Share-Based Compensation

The Company issues equity grants to certain employees and directors of the Company at the discretion of the Company’s Compensation and Talent 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 and amended and restated with shareholder approval in May 2015, the Michael Kors Holdings Limited Amended and Restated Omnibus Incentive Plan (the “Incentive Plan”). The 2008 Plan only provided for grants of share options and was authorized to issue up to 23,980,823 ordinary shares. As of April 1, 2017, there were no shares available to grant equity awards under the 2008 Plan. The Incentive Plan allows for grants 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 April 1, 2017, there were 8,770,441 ordinary shares available for future grants of equity awards under the Incentive Plan. Option grants issued from the 2008 Plan generally expire ten years from the date of the grant, and those issued under the Incentive 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. Under the 2008 Plan, performance-based share options may vest based upon the attainment of one of two performance measures. One performance measure is a divisional performance target 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 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. Under the Incentive Plan, options subject to time-based vesting requirements become vested in four equal increments on each of the four anniversaries of the date on of grant.

The following table summarizes the share options activity during Fiscal 2017, and information about options outstanding at April 1, 2017:



	Number of Options		Weighted Average Exercise price		Weighted Average Remaining Contractual Life (years)	Aggregate Intrinsic Value (in millions)
Outstanding at April 2, 2016	5,820,413		$	28.41
Granted	177,666		$	49.88
Exercised	(794,482	)	$	10.49
Canceled/forfeited	(412,552	)	$	70.62
Outstanding at April 1, 2017	4,791,045		$	28.55	3.29	$	88.6
Vested or expected to vest at April 1, 2017	4,774,511		$	28.55	3.29
Vested and exercisable at April 1, 2017	3,909,592		$	21.60	2.95	$	86.8

There were 881,453 unvested options and 3,909,592 vested options outstanding at April 1, 2017. The total intrinsic value of options exercised during Fiscal 2017 and Fiscal 2016 was $30.5 million and $70.3 million, respectively. The cash received from options exercised during Fiscal 2017 and Fiscal 2016 was $8.3 million and $12.7 million, respectively. As of April 1, 2017, the remaining unrecognized share-based compensation expense for nonvested share options was $9.2 million, which is expected to be recognized over the related weighted-average period of approximately 1.71 years.

The weighted average grant date fair value for options granted during Fiscal 2017, Fiscal 2016 and Fiscal 2015, was $13.79, $14.35 and $27.96, respectively. The following table represents assumptions used to estimate the fair value of options:



	Fiscal Years Ended
	April 1, 2017		April 2, 2016		March 28, 2015
Expected dividend yield	0.0	%	0.0	%	0.0	%
Volatility factor	30.1	%	31.1	%	33.2	%
Weighted average risk-free interest rate	1.1	%	1.6	%	1.5	%
Expected life of option	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 on the date of the grant. Expense for restricted share awards is based on the closing market price of the Company’s shares on the date of grant and is recognized ratably over the vesting period net of expected forfeitures.

Restricted share grants generally vest in equal increments on each of the four anniversaries of the date of grant. In addition, the Company grants two types of restricted share unit (“RSU”) awards: time-based RSUs and performance-based RSUs. Time-based RSUs generally vest in full either on the first anniversary of the date of grant for our independent directors, or in equal increments on each of the four anniversaries of the date of grant. Performance-based RSUs vest in full on the three-year anniversary of the date of grant, subject to the employee’s continued employment during the vesting period and only if certain pre-established cumulative performance targets are met at the end of the three-year performance period. Expense related to performance-based RSUs is recognized ratably over the three-year performance period, net of forfeitures, based on the probability of attainment of the related performance targets. The potential number of shares that may be earned ranges from 0%, if the minimum level of performance is not attained, to 150%, if the level of performance is at or above the predetermined maximum achievement level.

The following table summarizes restricted share activity during Fiscal 2017:



	Restricted Shares
	Number of Unvested Restricted Shares		Weighted Average Grant Date Fair Value
Unvested at April 2, 2016	390,229		$	82.38
Granted	—		$	—
Vested	(139,759	)	$	79.46
Canceled/forfeited	(65,045	)	$	83.71
Unvested at April 1, 2017	185,425		$	84.12

The total fair value of restricted shares vested was $6.7 million, $14.4 million and $22.8 million during Fiscal 2017, Fiscal 2016 and Fiscal 2015, respectively. As of April 1, 2017, the remaining unrecognized share-based compensation expense for non-vested restricted share grants was $8.5 million, which is expected to be recognized over the related weighted-average period of approximately 1.16 years.

The following table summarizes the RSU activity during Fiscal 2017:



	Service-based				Performance-based
	Number of Restricted Share Units		Weighted Average Grant Date Fair Value		Number of Restricted Share Units		Weighted Average Grant Date Fair Value
Unvested at April 2, 2016	1,071,058		$	47.13	579,774		$	61.84
Granted	907,149		$	49.27	98,237		$	49.88
Increase due to performance condition	—		$	—	80,093		$	62.24
Vested	(278,643	)	$	47.62	(240,278	)	$	62.24
Canceled/forfeited	(228,797	)	$	46.92	(116,049	)	$	62.73
Unvested at April 1, 2017	1,470,767		$	48.39	401,777		$	58.50

The total fair value of service-based RSUs vested during Fiscal 2017, Fiscal 2016 and Fiscal 2015 was $13.7 million, $1.1 million and $0.4 million, respectively. As of April 1, 2017, the remaining unrecognized share-based compensation expense for non-vested service-based and performance-based RSU grants was $54.0 million and $0.5 million, respectively, which is expected to be recognized over the related weighted-average periods of approximately 2.70 years and 0.22 years, respectively.

Share-Based Compensation Expense

The following table summarizes compensation expense attributable to share-based compensation for Fiscal 2017, Fiscal 2016 and Fiscal 2015 (in millions):



	Fiscal Years Ended
	April 1, 2017		April 2, 2016		March 28, 2015
Share-based compensation expense	$	33.9	$	48.4	$	48.9
Tax benefits related to share-based compensation expense	$	11.2	$	15.7	$	17.5

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 to date. The estimated value of future forfeitures for equity grants as of April 1, 2017 is approximately $1.8 million.