Stock Compensation

The Company recognized consolidated stock compensation expense of $23.4 and $6.5 during the three months ended December 31, 2013 and December 30, 2012, respectively. Stock compensation expense is principally included in “Selling, acquisition, operating and general expenses” in the accompanying Condensed Consolidated Statements of Operations.

A summary of stock options outstanding as of December 31, 2013 and related activity during the three months then ended, under HGI, Fidelity & Guaranty Life Holdings, Inc. ("FGH"), and FGL’s respective incentive plans are as follows (share amounts in thousands):



	HGI						FGH				FGL
Stock Option Awards	Options		Weighted Average Exercise Price		Weighted Average Grant Date Fair Value		Options		Weighted Average Exercise Price		Options	Weighted Average Exercise Price		Weighted Average Grant Date Fair Value
Stock options outstanding at September 30, 2013	3,954		$	6.52	$	2.55	335		$	44.23	—	$	—	$	—
Granted	1,326		11.76		5.06		—		—		191	17.00		3.30
Exercised	(121	)	4.85		1.72		(28	)	41.79		—	—		—
Forfeited or expired	—		—		—		(1	)	45.55		—	—		—
Stock options outstanding at December 31, 2013	5,159		7.91		3.21		306		44.44		191	17.00		3.30
Stock options vested and exercisable at December 31, 2013	1,723		6.93		2.72		129		42.56		—	—		—
Stock options outstanding and expected to vest	3,436		8.40		3.45		167		44.40		191	17.00		3.30

A summary of restricted stock, restricted stock units and Performance Restricted Stock Units ("PRSUs") outstanding as of December 31, 2013 and related activity during the three months then ended, under HGI, Spectrum Brands, FGH and FGL’s respective incentive plans are as follows (share amounts in thousands):



	HGI				FGL
Restricted Stock Awards	Shares		Weighted Average Grant Date Fair Value		Shares	Weighted Average Grant Date Fair Value
Restricted stock outstanding at September 30, 2013	3,456		$	7.72	—	$	—
Granted	3,302		12.00		107	17.00
Vested	(1,126	)	10.15		—	—
Restricted stock outstanding at December 31, 2013	5,632		9.74		107	17.00
Restricted stock expected to vest	5,632		9.74		107	17.00



	Spectrum Brands				FGH
Restricted Stock Units	Units		Weighted Average Grant Date Fair Value		Units		Weighted Average Grant Date Fair Value
Restricted stock units outstanding at September 30, 2013	1,118		$	39.11	46		$	49.60
Granted	414		68.95		—		—
Vested	(904	)	38.93		(15	)	49.45
Restricted stock units outstanding at December 31, 2013	628		59.03		31		49.68
Restricted stock units vested and exercisable at December 31, 2013	—		—		—		—
Restricted stock units expected to vest	628		59.03		28		49.58



	FGL
Performance Restricted Stock Units	Units	Weighted Average Grant Date Fair Value
Performance restricted stock units outstanding at September 30, 2013	—	$	—
Granted	469	17.00
Performance restricted stock units outstanding at December 31, 2013	469	17.00
Performance restricted stock units vested and exercisable at December 31, 2013	—	—
Performance restricted stock units expected to vest	469	17.00

On December 31, 2013 the Company had 22 thousand vested and outstanding restricted stock units with a weighted average grant date fair value of $4.61 per share.

HGI

During the Fiscal 2014 Quarter, HGI granted stock option awards and restricted stock awards representing approximately 1,326 thousand and 3,302 thousand shares, respectively. All of these grants are time based, and vest either immediately, or over periods of 1 year to 3 years. The total fair value of the stock grants during Fiscal 2014 Quarter on their respective grant dates was approximately $46.3. During Fiscal 2014 Quarter stock option awards and restricted stock awards with a total fair value of $14.4 vested. The total intrinsic value of share options exercised during Fiscal 2014 Quarter was $0.9, for which HGI received cash of $0.6 in settlement.

During the Fiscal 2013 Quarter, HGI granted stock option awards and restricted stock awards representing approximately 1,498 thousand and 3,227 thousand shares, respectively. All of these grants are time based, and vest over periods of 12 months up to 36 months. The total fair value of the stock grants on their respective grant dates was approximately $32.8.

Under HGI’s executive bonus plan for Fiscal 2013, executives will be paid in cash, stock options and restricted stock shares. The equity grants will have a grant date in the first fiscal quarter of 2015 and the shares will vest, either immediately, or between 12 and 36 months from the grant date.

As of December 31, 2013, there was approximately $35.7 of total unrecognized compensation cost related to unvested share-based compensation agreements previously granted, which is expected to be recognized over a weighted-average period of 2.24 years.

The fair values of restricted stock and restricted stock unit awards are determined based on the market price of HGI’s common stock on the grant date. The fair value of stock option awards is determined using the Black-Scholes option pricing model.

The following assumptions were used in the determination of these grant date fair values using the Black-Scholes option pricing model:



	2014	2013
Risk-free interest rate	1.46% to 1.75%	0.84%
Assumed dividend yield	—%	—%
Expected option term	5.3 to 6.0 years	5.3 to 6.0 years
Volatility	41.2%	42.8% to 44.0%

The weighted-average remaining contractual term of outstanding stock option awards at December 31, 2013, was 8.88 years.

Spectrum Brands

Spectrum Brands granted restricted stock units representing approximately 414 thousand shares during the three months ended December 31, 2013. Of these grants, 81 thousand restricted stock units vested immediately and 45 thousand restricted stock units are time-based and vest over a period of one year. The remaining 288 thousand restricted stock units are performance and time-based and vest over a two years period. The total market value of the restricted shares on the date of the grant was approximately $29.0.

Spectrum Brands granted restricted stock units representing approximately 574 thousand shares during the three months ended December 30, 2012. Of these grants 22 thousand restricted stock units are time-based and vest over a period of one year. Of the remaining 552 thousand restricted stock units, 90 thousand are performance based and vest over a one year period, and 462 thousand restricted stock units are performance-based and vest over a two years period. The total market value of the restricted shares on the date of the grant was approximately $25.6.

The fair values of restricted stock awards and restricted stock units are determined based on the market price of Spectrum Brands’ common stock on the grant date.

FGL

In conjunction with the initial public offering, on November 7, 2013, FGL’s board of directors adopted a long term stock-based incentive plan (the “FGL 2013 Stock Incentive Plan” ) under which certain officers, employees, directors and consultants are eligible to receive equity based awards. The FGL 2013 Stock Incentive Plan was approved by the stockholder on November 19, 2013, became effective on December 12, 2013 and expires in December 2023. FGL’s compensation committee approved the granting of awards under the FGL 2013 Stock Incentive Plan to certain employees, officers and directors (other than the members of the compensation committee). In addition, FGL’s board of directors approved the granting of awards to members of FGL’s compensation committee . The awards made to members of the FGL's compensation committee were not made under the FGL 2013 Stock Incentive Plan; however, these awards will be construed and administered as if subject to the terms of the FGL 2013 Stock Incentive Plan. FGL’s board of directors and stockholder, HGI, also approved the granting of unrestricted common shares to its directors in lieu of cash compensation at the election of each individual director.

FGL’s principal subsidiary, FGH, sponsors stock-based incentive plans and dividend equivalent plans (“DEPs”) for its employees (“FGH Plans”). Awards under the FGH Plans are based on the common stock of FGH. In Fiscal 2013, FGH determined that all equity awards will be settled in cash when exercised and therefore are classified as liability plans

During the Fiscal 2014 Quarter, FGL granted stock option awards, restricted stock awards and performance restricted stock units representing approximately 191 thousand, 107 thousand and 469 thousand shares, respectively. The stock option and restricted stock awards vest over a period of 3 years. The performance restricted stock units vest on September 30, 2016 contingent on the satisfaction of performance criteria and on the participant's continued employment unless otherwise noted in the agreement. The total fair value the stock grants during Fiscal 2014 Quarter on their respective grant dates was approximately $10.4. Additionally, on December 12, 2013, FGL granted 58 thousand unrestricted shares to certain directors in payment for services rendered. Total fair value of the unrestricted shares on the grant date was $1.0.

The total compensation cost related to non-vested options, restricted stock units and dividend equivalent plans, not yet recognized as of December 31, 2013 totaled $18.4 and will be recognized over a weighted-average period of 2.3 years.

The fair value of stock option awards is determined using the Black-Scholes option pricing model. The following assumptions were used in the determination of these grant date fair values using the Black-Scholes option pricing model:



	2014	2013
Risk-free interest rate	1.4%	0.8%
Assumed dividend yield	1.5%	6%
Expected option term	4.5 years	4.5 years
Volatility	25%	27%

EXCO/HGI JV

A summary of the activity related to the EXCO/HGI JV incentive unit plan was as follows (share amounts in thousands):



	Shares	Weighted average grant date fair value per share
Non-vested awards at September 30, 2013	102	$	10.00
Granted	—	—
Non-vested awards at December 31, 2013	102	10.00

ASC 718 requires share-based compensation be recorded with cost classifications consistent with cash compensation. The EXCO/HGI JV uses the full cost method to account for its oil and natural gas properties. As a result, part of the share-based payments are capitalized. During the three months ended December 31, 2013 an immaterial amount was capitalized as part of the EXCO/HGI JV’s oil and natural gas properties. HGI’s proportionate share of the EXCO/HGI JV’s total share-based compensation on unvested awards was $0.5 as of December 31, 2013, and will be recognized over an average period of 2.1 years.