Share-Based Compensation

In connection with our initial public offering, the Board of Directors adopted the 2005 Long-Term Equity Incentive Plan (the “Plan”), which provides for grants of up to a maximum of 5.0 million shares of restricted stock, stock options, restricted stock units and other equity-based awards. In June 2014, the Board of Directors approved, and in July 2014, the stockholders ratified, an increase of an additional 1.8 million shares of our common stock for issuance under the Plan, increased the maximum number of shares subject to stock options that may be awarded to any one participant under the Plan during any 12-month period from 1.0 million to 2.5 million shares, and extended the term of the Plan by ten years, to February 2025. Directors, officers and other employees of the Company and its subsidiaries, as well as others performing services for the Company, are eligible for grants under the Plan.

During 2017, pre-tax share-based compensation costs charged against income and the related income tax benefit recognized were $8.1 million and $2.6 million, respectively.

During 2016, pre-tax share-based compensation costs charged against income and the related income tax benefit recognized were $10.0 million and $3.5 million, respectively.

During 2015, pre-tax share-based compensation costs charged against income and the related income tax benefit recognized were $6.9 million and $1.9 million, respectively.

At March 31, 2017, there were $7.9 million of unrecognized compensation costs related to nonvested share-based compensation arrangements under the Plan, based on management’s estimate of the shares that will ultimately vest. We expect to recognize such costs over a weighted-average period of 0.8 years. The total fair value of options and restricted shares vested during 2017, 2016, and 2015 was $6.0 million, $7.0 million and $4.7 million, respectively. During the years ended March 31, 2017, 2016 and 2015, there were 94,718, 155,603 and 154,418 shares of restricted stock units that vested, respectively, and we issued shares of common stock. Additionally, we issued common stock as a result of 126,820, 348,055 and 386,254 stock options that were exercised during 2017, 2016 and 2015, respectively. Cash received from the exercise of stock options was $4.0 million during 2017, and we realized $0.9 million in tax benefits for the tax deductions resulting from option exercises in 2017. Cash received from the exercise of stock options was $6.7 million during 2016, and we realized $2.1 million in tax benefits for the tax deductions resulting from option exercises in 2016. Cash received from the exercise of stock options was $4.0 million during 2015, and we realized $2.2 million in tax benefits for the tax deductions from option exercises in 2015. At March 31, 2017, there were 2.4 million shares available for issuance under the Plan.

On May 9, 2016, the Compensation Committee of our Board of Directors granted 49,064 shares of restricted stock units and stock options to acquire 224,843 shares of our common stock to certain executive officers and employees under the Plan. All of the shares of restricted stock units vest in their entirety on the three-year anniversary of the date of grant. Upon vesting, the units will be settled in shares of our common stock. The stock options will vest 33.3% per year over three years and are exercisable for up to ten years from the date of grant. These stock options were granted at an exercise price of $57.18 per share, which is equal to the closing price for our common stock on the date of the grant. Termination of employment prior to vesting will result in forfeiture of the unvested restricted stock units and the unvested stock options. Vested stock options will remain exercisable by the employee after termination, subject to the terms of the Plan.

On September 12, 2016, we announced that Christine Sacco had been appointed as Chief Financial Officer of the Company, effective that same day. In connection with Ms. Sacco's appointment as Chief Financial Officer on September 12, 2016, the Company executed an offer letter with Ms. Sacco, which sets forth the terms of her compensation as approved by the Compensation Committee of the Board of Directors. In accordance with the terms of her offer letter, the Company granted Ms. Sacco 5,012 shares of restricted stock units and stock options to acquire 25,746 shares of our common stock under the Plan. The restricted stock units vest in their entirety on the three-year anniversary of the date of grant. Upon vesting, the units will be settled in shares of our common stock. The stock options will vest 33.3% per year over three years and are exercisable for up to ten years from the date of grant. These stock options were granted at an exercise price of $47.39 per share, which is equal to the closing price of our common stock on the date of grant.

On November 14, 2016, we announced that William C. P'Pool had been appointed as Senior Vice President, General Counsel and Corporate Secretary, effective that same day. In connection with Mr. P'Pool's appointment as Senior Vice President, General Counsel and Corporate Secretary on November 14, 2016, the Company executed an offer letter with Mr. P'Pool, which sets forth the terms of his compensation as approved by the Compensation Committee of the Board of Directors. In accordance with the terms of his offer letter, the Company granted Mr. P'Pool 2,664 shares of restricted stock units and stock options to acquire 13,683 shares of our common stock under the Plan. The restricted stock units vest in their entirety on the three-year anniversary of the date of grant. Upon vesting, the units will be settled in shares of our common stock. The stock options will vest 33.3% per year over three years and are exercisable for up to ten years from the date of grant. These stock options were granted at an exercise price of $50.06 per share, which is equal to the closing price of our common stock on the date of grant.

Restricted Stock Units

Restricted stock units ("RSUs") granted to employees under the Plan generally vest over three to five years, primarily upon the attainment of certain time vesting thresholds, and may also be contingent on the attainment of certain performance goals of the Company, including revenue and earnings before income taxes, depreciation and amortization targets. The RSUs provide for accelerated vesting if there is a change of control, as defined in the Plan. The RSUs granted to employees generally vest in their entirety on the three-year anniversary of the date of the grant. Upon vesting, the units will be settled in shares of our common stock. Termination of employment prior to vesting will result in forfeiture of the RSUs, unless otherwise accelerated by the Compensation Committee. The RSUs granted to directors vest in their entirety one year after the date of grant so long as the membership on the Board of Directors continues through the vesting date, and will be settled by delivery to the director of one share of common stock of the Company for each vested RSU promptly following the earliest of the director's (i) death, (ii) disability or (iii) six-month anniversary of the date on which the director's Board membership ceases for reasons other than death or disability.

At our annual meeting date on August 2, 2016, each of our six independent members of the Board of Directors received a grant of 1,896 restricted stock units under the Plan. Additionally, on May 26, 2016, the Compensation Committee granted 346 restricted stock units to a newly appointed Board member.

The fair value of the restricted stock units is determined using the closing price of our common stock on the date of the grant. The weighted-average grant-date fair value of restricted stock units granted during 2017, 2016, and 2015 was $55.44, $42.41 and $33.33, respectively.

A summary of the Company’s RSUs granted under the Plan is presented below:



RSUs	Shares (in thousands)		Weighted-Average Grant-Date Fair Value
Vested and Nonvested at March 31, 2014	437.5		$	16.76

Granted	106.9		33.33
Vested and issued	(154.4	)	13.37
Forfeited	(27.7	)	21.45
Vested and nonvested at March 31, 2015	362.3		22.74
Vested at March 31, 2015	76.6		11.62

Granted	266.1		42.41
Vested and issued	(155.6	)	18.31
Forfeited	(5.0	)	39.61
Vested and nonvested at March 31, 2016	467.8		35.22
Vested at March 31, 2016	69.8		14.76

Granted	68.4		55.44
Vested and issued	(94.7	)	28.51
Forfeited	(91.4	)	41.71
Vested and nonvested at March 31, 2017	350.1		39.29
Vested at March 31, 2017	63.4		20.12

Options

The Plan provides that the exercise price of options granted shall be no less than the fair market value of the Company's common stock on the date the options are granted. Options granted have a term of no greater than ten years from the date of grant and vest in accordance with a schedule determined at the time the option is granted, generally three to five years. The option awards provide for accelerated vesting in the event of a change in control, as defined in the Plan. Termination of employment prior to vesting will result in forfeiture of the unvested stock options. Vested stock options will remain exercisable by the employee after termination of employment, subject to the terms of the Plan.

The fair value of each option award is estimated on the date of grant using the Black-Scholes Option Pricing Model that uses the assumptions noted in the table below. Expected volatilities are based on the historical volatility of our common stock and other factors, including the historical volatilities of comparable companies. We use appropriate historical data, as well as current data, to estimate option exercise and employee termination behaviors. Employees that are expected to exhibit similar exercise or termination behaviors are grouped together for the purposes of valuation. The expected terms of the options granted are derived from our historical experience, management’s estimates, and consideration of information derived from the public filings of companies similar to us, and represent the period of time that options granted are expected to be outstanding. The risk-free rate represents the yield on U.S. Treasury bonds with a maturity equal to the expected term of the granted options.

The weighted-average grant-date fair values of the options granted during 2017, 2016, and 2015 were $21.75, $17.24, and $15.95, respectively.



	Year Ended March 31,
	2017		2016		2015
Expected volatility	37.8	%	40.2	%	47.3	%
Expected dividends	—		—		—
Expected term in years	6.0		6.0		6.0
Risk-free rate	1.7	%	1.7	%	2.2	%

A summary of option activity under the Plan is as follows:



Options	Shares (in thousands)		Weighted-Average Exercise Price		Weighted- Average Remaining Contractual Term	Aggregate Intrinsic Value (in thousands)

Outstanding at March 31, 2014	994.9		$	15.24

Granted	317.9		33.54
Exercised	(386.3	)	10.24
Forfeited or expired	(55.3	)	26.77
Outstanding at March 31, 2015	871.2		23.40

Granted	208.2		42.13
Exercised	(348.0	)	19.22
Forfeited or expired	(3.7	)	35.72
Outstanding at March 31, 2016	727.7		30.70

Granted	264.3		55.86
Exercised	(126.8	)	31.75
Forfeited or expired	(92.9	)	42.66
Outstanding at March 31, 2017	772.3		37.70		7.3	$	14,118
Exercisable at March 31, 2017	367.4		25.40		6.0	$	11,083

The aggregate intrinsic value of options exercised during 2017, 2016 and 2015 was $3.2 million, $8.6 million and $9.3 million, respectively.