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, 2016, approximately 13.1 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 2016, 2015 and 2014 of $35.4, $35.9 and $46.8, respectively, is included in Selling, general and administrative expenses in the Consolidated Statements of Operations. The related tax benefits for share-based compensation are $6.7, $10.9, and $27.1 for fiscal 2016, 2015 and 2014, respectively. As of June 30, 2016, the total unrecognized share-based compensation expense related to unvested stock options, Series A Preferred Stock, restricted and other share awards is $3.4, $7.7 and $35.2, 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 2.40, 3.79, and 2.68 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. There were no stock options accounted for under equity plans granted during 2016 and 2014.

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



		2015
Expected life		7.50 years
Risk-free interest rate		1.79%
Expected volatility		31.73%
Expected dividend yield		0.80%

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.

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, which is based upon the Company’s expectation to pay dividends over the contractual term of the options.

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, 2016 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, 2015	14.0		$	11.32
Granted	—		—
Exercised	(4.5	)	8.86
Forfeited	(2.2	)	16.69
Outstanding at June 30, 2016	7.3		$	11.25
Vested and expected to vest at June 30, 2016	6.4		$	10.43	$	99.2	4.34
Exercisable at June 30, 2016	2.9		$	8.82	$	48.8	3.06

The grant prices of the outstanding options as of June 30, 2016 ranged from $6.40 to $24.13. The grant prices for exercisable options ranged from $6.40 to $11.60.

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 2016, 2015 and 2014 is presented below:



	2016		2015		2014
Weighted-average grant date fair value of stock options	$	—	$	8.75	$	—
Intrinsic value of options exercised	87.6		77.2		28.3
Payment to settle nonqualified stock options of former CEOs	—		12.0		—

The Company’s non-vested nonqualified stock options as of June 30, 2016 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, 2015	10.3		$	4.70
Granted	—		—
Vested	(3.7	)	3.56
Forfeited	(2.2	)	6.18
Non-vested at June 30, 2016	4.4		$	4.81

The share-based compensation expense recognized on the nonqualified stock options is $14.7, $9.5 and $28.6 during fiscal 2016, 2015 and 2014, respectively.

Series A Preferred Stock

The Series A Preferred Stock are accounted for as a liability as of June 30, 2016 and 2015 and the Company recognized an expense of $2.0 and $0.4 in fiscal 2016 and 2015, respectively. See Note 22, Equity for additional information.

The fair value of the Company’s outstanding Series A Preferred Stock liability on June 30, 2016 and June 30, 2015 were estimated using the Black-Scholes valuation model with the following assumptions:



	2016		2015
Expected life	4.79 years		5.79 years
Risk-free interest rate	1.01	%	1.96	%
Expected volatility	36.74	%	26.14	%
Expected dividend yield	0.96	%	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 1.01% and 1.96% as of June 30, 2016 and 2015, respectively.

Expected volatility-The Company calculates expected volatility based on median volatility for peer companies using 4.79 years and 5.79 years of daily stock price history as of June 30, 2016 and 2015, respectively.

Expected dividend yield-The Company used an expected dividend yield of 0.96% and 0.63% as of June 30, 2016 and 2015, respectively, 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, 2016 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, 2015	1.9		$	5.24
Granted	—		—
Vested	—		—
Forfeited	(0.2	)	5.24
Non-vested at June 30, 2016	1.7		$	5.24

Restricted Share Units

During fiscal 2016, 1.2 million RSUs were granted under the Omnibus LTIP and 0.1 million RSUs were granted under the 2007 Stock Plan for Directors. 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.

The Company’s outstanding RSUs as of June 30, 2016 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, 2015	4.3
Granted	1.3
Settled	(0.2	)
Cancelled	(1.2	)
Outstanding at June 30, 2016	4.2
Vested and expected to vest at June 30, 2016	3.4		$	87.3	2.69

The share-based compensation expense recorded in connection with the RSUs was $18.2, $9.7 and $10.8 during fiscal 2016, 2015 and 2014, respectively.

The Company’s outstanding and non-vested RSUs as of June 30, 2016 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, 2015	3.9		$	16.23
Granted	1.3		33.82
Vested	(0.1	)	13.52
Cancelled	(1.2	)	17.57
Outstanding and nonvested at June 30, 2016	3.9		$	19.75

The total intrinsic value of RSUs vested and settled during fiscal 2016, 2015, and 2014 is $4.0, $6.2 and $2.8, respectively.

Executive Ownership Programs

The Company encourages stock ownership through various programs. These programs govern shares purchased by employees (“Purchased Shares”). Employees purchased 0.1 million and 0.1 million shares in fiscal 2016 and 2015, respectively, and received matching RSUs in accordance with the terms of Platinum under the Omnibus LTIP.

There was $0.0 share-based compensation expense recorded in connection with Purchased Shares during fiscal 2016. Share-based compensation (income) expense recorded for fiscal 2015 and fiscal 2014 was $(0.5) and nil, 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.

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 2014 had a weighted average grant date fair value of $6.82. There were no special incentive awards outstanding as of June 30, 2016, 2015 or 2014.

Share-based compensation expense recorded in connection with special incentive awards is $0.0, $0.0 and $7.4 for fiscal 2016, 2015 and 2014, respectively. The total intrinsic value of special incentive awards vested and settled during fiscal 2016, 2015, and 2014 is $0.0, $0.0, and $20.4, respectively. As of June 30, 2016 and 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 2016 and 2015.

Special Share Purchase Transaction

As noted in Note 22, 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 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 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.

From June 30, 2015 until the date the liability was settled by JABC, the value of the obligation declined $0.1, which was recorded as a reduction of stock compensation expense. On July 8, 2015, JABC repurchased the shares. The settlement of the liability of $13.8 is considered a non-cash capital contribution to the Company and therefore was recorded in Additional paid-in capital.

Phantom Units

On July 21, 2015, the Board granted Lambertus J.H. Becht (“Mr. Becht”), the Company’s Chairman of the Board and interim Chief Executive Officer (“CEO”), an award of 300,000 phantom units, in consideration of Mr. Becht’s increased and continuing responsibilities as interim CEO of the Company. At the time of grant, the phantom units had a value of $8.1 based on the closing price of the Company’s Class A Common Stock on July 21, 2015. Each phantom unit has an economic value equivalent to one share of the Company’s Class A Common Stock settleable in cash or shares at the election of Mr. Becht. The award to Mr. Becht was made outside of the Company’s Equity and Long-Term Incentive Plan. On July 24, 2015, Mr. Becht elected to receive payment of the phantom units in the form of shares of Class A Common Stock and the phantom units were valued at $8.0. 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 $8.0 of share-based compensation expense during the fiscal year ended June 30, 2016 as there are no service or performance conditions with respect to the phantom units.

On December 1, 2014, the Board granted Mr. Becht an award of 49,432 phantom units, in consideration of Mr. Becht’s increased responsibilities as interim CEO 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 2015 as there are no service or performance conditions with respect to the phantom units.