Share-Based Payments

At December 31, 2013, we had three share-based compensation plans.

The 1990 Equity Incentive Plan

The 1990 Equity Incentive Plan ("EI Plan") generally provides for two types of grants for our employees: stock options for shares of Class B common stock and restricted stock awards of Class B common stock. The stock options have a term of 10 years and one-third of the stock option award vests in each of the three successive years after the date of grant. There were no awards granted under the EI Plan in 2013, 2012 or 2011 and we are not expecting to grant any new awards under this plan.

Equity Compensation Plan for Non-Employee Directors

The Equity Compensation Plan for Non-Employee Directors ("EC Plan") provides for awards of shares of Class B common stock or options for shares of Class B common stock. Awards vest after completion of the director's annual term. The compensation cost associated with the EC plan is amortized over the directors' term. There were no awards granted under the EC Plan in 2013, 2012 or 2011 and we are not expecting to grant any new awards under this plan.

Molson Coors Brewing Company Incentive Compensation Plan

During 2013, 2012 and 2011, we issued the following awards related to shares of Class B common stock to certain directors, officers, and other eligible employees, pursuant to the Molson Coors Brewing Company Incentive Compensation Plan ("MCBC IC Plan"): RSUs, DSUs, PUs, PSUs, stock options, and SOSARs.

RSU awards are issued at the market value equal to the price of our stock at the date of the grant and vest over a period of 3 years. In 2013, 2012 and 2011, we granted 0.3 million, 0.4 million and 0.3 million RSUs, respectively, with a weighted-average market value of $42.74, $42.04 and $44.27 each, respectively. Prior to vesting, RSUs have no voting rights.

DSU awards, under the Directors' Stock Plan pursuant to the MCBC IC Plan, are elections made by non-employee directors of MCBC that enable them to receive all or one-half of their annual cash retainer payments in our stock. The deferred stock unit awards are issued at the market value equal to the closing price on the date of the grant. The DSUs are paid in shares of stock upon termination of service. Prior to vesting, DSUs have no voting rights. In 2013, 2012 and 2011, we granted a small number of DSUs with a weighted-average market value of $50.56, $43.74 and $43.53 per share, respectively.

PUs were granted based on a target value established at the date of grant and vest upon completion of a service requirement. The payout value can range from zero to two times the target value based on achievement of specified adjusted earnings per share targets. The PU award value can be settled in cash or shares, or partly in cash and partly in shares, at the discretion of the Company. If settled in shares, it will be based on the closing Class B common stock price on the date of vesting. Prior to vesting, no shares are issued and PUs have no voting or dividend rights. We account for the PUs as liabilities, resulting in variable compensation expense until settled. The variability of compensation expense arises primarily from changing estimates of adjusted earnings per share. Changes in the price of Class B common stock during the vesting period do not impact compensation expense but will impact the number of shares ultimately issued if the awards are settled in stock. Compensation expense is determined based upon the estimated fair value and recognized over the requisite service period of the grant once we have determined that achievement of the performance condition is probable. If in the future it becomes improbable that the performance condition will be met, previously recognized compensation cost will be reversed, and no compensation cost will be recognized. The service condition vesting period is three years. In 2013, there were a small number of PUs granted. In 2012 and 2011, we granted 0.7 million and 0.6 million PUs, respectively. The aggregate intrinsic value of PUs outstanding at December 31, 2013, and December 29, 2012, was $2.9 million and $18.9 million, respectively.

As part of our annual grant in the first quarter of 2013 we granted PSUs, rather than PUs that we had historically granted, for performance awards. PSUs are granted with a target value established at the date of grant and vest upon completion of a service requirement. The settlement amount of the PSUs is determined based on market and performance metrics, which include our total stockholder return performance relative to the S&P 500 and specified adjusted earnings per share. PSU compensation expense is based on a fair value assigned to the market metric using a Monte Carlo model, which will remain constant throughout the vesting period of three years, and a performance multiplier, which will vary due to changing estimates of adjusted earnings per share. We granted 0.2 million PSUs with a weighted-average fair value of $43.10.

Stock options are granted with an exercise price equal to the market value of a share of common stock on the date of grant. Stock options have a term of 10 years and generally vest over three years. During 2013, we granted 0.2 million options with a weighted-average fair value of $8.39 each. During 2012, we granted 0.3 million options with a weighted-average fair value of $8.09 each. During 2011, we granted 0.7 million options with a weighted-average fair value of $9.60 each.

SOSARs were granted with an exercise price equal to the market value of a share of common stock on the date of grant. The SOSARs entitle the award recipient to receive shares of the Company's stock with a fair value equal to the excess of the trading price over the exercise price of such shares on the date of the exercise. SOSARs have a term of ten years and generally vest over three years. No SOSARs were granted in 2013, 2012 or 2011.

The mark-to-market share-based compensation expense before tax, related to our share-based awards granted to former CBC employees now employed by MillerCoors during the fiscal year 2011, was a benefit of $0.1 million and this amount is included in the table below. We did not record an adjustment in 2012 or 2013 as these awards were fully vested as of the end of the second quarter of 2011. No further adjustments will be recorded related to these awards.

The following table summarizes share-based compensation expense:



	For the years ended
	December 31, 2013			December 29, 2012			December 31, 2011
	(In millions)
Pretax compensation expense	$	19.5		$	14.0		$	24.6
Tax benefit	(5.6		)	(4.2		)	(6.8		)
After-tax compensation expense	$	13.9		$	9.8		$	17.8

The increase in expense during 2013 was primarily driven by accelerated expense related to certain RSUs and PSUs granted in the first quarter of 2013. The decrease in expense from 2011 to 2012 was primarily driven by lower values of performance units at year end, fewer options granted during the year and increased forfeitures.

As of December 31, 2013, there was approximately $15.6 million of total unrecognized compensation cost from all share-based compensation arrangements granted under the plans, related to unvested shares. This compensation is expected to be recognized over a weighted-average period of approximately 1.0 year.

The following table represents non-vested RSUs, DSUs, PSUs and PUs as of December 31, 2013, and the activity during 2013:



	RSUs and DSUs		PUs		PSUs
	Units	Weighted-average grant date fair value per unit	Units	Weighted-average grant date fair value per unit	Units	Weighted-average grant date fair value per unit
	(In millions, except per share amounts)
Non-vested as of December 29, 2012	0.7	$43.06	1.7	$10.90	—	$—
Granted	0.3	$42.94	—	$—	0.2	$43.10
Vested	(0.2)	$42.96	(0.6)	$11.61	—	$—
Forfeited	(0.1)	$41.81	(0.1)	$3.58	—	$—
Non-vested as of December 31, 2013	0.7	$42.08	1.0	$2.87	0.2	$43.10

The total intrinsic values of RSUs and DSUs vested during 2013, 2012 and 2011 were $10.2 million, $9.4 million and $24.4 million, respectively. The total share based liabilities paid for PU's vested during 2013, 2012, and 2011 were $6.9 million, $7.3 million and $4.9 million, respectively.

The following table represents the summary of options and SOSARs outstanding as of December 31, 2013, and the activity during 2013.



	Shares outstanding					Shares exercisable at year end
	Shares	Weighted- average exercise price	Weighted- average remaining contractual life (years)	Aggregate intrinsic value		Shares	Weighted- average exercise price	Weighted- average remaining contractual life (years)	Aggregate intrinsic value
	(In millions, except per share amounts and years)
Outstanding as of December 29, 2012	6.0	$40.55	4.05	$	23.2	5.2	$40.07	3.38	$	23.1
Granted	0.2	$45.22
Exercised	(2.7)	$37.11
Forfeited	—
Outstanding as of December 31, 2013	3.5	$43.41	4.57	$	45.1	2.9	$43.26	3.86	$	38.4

The total intrinsic values of options exercised during 2013, 2012 and 2011 were $36.0 million, $16.7 million and $3.9 million, respectively. During 2013, 2012 and 2011, cash received from stock options exercises was $88.8 million, $34.1 million and $11.6 million, respectively, and the total tax benefit to be realized for the tax deductions from these option exercises and other awards was $7.7 million, $4.9 million and $2.0 million, respectively.

The shares of common stock to be issued under the stock option plans are made available from authorized and unissued Company common stock. As of December 31, 2013, there were 7.9 million shares of the Company's common stock available for the issuance as option, SOSAR, RSU, DSU, PSU, and PU awards under the MCBC IC Plan.

The fair value of each option granted in 2013, 2012 and 2011 was determined on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:



	For the years ended
	December 31, 2013	December 29, 2012	December 31, 2011
Risk-free interest rate	1.43%	1.50%	2.57%
Dividend yield	2.88%	2.99%	2.57%
Volatility range	22.4% - 25.9%	25.8% - 27.6%	25.3% - 29.4%
Weighted-average volatility	25.02%	25.86%	26.29%
Expected term (years)	7.7	4.0 - 7.7	4.0 - 7.7
Weighted-average fair value	$8.39	$8.09	$9.60

The risk-free interest rates utilized for periods throughout the contractual life of the options are based on a zero-coupon U.S. Treasury security yield at the time of grant. Expected volatility is based on a combination of historical and implied volatility of our stock. The expected term of options is estimated based upon observations of historical employee option exercise patterns and trends. The range on the expected term in 2011 and 2012 results from awards granted to separate groups of employees who exhibit different historical exercise behavior.

The fair value of the market metric for each PSU granted in the first quarter of 2013 was determined on the date of grant using a Monte Carlo model to simulate total stockholder return for MCBC and peer companies. This value was calculated at $43.10 using a term of 2.83 years as the time between grant date and the end of the performance period. Specific inputs into this valuation, derived using the specified term include a volatility of 21.13% for MCBC and between a range of 12% and 69% for our peers, a risk-free interest rate of 0.33% and a dividend yield of 2.88%.