Stockholders' Equity

The Company has authorized 5,000,000 shares of preferred stock, par value $1.00, none of which has been issued.

The Company sponsors six stock-based incentive plans, including: the Orbital ATK, Inc. 2015 Stock Incentive Plan (the "2015 Stock Incentive Plan"); three legacy ATK plans (the Alliant Techsystems Inc. 2005 Stock Incentive Plan, the Non-Employee Director Restricted Stock Plan and the 1990 Equity Incentive Plan); and two legacy Orbital plans, under which the Company assumed the obligation to issue Company common stock pursuant to the terms of the Transaction Agreement relating to the Merger (the Orbital Sciences Corporation 2005 Amended and Restated Stock Incentive Plan and the Orbital Sciences Corporation 1997 Stock Option and Incentive Plan). At December 31, 2015, the Company has authorized up to 3,750,000 common shares under the ATK 2015 Stock Incentive Plan, of which 3,704,016 common shares are available to be granted. No new grants will be made out of the other five plans.

There are five types of awards outstanding under the Company's stock incentive plans: performance awards, TSR awards, restricted stock units, restricted stock and stock options. The Company issues treasury shares upon (i) the payment of performance awards, TSR awards and restricted stock units, (ii) the grant of restricted stock, and (iii) the exercise of stock options.

Pursuant to the terms of the Transaction Agreement and under the terms of the ATK 2005 Stock Incentive Plan, all of the performance awards and TSR awards outstanding at February 9, 2015 were converted into time-vesting restricted stock units in connection with the Distribution, with vesting periods corresponding to the respective performance periods. At December 31, 2015, there were 40,707 shares reserved for the vesting of restricted stock units for the fiscal 2014-2016 performance period on March 31, 2016 and 55,677 shares reserved for the vesting of restricted stock units for the fiscal 2015-2017 performance period on March 31, 2017.

At December 31, 2015, there were up to 157,799 shares reserved for performance and TSR awards for executive officers and key employees. Performance shares are valued at the fair value of the Company stock at the grant date and expense is recognized based on the number of shares expected to vest under the terms of the award under which they are granted. Of these performance shares:


•	up to 50% will become payable only upon achievement of a financial performance goal relating to absolute earnings per share growth for the performance period beginning April 1, 2015 and ending December 31, 2017;


•	up to 50% will become payable only upon achievement of a performance goal relating to absolute sales growth for the performance period beginning April 1, 2015 and ending December 31, 2017.

The weighted average fair value of TSR awards granted was $94.93 during the nine months ended December 31, 2015 and fiscal 2015. The Company used an integrated Monte Carlo simulation model to determine the fair value of these awards. The Monte Carlo model calculates the probability of satisfying the market conditions stipulated in the award. This probability is an input into the trinomial lattice model used to determine the fair value of the awards as well as the assumptions of other variables, including the risk-free interest rate and expected volatility of the Company's stock price in future periods. The risk-free rate is based on the U.S. dollar-denominated U.S. Treasury strip rate with a remaining term that approximates the life assumed at the date of grant.

Weighted-average assumptions used in estimating the value of the TSR award were as follows:



	Nine Months Ended December 31, 2015		Year Ended March 31, 2015
Risk-free rate	1.02	%	1.02	%
Expected volatility	22.81	%	22.81	%
Expected dividend yield	1.78	%	1.78	%
Expected award life	3		3

Restricted stock granted to non-employee directors and certain key employees totaled 86,108 shares in the 2015 transition period, 139,093 shares in fiscal 2015, and 127,425 shares in fiscal 2014. Restricted shares vest over periods generally ranging from one to three years from the date of award and are valued at the fair value of the Company's common stock at the grant date.

Stock options may be granted periodically, with an exercise price equal to the fair market value of the Company's common stock on the date of grant, and generally vest from one to three years from the date of grant. Options are generally granted with seven-year or ten-year terms.

The weighted-average fair value of each option grant is estimated on the date of grant using the Black-Scholes option pricing model and represents the difference between fair market value on the date of grant and the estimated market value on the expected exercise date. The option pricing model requires the Company to make assumptions. The risk-free rate is based on U.S. Treasury zero-coupon issues with a remaining term that approximates the expected life assumed at the date of grant. Expected volatility is based on the historical volatility of the Company's stock over the past seven years. The expected option life is based on the contractual term of the stock option and expected employee exercise and post-vesting employment termination trends. The weighted-average fair value of options granted was $20.80, $39.81 and $35.34 during the 2015 transition period and the years ended March 31, 2015 and March 31, 2014, respectively.

Weighted-average assumptions used in estimating the value of the grants were as follows:



	Nine Months Ended December 31, 2015	Years Ended
	Nine Months Ended December 31, 2015	March 31, 2015	March 31, 2014
Risk-free rate	1.99%	1.82%	1.86%-2.07%
Expected volatility	27.91%	27.67%	25.95%-26.71%
Expected dividend yield	1.17%	0.99%	1.27%-1.58%
Expected option life	7 years	7 years	7 years

Total pre-tax stock-based compensation expense of $19,521, $25,325 and $12,701 was recognized during the 2015 transition period, fiscal 2015 and fiscal 2014, respectively. The total income tax benefit recognized in the statement of comprehensive income for share-based compensation was $7,544, $8,761 and $4,874 during the 2015 transition period, fiscal 2015 and fiscal 2014, respectively.

The Company's stock option activity was as follows:



	Shares		Weighted Average Exercise Price		Weighted Average Remaining Contractual Life (in years)	Aggregate Intrinsic Value (per option)
Outstanding, March 31, 2013	262,248		$	61.72	2.7	$	—
Granted	47,490		130.86
Exercised	(13,173	)	55.32
Forfeited/expired	(26,160	)	62.34
Outstanding, March 31, 2014	270,405		$	74.11	8.3	$	68.04
Granted	73,100		72.06
Converted in conjunction with the Merger	11,225		27.45
Outstanding, March 31, 2015	354,730		$	41.83	7.8	$	34.80
Granted	1,443		73.13
Exercised	(122,893	)	30.90
Outstanding, December 31, 2015	233,280		$	47.79	7.7	$	41.55
Options exercisable at:
December 31, 2015	109,509		$	32.43	6.6	$	56.91
March 31, 2015	230,715		$	64.32	7.0	$	44.99
March 31, 2014	114,083		$	61.63	8.0	$	80.52

The total intrinsic value of options exercised was $5,363 (as restated) and $295 during the 2015 transition period and fiscal 2014, respectively. There were no options exercised in fiscal 2015. Total cash received from options exercised during the 2015 transition period and fiscal 2014 was $3,684 and $729, respectively.

The Company's nonvested stock-based compensation awards activity was as follows:



	Performance Share and TSR Awards		Restricted Stock Units		Restricted Stock Awards		Combined Weighted Average Grant Date Fair Value
Nonvested, March 31, 2013	491,016		—		267,426		$	65.42
Granted	113,212		—		127,451		114.65
Canceled/forfeited	(200,557	)	—		(13,526	)	68.65
Vested	(95,579	)	—		(98,407	)	66.60
Nonvested, March 31, 2014	308,092		—		282,944		$	83.91
Granted	161,661		—		139,094		81.88
Converted in conjunction with the Merger	—		647,436		—		71.29
Canceled/forfeited	(309,223	)	—		(13,521	)	87.05
Vested	—		(146,497	)	(195,882	)	72.50
Nonvested, March 31, 2015	160,530		500,939		212,635		$	77.02
Granted	2,976		—		86,108		74.88
Canceled/forfeited	(5,374	)	(10,908	)	(9,914	)	80.88
Vested	(333	)	(191,084	)	(17,806	)	43.87
Nonvested, December 31, 2015	157,799		298,947		271,023		$	75.57

At December 31, 2015, the total unrecognized compensation cost related to nonvested stock-based compensation awards was $29,320 and is expected to be realized over a weighted average period of 2.2 years.

Share Repurchases

On March 11, 2015, the Company's Board of Directors authorized the Company to repurchase up to the lesser of $75,000 or 1.0 million shares of its common stock through December 31, 2015. On August 4, 2015, the Board of Directors increased the amount authorized for repurchase to the lesser of $100,000 or 1.4 million shares of the Company's common stock. On October 29, 2015, the Board of Directors increased the amount authorized for repurchase to the lesser of $250,000 or 3.25 million shares. Under the authorized repurchase program, shares of the Company common stock may be purchased from time to time in the open market, subject to compliance with applicable laws and regulations and the Company’s debt covenants, depending upon market conditions and other factors. The Company repurchased 1,008,445 shares for $75,795 in the 2015 transition period, $0 during fiscal 2015 and 609,922 shares for $52,130 during fiscal 2014.

In accordance with the Transaction Agreement entered into on April 28, 2014, the Company did not repurchase any outstanding shares prior to the closing of the Distribution and Merger during fiscal 2015.