(8) STOCK-BASED COMPENSATION

The following tables summarize the Company’s stock-based compensation expense for liability and equity classified awards included in the condensed consolidated statements of operations.


	Three months ended December 31,					Six months ended December 31,
	2017		2016			2017	2016
	(in millions)
Included in:
Operating costs	$	2.3	$	3.3	$	5.5	$	6.6
Selling, general and administrative expenses		21.2		31.2		45.8		59.9
Total stock-based compensation expense	$	23.5	$	34.5	$	51.3	$	66.5

CII common units	$	—	$	5.9	$	—	$	10.1
Part A restricted stock units		19.4		18.8		41.6		40.1
Part B restricted stock units		3.6		9.5		8.7		15.7
Part C restricted stock units		0.5		0.3		1.0		0.6
Total stock-based compensation expense	$	23.5	$	34.5	$	51.3	$	66.5

CII Common Units

During the three and six months ended December 31, 2016, the Company recognized $5.9 million and $10.1 million, respectively, of stock-based compensation expense related to vesting of common units of Communications Infrastructure Investments, LLC (“CII”). On December 31, 2016, the CII common units became fully vested and as such there is no compensation cost associated with CII common units for the three and six months ended December 31, 2017.

Performance Compensation Incentive Program

During October 2014, the Company adopted the 2014 Performance Compensation Incentive Program (“PCIP”). The PCIP includes incentive cash compensation and equity (in the form of RSUs). Grants under the PCIP RSU plans are made quarterly for all participants. The PCIP was effective on October 16, 2014 and will remain in effect for a period of 10 years (or through October 16, 2024) unless it is earlier terminated by the Company’s Board of Directors.

The PCIP has the following components:

Part A

Under Part A of the PCIP, certain full-time employees, including the Company’s executives, are eligible to earn quarterly awards of RSUs. Each participant in Part A of the PCIP will have an RSU annual award target value, which will be allocated to each fiscal quarter. The final Part A value awarded to a participant for any fiscal quarter is determined by the Compensation Committee of the Board of Directors subsequent to the end of the respective performance period taking into account the Company’s measured value creation for the quarter, as well as such other subjective factors that it deems relevant (including group and individual level performance factors). The number of Part A RSUs granted will be calculated based on the final award value determined by the Compensation Committee divided by the average closing price of the Company’s common stock over the last ten trading days of the respective performance period. Part A RSUs will vest assuming continuous employment fifteen months subsequent to the end of the performance period (for awards relating to periods through June 30, 2017) or twelve months subsequent to the end of the performance period (for awards relating to the period ended September 30, 2017, and subsequent quarters). Upon vesting, the RSUs convert to an equal number of shares of the Company’s common stock. Additionally, under Part A of the PCIP, awards may be granted to certain employees upon commencement of their employment with the Company.

During the three and six months ended December 31, 2017, the Company recognized $19.4 million and $41.6 million, respectively, of compensation expense associated with the vested portion of the Part A awards. During the three and six months ended December 31, 2016, the Company recognized $18.8 million and $40.1 million, respectively, of compensation expense associated with the vested portion of the Part A awards. The December 2017 and June 2017 quarterly awards were recorded as liabilities totaling $6.0 million and $5.5 million, as of December 31, 2017 and June 30, 2017, respectively, as the awards represent an obligation denominated in a fixed dollar amount to be settled in a variable number of shares during the subsequent quarter. The quarterly stock-based compensation liability is included in “Accrued liabilities” in the accompanying condensed consolidated balance sheets. Upon the issuance of the RSUs, the liability is re-measured and then reclassified to additional paid-in capital, with a corresponding charge (or credit) to stock based compensation expense. The value of the remaining unvested RSUs is expensed ratably through the vesting date. At December 31, 2017, the remaining unrecognized compensation cost to be expensed over the remaining vesting period for Part A awards is $27.3 million.

The following table summarizes the Company’s Part A RSU activity for the six months ended December 31, 2017:


	Number of Part A RSUs	Weighted average grant-date fair value per share		Weighted average remaining contractual term in months
Outstanding at July 1, 2017	2,364,386	$	31.63	7.1
Granted	1,158,872		34.96
Vested	(1,460,389)		31.54
Forfeited	(193,105)		n/a
Outstanding at December 31, 2017	1,869,764	$	33.42	7.4

Part B

Under Part B of the PCIP, participants, including the Company’s executives, are awarded quarterly grants of RSUs. The number of the RSUs earned by the participants is based on the Company’s stock price performance over a performance period of one year with the starting price being the average closing price over the last ten trading days of the quarter immediately prior to the grant and vest. The RSUs vest assuming continuous employment through the end of the measurement period, twelve months after the beginning of the performance period (for awards vesting on or prior to June 30, 2018) or fifteen months after the beginning of the performance period (for awards vesting after June 30, 2018). The existence of a vesting provision that is associated with the performance of the Company’s stock price is a market condition, which affects the determination of the grant date fair value. Upon vesting, RSUs earned convert to an equal number of shares of the Company’s common stock.

The following table summarizes the Company’s Part B RSU activity for the six months ended December 31, 2017:


	Number of Part B RSUs	Weighted average grant-date fair value per unit		Weighted average remaining contractual term in months
Outstanding at July 1, 2017	411,973	$	42.86	6.1
Granted	246,516		27.28
Vested	(252,529)		52.49
Forfeited	(6,636)		n/a
Outstanding at December 31, 2017	399,324	$	27.30	6.0

The table below reflects the total Part B RSUs granted during Fiscal 2018 and 2017, the maximum eligible shares of the Company’s common stock that the respective Part B RSU grant could be converted into shares of the Company’s common stock, and the grant date fair value per Part B RSU during the period indicated. The table below also reflects the units converted to the Company’s common stock at a vesting date that is subsequent to the period indicated for those RSUs granted during the period indicated:


	During the three months ended
	December 31, 2017		September 30, 2017
Part B RSUs granted		82,556		163,960
Maximum eligible shares of the Company's common stock		569,636		590,256
Grant date fair value per Part B RSU	$	45.10	$	19.06
Units converted to Company's common stock at vesting date		n/a		n/a


	During the three months ended
	June 30, 2017		March 31, 2017		December 31, 2016		September 30, 2016
Part B RSUs granted		152,808		171,316		191,015		200,425
Maximum eligible shares of the Company's common stock		550,109		880,564		981,817		1,030,185
Grant date fair value per Part B RSU	$	26.52	$	27.39	$	75.56	$	47.00
Units converted to Company's common stock at vesting date		n/a		41,368		102,511		99,508

During the three and six months ended December 31, 2017, the Company recognized stock-based compensation expense of $3.6 million and $8.7 million, respectively, related to Part B awards. During the three and six months ended December 31, 2016, the Company recognized stock-based compensation expense of $9.5 million and $15.7 million, respectively, related to Part B awards.

The grant date fair value of Part B RSU grants is estimated utilizing a Monte Carlo simulation. This simulation estimates the ten-day average closing stock price ending on the vesting date, the stock price performance over the performance period, and the number of common shares to be issued at the vesting date. Various assumptions are utilized in the valuation method, including the target stock price performance ranges and respective share payout percentages, the Company’s historical stock price performance and volatility, peer companies’ historical volatility and an appropriate risk-free rate. The aggregate future value of the grant under each simulation is calculated using the estimated per share value of the common stock at the end of the vesting period multiplied by the number of common shares projected to be granted at the vesting date. The present value of the aggregate grant is then calculated under each of the simulations, resulting in a distribution of potential present values. The fair value of the grant is then calculated based on the average of the potential present values. The remaining unrecognized compensation cost associated with Part B RSU grants is $5.7 million at December 31, 2017.

Part C

Under Part C of the PCIP, independent directors of the Company are eligible to receive quarterly awards of RSUs. Independent directors electing to receive a portion of their annual director fees in the form of RSUs are granted a set dollar amount of Part C RSUs each quarter. The quantity of Part C RSUs granted is based on the average closing price of the Company’s common stock over the last ten trading days of the quarter ended immediately prior to the grant date and vest at the end of each quarter for which the grant was made. During the three and six months ended December 31, 2017, the Company’s independent directors were granted 14,261 and 29,947 Part C RSUs, respectively. During the three and six months ended December 31, 2016, the Company’s independent directors were granted 11,230 and 21,841 Part C RSUs, respectively. During the three and six months ended December 31, 2017, the Company recognized $0.5 million and $1.0 million, respectively, of stock-based compensation expense associated with the Part C awards. During the three and six months ended December 31, 2016, the Company recognized $0.3 million and $0.6 million, respectively, of compensation expense associated with the Part C RSUs.