NOTE 13. EQUITY-BASED COMPENSATION

Employees of the Company participate in the News Corporation 2013 Long-Term Incentive Plan (the “2013 LTIP”), under which equity-based compensation, including stock options, performance stock units (“PSUs”), restricted stock units (“RSUs”) and other types of awards can be granted. The Company has the ability to award up to 30 million shares of Class A Common Stock under the terms of the 2013 LTIP in addition to awards assumed in connection with the Separation and with acquisitions.

The following table summarizes the Company’s equity-based compensation expense from continuing operations reported in the Statements of Operations:


	For the fiscal years ended June 30,
	2018		2017		2016
	(in millions)
Total Equity compensation expense	$	76	$	38	$	55

Total intrinsic value of stock options exercised	$	1	$	2	$	3

As of June 30, 2018, total compensation cost not yet recognized for all plans presented related to unvested awards held by the Company’s employees was approximately $56 million and is expected to be recognized over a weighted average period of between one and two years.

The tax benefit recognized on PSUs and RSUs for the Company’s employees that vested and stock options that were exercised by the Company’s employees, during the applicable fiscal year was $9 million, $17 million, and $11 million for the fiscal years ended June 30, 2018, 2017 and 2016, respectively.

Summary of Incentive Plans

The fair value of equity-based compensation granted under the 2013 LTIP is calculated according to the type of award issued. Cash settled awards are marked-to-market at the end of each reporting period.

Performance Stock Units

PSUs are grants that entitle the holder to shares of the Company’s Class A Common Stock or the cash equivalent value of such shares based on the achievement of pre-established performance metrics over the applicable performance period. The fair value of PSUs is determined on the date of grant and expensed using a straight-line method over the applicable vesting period. The expense is adjusted to reflect the number of shares expected to vest based on management’s determination of the probable achievement of the pre-established performance metrics. The Company records a cumulative adjustment in periods in which its estimate of the number of shares expected to vest changes. Any person who holds PSUs shall have no ownership interest in the shares or cash to which such PSUs relate unless and until the shares or cash are delivered to the holder. All shares of Class A Common Stock reserved for cancelled or forfeited equity-based compensation awards become available for future grants. Dividend equivalents have been granted to participants beginning with the fiscal 2017-2019 PSU award and are subject to the same terms as the related PSU awards.

In the first quarters of fiscal 2018, 2017 and 2016, certain employees of the Company received grants of PSUs that cliff vest after the completion of three fiscal years, subject to three-year performance conditions consisting of pre-defined targets based on the Company’s cumulative earnings per share, cumulative free cash flow and three-year total shareholder return (“TSR”) relative to that of the companies that comprise the Standard and Poor’s 500 Index, or beginning with PSUs granted in fiscal 2018, the Standard and Poor’s 1500 Media Index. The fair value of the TSR condition is determined using a Monte Carlo simulation model.

In the first quarter of fiscal 2018, certain employees of the Company received grants of PSUs that have graded vesting after the completion of one and two fiscal years, subject to one-year performance conditions consisting of pre-defined targets and grants of PSUs that cliff vest after the completion of three fiscal years, subject to three-year performance conditions consisting of pre-defined targets. The one-year performance conditions are based on a combination of business-unit-specific free cash flow and revenue or Company earnings per share, or EPS and free cash flow. The three-year performance conditions are based on a combination of business-unit-specific revenue, EBITDA (as defined in Note 20—Segment Information) and free cash flow or Company EPS, cumulative free cash flow and three-year TSR relative to that of the companies that comprise the Standard and Poor’s 1500 Media Index.

For the fiscal years ended June 30, 2018, 2017 and 2016, the Company granted approximately 4.4 million, 5.5 million, and 4.2 million PSUs, respectively, at target to the Company’s employees, of which approximately 3.2 million, 4.1 million and 3.0 million PSUs, respectively, will be settled in Class A Common Stock, with the remaining PSUs, which are granted to executive directors and to employees in certain foreign locations, being settled in cash, assuming performance conditions are met.

For the fiscal years ended June 30, 2018, 2017 and 2016, approximately 1.6 million, 2.8 million and 1.2 million PSUs respectively, vested, of which approximately 0.5 million, 1.0 million and 0.2 million PSUs, respectively, were settled in cash for approximately $6.6 million, $13.1 million and $3.3 million, respectively, before statutory tax withholdings.

Restricted Stock Units

RSU awards are grants that entitle the holder to shares of the Company’s Class A Common Stock. The fair value of RSUs is based upon the fair market value of the shares underlying the awards on the grant date. Any person who holds RSUs shall have no ownership interest in the shares to which such RSUs relate unless and until the shares are delivered to the holder.

During fiscal 2018, 2017 and 2016, certain employees of the Company received grants of time-vested RSUs. Vesting of the awards is subject to the participants’ continued employment with the Company through the applicable vesting date. During the fiscal years ended June 30, 2018, 2017 and 2016, 0.3 million, 0.4 million and 0.3 million RSUs, respectively, were granted to the Company’s employees. These RSUs have graded vesting primarily over two to four years.

The following table summarizes the activity from continuing and discontinued operations related to the target PSUs and RSUs granted to the Company’s employees that will be settled in shares of the Company (PSUs and RSUs in thousands):


	Fiscal 2018					Fiscal 2017					Fiscal 2016
	Number of shares			Weighted average grant- date fair value		Number of shares			Weighted average grant- date fair value		Number of shares			Weighted average grant- date fair value
*PSUs and RSUs*
Unvested units at beginning of the year		8,652		$	15.57		7,773		$	17.34		8,355		$	16.77
Granted^(a)		3,510			13.47		4,502			14.69		3,472			15.51
Vested^(b)		(1,467	)		16.70		(2,387	)		18.38		(1,913	)		13.56
Cancelled^(c)		(1,354	)		16.04		(1,236	)		17.08		(2,141	)		15.76

Unvested units at the end of the year^(d)		9,341		$	14.54		8,652		$	15.57		7,773		$	17.34

^(a)	For fiscal 2018, includes 3.2 million target PSUs and 0.3 million RSUs granted.

For fiscal 2017, includes 4.1 million target PSUs and 0.4 million RSUs granted.

For fiscal 2016, includes 3.0 million target PSUs and 0.3 million RSUs granted and a payout adjustment of 0.2 million PSUs due to the actual performance level achieved for PSUs granted in fiscal 2013 that vested during fiscal 2016.

^(b)	The fair value of PSUs and RSUs held by the Company’s employees that vested during the fiscal years ended June 30, 2018, 2017 and 2016 was $25 million, $44 million and $26 million, respectively.

^(c)	For fiscal 2018, includes 0.6 million of target PSUs and 0.1 million RSUs cancelled and a payout adjustment of 0.7 million PSUs due to the actual performance level achieved for PSUs granted in fiscal 2015 that vested during fiscal 2018.

For fiscal 2017, includes 0.7 million of target PSUs and 0.1 million RSUs cancelled and a payout adjustment of 0.4 million PSUs due to the actual performance level achieved for PSUs granted in fiscal 2014 that vested during fiscal 2017.

For fiscal 2016, includes 0.8 million of target PSUs and 0.3 million RSUs cancelled and a payout adjustment of 1.0 million PSUs due to the actual performance level achieved for PSUs granted in fiscal 2013 that vested during fiscal 2016.

^(d)	The intrinsic value of these unvested RSUs and target PSUs was approximately $145 million as of June 30, 2018.

Stock Options

The following table summarizes information about stock option transactions for the employee stock option plans (options in thousands):


	Fiscal 2018					Fiscal 2017					Fiscal 2016
	Options			Weighted average exercise price		Options			Weighted average exercise price		Options			Weighted average exercise price
				(in US$)					(in US$)					(in US$)
Outstanding at the beginning of the year		666		$	7.74		1,238		$	9.03		2,008		$	8.82
Exercised		(189	)		8.04		(354	)		7.78		(508	)		7.34
Cancelled		(4	)		9.04		(218	)		15.00		(262	)		10.75

Outstanding at the end of the year^(a)		473		$	7.61		666		$	7.74		1,238		$	9.03

Exercisable at the end of the year^(b)		470					585					945

^(a)	The intrinsic value of options outstanding held by the Company’s employees as of June 30, 2018, 2017 and 2016 was $3.7 million, $4.0 million and $3.0 million, respectively. The weighted average remaining contractual life of options outstanding as of June 30, 2018 was 4.06 years.

^(b)	The weighted average remaining contractual life of options exercisable as of June 30, 2018 was 4.04 years.