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Share-Based Compensation | 6 Months Ended
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Sep. 27, 2014
Share-Based Compensation | 10. Share-Based Compensation The Company issues equity grants to certain employees and directors of the Company at the discretion of the Company’s Compensation Committee. The Company has two equity plans, one adopted in Fiscal 2008, the Michael Kors (USA), Inc. Stock Option Plan (as amended and restated, the “2008 Plan”), and the other adopted in the third fiscal quarter of Fiscal 2012, the Michael Kors Holdings Limited Omnibus Incentive Plan (the “2012 Plan”). The 2008 Plan provided for the granting of share options only and was authorized to issue up to 23,980,823 ordinary shares. Subsequent to the adoption of the 2012 Plan, there were no shares available for the granting of equity awards under the 2008 Plan. The 2012 Plan allows for the granting of share options, restricted shares and restricted share units, and other equity awards, and authorizes a total issuance of up to 15,246,000 ordinary shares. At September 27, 2014, there were 10,701,997 ordinary shares available for the granting of equity awards under the 2012 Plan. Option grants issued from the 2008 Plan generally expire ten years from the date of the grant, and those issued under the 2012 Plan generally expire seven years from the date of the grant. Share Options Share options are generally exercisable at no less than the fair market value on the date of grant. The Company has issued two types of option grants, those that vest based on the attainment of a performance target and those that vest based on the passage of time. Performance based share options may vest based upon the attainment of one of two performance measures. One performance measure is an individual performance target, which is based upon certain performance targets unique to the individual grantee, and the other measure is a company-wide performance target, which is based on a cumulative minimum growth requirement in consolidated net equity. The individual performance target vests 20% of the total option grant each year the target is satisfied. The individual has ten years in which to achieve five individual performance vesting tranches. The company-wide performance target must be achieved over the ten-year term. Performance is measured at the end of the term, and any unvested options under the grant vest if the target is achieved. The Company-wide performance target is established at the time of the grant. The target metrics underlying individual performance vesting requirements are established for each recipient each year up until such time as the grant is fully vested. Options subject to time based vesting requirements generally become vested in four equal increments on each of the first, second, third and fourth anniversaries of the date on which such options were awarded. The following table summarizes the share option activity during the six months ended September 27, 2014, and information about options outstanding at September 27, 2014:
|  | Number of Options |  |  | Weighted Average Exercise price |  |  | Weighted Average Remaining Contractual Life (years) |  |  | Aggregate Intrinsic Value (in thousands) |
Outstanding at March 29, 2014 |  |  | 8,377,928 |  |  | $ | 13.69 |  |  |  |  |  |  |  |  |
Granted |  |  | 724,746 |  |  | $ | 92.73 |  |  |  |  |  |  |  |  |
Exercised |  |  | (1,142,083 | ) |  | $ | 7.13 |  |  |  |  |  |  |  |  |
Canceled/forfeited |  |  | (126,703 | ) |  | $ | 29.20 |  |  |  |  |  |  |  |  |
Outstanding at September 27, 2014 |  |  | 7,833,888 |  |  | $ | 21.70 |  |  |  | 5.84 |  |  | $ | 405,430 |
Vested or expected to vest at September 27, 2014 |  |  | 7,677,210 |  |  | $ | 21.70 |  |  |  | 5.84 |  |  |  |  |
Vested and exercisable at September 27, 2014 |  |  | 3,388,805 |  |  | $ | 10.26 |  |  |  | 5.56 |  |  | $ | 207,492 |
There were 4,445,083 non-vested and 3,388,805 vested outstanding options at September 27, 2014. The total intrinsic value of options exercised during the six months ended September 27, 2014 was $91.9 million, and the cash received from options exercised during this period was $8.1 million. The total intrinsic value of options exercised during the six months ended September 28, 2013 was $128.5 million, and the cash received from options exercised during this period was $13.0 million. As of September 27, 2014, the remaining unrecognized share-based compensation expense for non-vested share options to be expensed in future periods is $39.1 million, and the related weighted-average period over which it is expected to be recognized is approximately 3.0 years. The weighted average grant date fair value for options granted during the three and six months ended September 27, 2014 was $26.63 and $28.66, respectively, and for the three and six months ended September 28, 2013 was $27.46 and $24.93, respectively. The following table represents assumptions used to estimate the fair value of options:
|  | Three Months Ended |  |  | Six Months Ended |
|  | September 27, 2014 |  |  | September 28, 2013 |  |  | September 27, 2014 |  |  | September 28, 2013 |
Expected dividend yield |  |  | 0.0 | % |  |  | 0.0 | % |  |  | 0.0 | % |  |  | 0.0 | %
Volatility factor |  |  | 33.1 | % |  |  | 43.3 | % |  |  | 33.3 | % |  |  | 46.1 | %
Weighted average risk-free interest rate |  |  | 1.6 | % |  |  | 1.5 | % |  |  | 1.5 | % |  |  | 1.0 | %
Expected life of option |  |  | 4.75 years |  |  |  | 4.75 years |  |  |  | 4.75 years |  |  |  | 4.75 years |
Restricted Shares and Restricted Share Units The Company grants restricted shares and restricted share units at the fair market value at the date of the grant. Expense for restricted share grants is calculated based on the intrinsic value of the grant, which is the difference between the cost to the recipient and the fair market value of the underlying share (grants are generally issued at no cost to the recipient). Expense is recognized ratably over the vesting period which is generally three to four years from the date of the grant. Similar to share options, restricted share grants generally vest in four equal increments on each of the first, second, third and fourth anniversaries of the date on which such grants were awarded. With respect to restricted share units, there are two types: performance based vesting grants and time based vesting grants. Share units whose vesting is based on meeting certain performance criteria, vest in full, three years from their anniversary date only if certain cumulative performance targets are met at the end of the three year period. Expense related to these grants is recognized ratably over the three year performance period subject to the probability of the attainment of the related performance targets. Share units that vest based on time generally vest in full either on the first or fourth anniversary of the date of the grant, and are expensed accordingly. The following table summarizes restricted shares under the 2012 Plan as of September 27, 2014 and changes during the fiscal period then ended:
|  | Number of Unvested Restricted Shares |  |  | Weighted Average Grant Date Fair Value |
Unvested at March 29, 2014 |  |  | 657,853 |  |  | $ | 38.38 |
Granted |  |  | 378,975 |  |  | $ | 93.08 |
Vested |  |  | (45,489 | ) |  | $ | 62.18 |
Canceled/forfeited |  |  | (19,222 | ) |  | $ | 61.06 |
Unvested at September 27, 2014 |  |  | 972,117 |  |  | $ | 57.73 |
The total fair value of restricted shares vested during the six months ended September 27, 2014 was $5.8 million. The total fair value of restricted shares vested during the six months ended September 28, 2013 was $0.1 million. As of September 27, 2014, the remaining unrecognized share-based compensation expense for non-vested restricted share grants to be expensed in future periods is $47.0 million, and the related weighted-average period over which it is expected to be recognized is approximately 3.18 years. The following table summarizes restricted share units under the 2012 Plan as of September 27, 2014 and changes during the fiscal period then ended:
|  | Number of Unvested Restricted Units |  |  | Weighted Average Grant Date Fair Value |
Unvested at March 29, 2014 |  |  | 199,779 |  |  | $ | 58.31 |
Granted |  |  | 239,311 |  |  | $ | 81.88 |
Vested |  |  | (4,370 | ) |  | $ | 68.65 |
Canceled/forfeited |  |  | (1,446 | ) |  | $ | 62.24 |
Unvested at September 27, 2014 |  |  | 433,274 |  |  | $ | 71.21 |
As of September 27, 2014, the remaining unrecognized share-based compensation expense for non-vested restricted share units to be expensed in future periods is $21.4 million, and the related weighted-average period over which it is expected to be recognized is approximately 2.27 years. Compensation expense attributable to share-based compensation for the three and six months ended September 27, 2014 was approximately $13.4 million and $21.6 million, respectively. Compensation expense attributable to share-based compensation for the three and six months ended September 28, 2013 was approximately $7.6 million and $13.1 million, respectively. Forfeitures are estimated at the time of grant and revised, if necessary, in subsequent periods if actual forfeitures differ from those estimates. The Company estimates forfeitures based on its historical forfeiture rate since the inception of stock option granting. The estimated value of future forfeitures for equity grants as of September 27, 2014 is approximately $1.6 million.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5047-113901 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5070-113901 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6406099&loc=d3e25284-112666 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 40 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6418621&loc=d3e17540-113929 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -SubTopic 10 -Section 50 -Paragraph 4 -URI http://asc.fasb.org/extlink&oid=6415400&loc=d3e5444-113901 Reference 6: http://www.xbrl.org/2003/role/presentationRef -Publisher SEC -Name Staff Accounting Bulletin (SAB) -Number Topic 14 + Details
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