SHARE-BASED COMPENSATION PLANS

The Company has various share-based compensation programs (the “Plans”) under which awards, including non-qualified stock options, Series A Preferred Stock, RSUs and other share-based awards, may be granted or shares of Class A Common Stock may be purchased. As of June 30, 2015, approximately 12.5 million shares of the Company's Class A Common Stock were available to be granted pursuant to these Plans.

The Company accounts for its share-based compensation plans for common stock as equity plans. The share-based compensation for equity plans is estimated and fixed at the grant date, based on the estimated fair value of the award. Series A Preferred Stock is accounted for using the liability plan accounting to the extent the award is expected to be settled in cash. Accordingly, share-based compensation expense for the liability plan awards are measured at the end of each reporting period based on the fair value of the award on each reporting date and recognized as an expense to the extent earned.

Total share-based compensation expense for fiscal 2015, 2014 and 2013 of $35.9, $46.8 and $144.4, respectively, is included in Selling, general and administrative expenses in the Consolidated Statements of Operations. As of June 30, 2015, the total unrecognized share-based compensation expense related to unvested stock options, Series A Preferred Stock, restricted, and other share awards is $19.6, $16.0 and $32.8, respectively. The unrecognized share-based compensation expense related to unvested stock options, Series A Preferred Stock, and restricted and other share awards is expected to be recognized over a weighted-average period of 2.91, 4.87, and 3.22 years, respectively.

Nonqualified Stock Options

In April 2015, the Company granted 1.7 million nonqualified stock option awards to a select group of key executives. These options are accounted for using equity plan accounting whereby the share-based compensation expense is estimated and fixed at the grant date based on the estimated value of the options using the Black-Scholes valuation model.

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 awards, the fair value of the award which determined the measurement of the equity on the balance sheet was measured at the grant date. 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.

During fiscal 2015, the share-based compensation expense recognized on nonqualified stock options is based upon the fair value on April 15, 2015, and June 12, 2013 were estimated using the Black-Scholes valuation model with the following assumptions:



	2015		2014	2013
Expected life	7.50 years		N/A	4.03 years
Risk-free interest rate	1.79	%	N/A	0.84	%
Expected volatility	31.73	%	N/A	32.53	%
Expected dividend yield	0.80	%	N/A	0.86	%

Expected life—The expected life 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 was 1.79% as of April 15, 2015, and ranged from 0.11% to 1.30% as of June 12, 2013.

Expected volatility—The Company calculates expected volatility based on median volatility for peer companies using expected life daily stock price history equal to the expected life.

Expected dividend yield—The Company used an expected dividend yield of 0.80% as of April 15, 2015, and 0.86% as of June 12, 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 June 30, 2015 and activity during the fiscal year then ended are presented below:



	Shares (in millions)		Weighted Average Exercise Price		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term
Outstanding at July 1, 2014	23.2		$	9.32
Granted	1.7		24.13
Exercised	(6.8	)	8.59
Forfeited	(4.1	)	9.99
Outstanding at June 30, 2015	14.0		$	11.32
Vested and expected to vest at June 30, 2015	12.5		$	10.79	$	264.3	5.15
Exercisable at June 30, 2015	3.7		$	8.41	$	87.7	2.97

The grant prices of the outstanding options as of June 30, 2015 ranged from $5.10 to $24.13. The grant prices for exercisable options ranged from $5.10 to $10.50.

A summary of the aggregated weighted-average grant date fair value of stock options granted, total intrinsic value of stock options exercised and payment to settle nonqualified stock options for fiscal 2015, 2014 and 2013 is presented below:



	2015		2014		2013
Weighted-average grant date fair value of stock options	$	8.75	$	—	$	—
Intrinsic value of options exercised	77.2		28.3		160.6
Payment to settle nonqualified stock options of former CEOs	12.0		—		101.4
Payment to settle nonqualified stock options					53.0

The Company’s non-vested nonqualified stock options as of June 30, 2015 and activity during the fiscal year then ended are presented below:



	Shares (in millions)		Weighted Average Grant Date Fair Value
Non-vested at July 1, 2014	16.2		$	3.81
Granted	1.7		24.13
Vested	(3.5	)	3.56
Forfeited	(4.1	)	3.89
Non-vested at June 30, 2015	10.3		$	4.70

The share-based compensation expense recognized on the nonqualified stock options is $9.5, $28.6 and $98.8 during fiscal 2015, 2014 and 2013, respectively.

Prior to June 12, 2013, the Pre-IPO 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 $0.4 to share-based compensation expense in fiscal 2013. There was no fair value adjustment recorded for fiscal 2015 or 2014.

Series A Preferred Stock

The Company sold 7.4 million shares of Series A Preferred Stock for $0.01 par value to four executives, of which 5.5 million were subsequently forfeited and repurchased by the Company at the $0.01 par value. The exercise price of the outstanding Series A Preferred Stock as of June 30, 2015 was $27.97. The holders of the 1.9 million Series A Preferred Stock are entitled to initiate an exchange into, at the election of the Company, either: (i) cash equal to the market value of a share of Class A Common Stock on the date of conversion less $27.97 or (ii) the number of whole shares whose value is equal to the market value of a share of Class A Common Stock on the date of conversion less $27.97. The Series A Preferred Stock are accounted for as a liability as of June 30, 2015 and the Company recognized an expense of $0.4 in fiscal 2015, accordingly.

The fair value of the Company’s outstanding Series A Preferred Stock liability on June 30, 2015 were estimated using the Black-Scholes valuation model with the following assumptions:



	2015
Expected life	5.79 years
Risk-free interest rate	1.96	%
Expected volatility	26.14	%
Expected dividend yield	0.63	%

Expected life -The expected life represents the period of time (years) that Series A Preferred Stock 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 Series A Preferred Stock.

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 Series A Preferred Stock, which is 1.96% as of June 30, 2015.

Expected volatility-The Company calculates expected volatility based on median volatility for peer companies using 5.79 years of daily stock price history.

Expected dividend yield-The Company used an expected dividend yield of 0.63% as of June 30, 2015, which is based upon the Company’s expectation to pay dividends over the contractual term of the shares of Series A Preferred Stock.

Shares of Series A Preferred Stock generally become exercisable 5 years from the date of the grant and have a 2-year exercise period from the date the grant becomes fully vested for a total contractual life of 7 years.

The Company’s non-vested shares of Series A Preferred Stock as of June 30, 2015 and activity during the fiscal year then ended are presented below:



	Shares (in millions)		Weighted Average Grant Date Fair Value
Non-vested at July 1, 2014	—		$	—
Granted	7.4		5.24
Vested	—		—
Forfeited	(5.5	)	5.24
Non-vested at June 30, 2015	1.9		$	5.24

Restricted Share Units

During fiscal 2015, 1.7 million RSUs were granted under the Omnibus LTIP and 0.1 million RSUs were granted under the 2007 Stock Plan for Directors. During fiscal 2014, 2.1 million RSUs were granted under the Omnibus LTIP and 0.1 million RSUs were granted under the 2007 Stock Plan for Directors.

The Company’s outstanding RSUs as of June 30, 2015 and activity during the fiscal year then ended are presented below:



	Shares (in millions)		Aggregate Intrinsic Value		Weighted Average Remaining Contractual Term
Outstanding at July 1, 2014	4.4
Granted	1.8
Settled	(0.3	)
Cancelled	(1.6	)
Outstanding at June 30, 2015	4.3
Vested and expected to vest at June 30, 2015	3.4		$	107.4	3.14

The share-based compensation expense recorded in connection with the RSUs was $9.7, $10.8 and $9.1 during fiscal 2015, 2014 and 2013, respectively.

Prior to June 12, 2013, the Pre-IPO 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 $0.7 to share-based compensation expense for fiscal 2013. There was no fair value adjustment recorded for fiscal 2015 or 2014.

The Company’s outstanding and non-vested RSUs as of June 30, 2015 and activity during the fiscal year then ended are presented below:



	Shares (in millions)		Weighted Average Grant Date Fair Value
Outstanding and nonvested at July 1, 2014	4.0		$	15.77
Granted	1.8		16.95
Vested	(0.3	)	14.32
Cancelled	(1.6	)	15.82
Outstanding and nonvested at June 30, 2015	3.9		$	16.23

The total intrinsic value of RSUs vested and settled during fiscal 2015, 2014, and 2013 is $6.2, $2.8 and $4.2, respectively.

Executive Ownership Programs

The Company encourages stock ownership through various programs. These programs govern shares purchased by employees (“Purchased Shares”). During fiscal 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.

Employees purchased 0.1 million and 0.1 million shares in fiscal 2015 and 2014, respectively, and received matching RSUs in accordance with the terms of Platinum under the Omnibus LTIP. There were 1.4 million and 1.3 million Purchased Shares outstanding as of June 30, 2015 and 2014, respectively.

There was $(0.5) share-based compensation (income) expense recorded in connection with Purchased Shares during fiscal 2015. During the first quarter of fiscal 2015, Mr. Scannavini forfeited less than 0.1 million restricted shares. Share-based compensation expense recorded for fiscal 2014 and fiscal 2013 was nil and $10.7, respectively.

Prior to June 12, 2013, the Pre-IPO 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 $5.8 to share-based compensation expense for fiscal 2013. There was no fair value adjustment recorded for fiscal 2015 or 2014.

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 vested on June 13, 2014, the one-year anniversary date of the IPO. The 1.2 million shares that vested during fiscal 2013 and 2014 had a weighted average grant date fair value of $6.82. There were no special incentive awards outstanding as of June 30, 2015 or 2014.

Share-based compensation expense recorded in connection with special incentive awards is $0.0, $7.4 and $18.9 for fiscal 2015, 2014 and 2013, respectively. The total intrinsic value of special incentive awards vested and settled during fiscal 2015, 2014, and 2013 is $0.0, $20.4, and $20.9, respectively. As of June 30, 2015, there were no special incentive awards outstanding as all special incentive awards vested as of June 13, 2014. There was no vesting or forfeiture activity during fiscal 2015.

Special Share Purchase Transaction

As noted at Special Share Purchase Transaction described in Note 22, “Equity”, JABC sold 1.7 million shares of its Class B shares to certain Coty executives and individuals intended to become Coty executives. One of these individuals purchased the 1.4 million shares on March 13, 2015 at a purchase price representing a discount of $1.9 below the market price on the purchase date, which was determined to be share-based compensation expense to the Company. Subsequently, the individual that had purchased the 1.4 million shares on March 13, 2015 indicated a desire to sell the Class A Common Stock back to JABC. JABC entered into an agreement and repurchased these shares on July 8, 2015 at the market price on that date. At June 30, 2015, the Company determined that the individual was not expected to hold the shares for a period of at least six months and therefore, the shares should be deemed compensatory and accounted for under liability plan accounting. The Company recorded a total of $15.8 share-based compensation expense to Selling, general and administrative expense which includes: (a) $1.9 for the discount recorded to APIC and (b) $13.9 for the difference between the market price of the shares as of June 30, 2015 and the original sale date of March 13, 2015 recorded to Accrued expenses and other current liabilities.

Phantom Units

On December 1, 2014, the Board granted Lambertus J.H. Becht (“Mr. Becht”), the Company’s Chairman of the Board and interim Chief Executive Officer, an award of 49,432 phantom units, in consideration of Mr. Becht’s increased responsibilities as interim Chief Executive Officer of the Company. At the time of grant, the phantom units had a value of $1.0 based on the closing price of the Company’s Class A Common Stock on December 1, 2014, and each phantom unit has an economic value equivalent to one share of the Company’s Class A Common Stock. Mr. Becht elected to receive payment of the phantom units in the form of shares of Class A Common Stock. As a result the phantom units will be settled in shares of Class A Common Stock on the fifth anniversary of the grant date or, in the event of a change of control or Mr. Becht’s death or disability, immediately.

The Company recognized $1.0 of share-based compensation expense during fiscal year 2015 as there are no service or performance conditions with respect to the phantom units.