Share-Based Payments

During the first quarter of 2014 and 2013, we recognized share-based compensation expense related to the following Class B common stock awards to certain directors, officers and other eligible employees, pursuant to the Molson Coors Brewing Company Incentive Compensation Plan ("Incentive Compensation Plan"): restricted stock units ("RSU"), deferred stock units ("DSU"), performance share units ("PSU"), performance units ("PU") and stock options. The settlement amount of the PSUs is determined based on market and performance metrics, which include our total shareholder return performance relative to the S&P 500 and specified internal performance metrics designed to drive greater shareholder return. 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 the performance metric condition.

The following table summarizes share-based compensation expense:



	Three Months Ended
	March 31, 2014			March 30, 2013
	(In millions)
Pretax compensation expense	$	8.3		$	11.1
Tax benefit	(2.7		)	(3.4		)
After-tax compensation expense	$	5.6		$	7.7

As of March 31, 2014, there was $26.7 million of total unrecognized compensation cost from all share-based compensation arrangements granted under the Incentive Compensation Plan, related to unvested shares. This compensation expense is expected to be recognized over a weighted-average period of 1.6 years.

The following table represents the summary of stock options and stock-only stock appreciation rights ("SOSAR") outstanding as of March 31, 2014, and the activity during the three months ended March 31, 2014:



	Shares outstanding	Weighted-average exercise price per share	Weighted-average remaining contractual life (years)	Aggregate intrinsic value
	(In millions, except per share amounts and years)
Outstanding as of December 31, 2013	3.5	$43.41	4.57	$	45.1
Granted	0.2	$58.24
Exercised	(0.6)	$42.19
Forfeited	(0.1)	$44.24
Outstanding as of March 31, 2014	3.0	$44.46	4.73	$	43.2
Exercisable at March 31, 2014	2.6	$43.66	4.03	$	39.3

The total intrinsic value of stock options exercised was $8.9 million during each of the three months ended March 31, 2014, and March 30, 2013. During the three months ended March 31, 2014, and March 30, 2013, cash received from stock option exercises was $20.2 million and $27.2 million, respectively, and the total tax benefit for the tax deductions from these stock option exercises and other awards was $2.0 million and $1.6 million, respectively.

The following table represents non-vested RSUs, DSUs, PSUs and PUs as of March 31, 2014, and the activity during the three months ended March 31, 2014:



	RSUs and DSUs			PUs			PSUs
	Units		Weighted-average grant date fair value per unit	Units		Weighted-average fair value per unit	Units	Weighted-average grant date fair value per unit
	(In millions, except per unit amounts)
Non-vested as of December 31, 2013	0.7		$42.08	1.0		$2.87	0.2	$43.10
Granted	0.2		$58.17	—		$—	0.2	$58.69
Vested	(0.2	)	$40.27	(0.5	)	$6.16	—	$—
Forfeited	—		$—	—		$—	—	$—
Non-vested as of March 31, 2014	0.7		$46.55	0.5		$0.43	0.4	$50.44

The weighted-average fair value per unit for the non-vested PSUs is $42.75 as of March 31, 2014.

The fair value of each option granted in the first quarter of 2014 and 2013 was determined on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:



	Three Months Ended
	March 31, 2014	March 30, 2013
Risk-free interest rate	2.29%	1.43%
Dividend yield	2.57%	2.88%
Volatility range	22.66%-26.57%	22.39%-25.90%
Weighted-average volatility	25.59%	25.02%
Expected term (years)	7.5	7.7
Weighted-average fair market value	$12.78	$8.39

The risk-free interest rates utilized for periods throughout the contractual life of the stock 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 stock options is estimated based upon observations of historical employee option exercise patterns and trends of those employees granted options in the respective year.

The fair value of the market metric for each PSU granted in the first quarter of 2014 and 2013 was determined on the date of grant using a Monte Carlo model to simulate total shareholder return for MCBC and peer companies with the following weighted-average assumptions:



	Three Months Ended
	March 31, 2014	March 30, 2013
Risk-free interest rate	0.72%	0.33%
Dividend yield	2.57%	2.88%
Volatility range	12.45%-72.41%	12.18%-69.37%
Weighted-average volatility	21.72%	21.13%
Expected term (years)	2.82	2.83
Weighted-average fair market value	$58.69	$43.10

The risk-free interest rates utilized for periods throughout the expected term of the PSUs are based on a zero-coupon U.S. Treasury security yield at the time of grant. Expected volatility is based on historical volatility of our stock as well as the stock of our peer firms, as shown within the volatility range above, for a period from the grant date consistent with the expected term. The expected term of PSUs is calculated based on the grant date to the end of the performance period.

As of March 31, 2014, there were 7.4 million shares of the Company's Class B common stock available for issuance as awards under the Incentive Compensation Plan.