable at March 31, 2014	8.3		$	8.21	$	56.0	3.91

There were no options granted in the current year. The grant prices of the outstanding options as of March 31, 2014 ranged from $4.65 to $11.60. The grant prices for exercisable options ranged from $4.65 to $10.50.

A summary of the total intrinsic value of stock options exercised and payment to settle nonqualified stock options for the nine months ended March 31, 2014 and 2013 is presented below:



	March 31,
	2014		2013
Intrinsic value of options exercised	$	14.9	$	44.8
Payment to settle nonqualified stock options	—		41.7

The Company’s non-vested nonqualified stock options as of March 31, 2014 and activity during the nine months then ended are presented below:



	Shares (in millions)		Weighted Average Grant Date Fair Value
Non-vested at July 1, 2013	22.7		$	3.57
Vested	(4.6	)	2.68
Forfeited	(1.6	)	3.69
Non-vested at March 31, 2014	16.5		$	3.81

The share-based compensation expense recognized on the nonqualified stock options is $7.7 and $51.5 during the three months ended March 31, 2014 and 2013, and $22.2 and $80.1 during the nine months ended March 31, 2014 and 2013, respectively.

Prior to June 12, 2013, the share-based compensation plans governing the exercised options contained a clause permitting the participants to sell their unrestricted shares of Common Stock back to the Company without restrictions. During the period of time that the Company retained the risks and rewards of share ownership, the Company recorded the value of Common Stock in excess of par value to Accrued expenses and other current liabilities and the change in fair value of Common Stock issued to option holders of $0.1 and $0.3 to share-based compensation expense during the three and nine months ended March 31, 2013.

Restricted Share Units

During the nine months ended March 31, 2014, 2.0 million RSUs were granted under the Omnibus LTIP and 0.1 million RSUs were granted under the 2007 Stock Plan for Directors. During the nine months ended March 31, 2013, the Company granted 2.2 million RSUs under the LTIP and 0.1 million under the 2007 Stock Plan for Directors.

The Company’s outstanding RSUs as of March 31, 2014 and activity during the nine months then ended are presented below:



	Shares (in millions)		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term
Outstanding at July 1, 2013	2.7
Granted	2.1
Settled	(0.1	)
Cancelled	(0.2	)
Outstanding at March 31, 2014	4.5
Vested and expected to vest at March 31, 2014	3.7		$	54.8	3.75

The share-based compensation expense recorded in connection with the RSUs was $3.1 and $2.8 during the three months ended March 31, 2014 and 2013, and $8.0 and $6.8 during the nine months ended March 31, 2014 and 2013, respectively.

Prior to June 12, 2013, the share-based compensation plans governing the released awards contained a clause permitting the participants to sell their unrestricted shares of Common Stock back to the Company without restrictions. During the period of time that the Company retained the risks and rewards of ownership, the Company recorded the value of Common Stock in excess of par value to Accrued expenses and other current liabilities and the change in fair value of Common Stock issued to holders of RSUs of $0.1 and $0.5 to share-based compensation expense during the three and nine months ended March 31, 2013.

The Company’s outstanding and non-vested RSUs as of March 31, 2014 and activity during the nine months then ended are presented below:



	Shares (in millions)		Weighted Average Grant Date Fair Value
Outstanding and nonvested at July 1, 2013	2.3		$	15.49
Granted	2.1		16.05
Vested	(0.1	)	15.50
Cancelled	(0.2	)	15.75
Outstanding and nonvested at March 31, 2014	4.1		$	15.76

The total intrinsic value of RSUs vested and settled during the nine months ended March 31, 2014 and 2013 is $1.4 and $4.0, respectively.

Executive Ownership Programs

The Company encourages stock ownership through various programs. These programs govern shares purchased by employees (“Purchased Shares”). During the three months ended December 31, 2012, the Company adopted the Omnibus LTIP, which governs Platinum, and amended and restated the previous ownership program. As a result, all outstanding shares purchased by employees were considered vested as of the adoption date or the amendment date, as applicable, and no longer incur expense.

During the three and nine months ended March 31, 2014 and 2013, employees purchased 0.1 and 0.3 million shares, respectively, and received matching RSUs in accordance with the terms of Platinum under the Omnibus LTIP. There were 1.3 and 1.2 million Purchase Shares outstanding as of March 31, 2014 and 2013, respectively.

There was no share-based compensation expense recorded in connection with Purchased Shares during fiscal 2014. Share-based compensation expense recorded for the three and nine months ended March 31, 2013 was nil and $10.3, respectively. The total intrinsic value of restricted shares vested and settled under the EOP during the nine months ended March 31, 2013 is $13.7.

Prior to June 12, 2013, the share-based compensation plans governing the restricted and released shares contained a clause permitting the participants to sell their Purchased Shares of Common Stock back to the Company without restrictions once the restriction period on the Purchased Shares expired. During the period of time that the Company retained the risks and rewards of ownership, the Company recorded the value of Common Stock in excess of par value to Accrued expenses and other current liabilities and the change in fair value of Common Stock issued to holders of Purchased Shares of $3.2 and $5.8 to share-based compensation expense for the three and nine months ended March 31, 2013, respectively.

Special Incentive Award

In February 2012 and September 2010, the Company granted a special incentive award to a select group of key executives that, upon vesting, provides 3.9 million shares of Common Stock, of which 1.5 million shares of Common Stock were forfeited by one holder during fiscal 2013. Prior to June 13, 2013, the date the Class A Common Stock began trading on the NYSE, vesting of these awards was dependent upon the occurrence of (i) an initial public offering by September 14, 2015 or (ii) if an initial public offering had not occurred by September 14, 2015, upon achievement of a target fair value of the Company’s share price and the completion of the service period upon the vesting date of September 14, 2015.

During December 2012, the target fair value of the Company’s share price was achieved and as a result, share-based compensation expense was recorded based on the fair value of the Company’s Common Shares on each reporting period date from December 2012 through June 13, 2013.

On June 13, 2013, the date Class A Common Stock began trading on the New York Stock Exchange, the special incentive awards were re-measured at the IPO price and 50% of the outstanding awards vested immediately. The remaining awards will vest on the one-year anniversary date of the IPO.

Share-based compensation expense recorded in connection with special incentive awards is $1.4 and $3.9 for the three months ended March 31, 2014 and 2013, and $5.5 and $2.9 for the nine months ended March 31, 2014 and 2013, respectively. The Company has 1.0 million and 1.2 million shares of outstanding and non-vested special incentive awards as of March 31, 2014 and June 30, 2013 with a weighted average grant date fair value of $6.83 and $6.82, respectively. During the three and nine months ended March 31, 2014, 0.2 million special incentive award units vested due to a stipulation within one participant’s termination agreement. The vested units had a weighted average grant date fair value of $6.74. During the three and nine months ended March 31, 2013, no vesting activity occurred and one holder forfeited an award of 1.5 million units.