Share-Based Payments

We have one share-based compensation plan, the MCBC Incentive Compensation Plan (the "Incentive Compensation Plan"), as of June 30, 2017, and all outstanding awards fall under this plan. During the three and six months ended June 30, 2017, and June 30, 2016, 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 Incentive Compensation Plan: restricted stock units ("RSUs"), deferred stock units ("DSUs"), performance share units ("PSUs") 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 upon grant, which remains constant throughout the vesting period of three years and a performance multiplier, which will vary due to changing estimates of the performance metric condition.



	Three Months Ended						Six Months Ended
	June 30, 2017			June 30, 2016			June 30, 2017			June 30, 2016
	(In millions)
Pretax compensation expense	$	16.1		$	6.4		$	31.6		$	13.1
Tax benefit	(5.5		)	(1.9		)	(10.8		)	(3.8		)
After-tax compensation expense	$	10.6		$	4.5		$	20.8		$	9.3

The increase in expense in the first half of 2017 was primarily driven by the issuance of replacement awards to MillerCoors employees in connection with the completion of the Acquisition, as well as accelerated expense related to certain awards during the first quarter of 2017.

As of June 30, 2017, there was $92.2 million of total unrecognized compensation expense from all share-based compensation arrangements granted under the Incentive Compensation Plan, related to unvested awards. This total compensation expense is expected to be recognized over a weighted-average period of 1.9 years.



	RSUs and DSUs			PSUs
	Units		Weighted-average grant date 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, 2016	0.8		$87.01	0.5		$81.67
Granted	0.3		$92.15	0.2		$97.13
Vested	(0.3	)	$77.43	(0.2	)	$57.34
Converted⁽¹⁾	0.3		$106.17	(0.1	)	$106.17
Forfeited	—		$—	—		$—
Non-vested as of June 30, 2017	1.1		$95.53	0.4		$89.46


(1)	During the three months ended March 31, 2017, the MillerCoors 2016 PSU replacement awards were converted to RSUs under the Incentive Compensation Plan based on the achievement of the performance metric during the one year performance period ended December 31, 2016. These awards cliff vest at the end of a three year service period in the first quarter of 2019.

The weighted-average fair value per unit for the non-vested PSUs is $111.50 as of June 30, 2017.



	Stock options and SOSARS
	Awards	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, 2016	1.5	$59.79	5.4	$	58.2
Granted	0.2	$96.77
Exercised	(0.1)	$55.71
Forfeited	—	$—
Outstanding as of June 30, 2017	1.6	$63.89	5.5	$	38.0
Expected to vest at June 30, 2017	0.4	$89.81	8.9	$	0.8
Exercisable at June 30, 2017	1.2	$56.28	4.5	$	37.2

The total intrinsic values of stock options and SOSARs exercised during the six months ended June 30, 2017, and June 30, 2016, were $5.3 million and $9.9 million, respectively. During the six months ended June 30, 2017, and June 30, 2016, cash received from stock option exercises was $1.1 million and $5.4 million, respectively, and total tax benefits realized, including excess tax benefits, from share-based awards vested or exercised was $19.2 million and $10.9 million, respectively.

The fair value of each option granted in the first half of 2017 and 2016 was determined on the date of grant using the Black-Scholes option-pricing model with the following weighted-average assumptions:



	Six Months Ended
	June 30, 2017	June 30, 2016
Risk-free interest rate	2.04%	1.40%
Dividend yield	1.64%	1.81%
Volatility range	22.40%-22.88%	23.16%-24.64%
Weighted-average volatility	22.52%	23.53%
Expected term (years)	5.1	5.2
Weighted-average fair market value	$18.66	$16.65

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 half of 2017 and 2016 was determined on the date of grant using a Monte Carlo model to simulate total stockholder return for MCBC and peer companies with the following weighted-average assumptions:



	Six Months Ended
	June 30, 2017	June 30, 2016
Risk-free interest rate	1.59%	1.04%
Dividend yield	1.64%	1.81%
Volatility range	13.71%-80.59%	14.10%-77.11%
Weighted-average volatility	24.24%	23.68%
Expected term (years)	2.8	2.8
Weighted-average fair market value	$97.13	$90.49

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 June 30, 2017, there were 4.3 million shares of the Company's Class B common stock available for issuance as awards under the Incentive Compensation Plan.