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 December 30, 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 December 30, 2017, there were 7,156,445 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.

The following table summarizes the Company’s share-based compensation activity during the nine months ended December 30, 2017:



	Options		Restricted Shares		Service-Based RSUs		Performance-Based RSUs
Outstanding/Unvested at April 1, 2017	4,791,045		185,425		1,470,767		401,777
Granted	208,264		—		1,325,307		139,562
Exercised/Vested	(494,926	)	(113,999	)	(400,057	)	(81,212	)
Decrease due to performance condition	—		—		—		(12,891	)
Canceled/forfeited	(75,167	)	(6,060	)	(189,305	)	—
Outstanding/Unvested at December 30, 2017	4,429,216		65,366		2,206,712		447,236

The weighted average grant date fair value for options granted during the nine months ended December 30, 2017 and December 31, 2016 was $11.62 and $13.79, respectively. The weighted average grant date fair value of service-based and performance-based RSUs granted during the nine months ended December 30, 2017 was $37.33 and $34.68, respectively and $50.08 and $49.88, respectively, during the nine months ended December 31, 2016.

The Company uses the Black-Scholes valuation model to estimate the grant date fair value of its share option awards. Beginning in Fiscal 2018, the Company started using its own historical experience in determining the expected holding period and volatility of its time-based share option awards. In prior periods, the Company used the simplified method for determining the expected life of its options and average volatility rates of similar actively traded companies over the estimated holding period, due to insufficient historical option exercise experience as a public company. The following table presents assumptions used to estimate the fair value of options granted during the nine months ended December 30, 2017 and December 31, 2016:



	Nine Months Ended
	December 30 2017		December 31 2016
Expected dividend yield	0.0	%	0.0	%
Volatility factor	36.3	%	30.1	%
Weighted average risk-free interest rate	1.8	%	1.1	%
Expected life of option	4.69 years		4.75 years

Share-Based Compensation Expense

The following table summarizes compensation expense attributable to share-based compensation for the three and nine months ended December 30, 2017 and December 31, 2016 (in millions):



	Three Months Ended					Nine Months Ended
	December 30, 2017			December 31, 2016		December 30, 2017		December 31, 2016
Share-based compensation expense	$	8.5		$	5.3	$	29.6	$	26.7
Tax (deficit) benefits related to share-based compensation expense ⁽¹⁾	$	(0.6	)	$	1.6	$	6.2	$	9.1

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⁽¹⁾	Due to the reduction in the corporate tax rate introduced by the Tax Act enacted on December 22, 2017 (see Note 2 for additional information), the Company has realized a net tax deficit during the three months ended December 30, 2017, as the benefit of the tax deduction was revalued to the lower tax rate during this period.

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 December 30, 2017 is approximately $7.6 million.

Please refer to Note 15 in the Company’s Fiscal 2017 Annual Report on Form 10-K for additional information relating to the Company’s share-based compensation awards.