(12) STOCK-BASED COMPENSATION

Stock-based compensation expense is recognized over the requisite service period, which generally equals the stated vesting period. Pre-tax stock-based compensation expense was $7.1 million and $11.8 million for the three months ended March 31, 2017 and 2016, respectively, with a resulting deferred tax benefit of $2.7 million and $4.5 million, respectively. Pre-tax stock-based compensation expense was $19.1 million and $36.8 million for the nine months ended March 31, 2017 and 2016, respectively, with a resulting tax benefit of $7.3 million and $14.0 million, respectively. The deferred tax benefit was calculated at a rate of 38%, which represents the expected effective income tax rate at the time of the compensation expense deduction primarily at PHSI, and differs from the Company's current effective income tax rate which includes the impact of partnership income not subject to federal and state income taxes.

Premier 2013 Equity Incentive Plan

The Premier 2013 Equity Incentive Plan, as amended and restated (and including any further amendments thereto, the "2013 Equity Incentive Plan"), provides for grants of up to 11.3 million shares of Class A common stock, all of which are eligible to be issued as non-qualified stock options, incentive stock options, stock appreciation rights, restricted stock, restricted stock units or performance awards. As of March 31, 2017, there were 4.6 million shares available for grant under the 2013 Equity Incentive Plan.

The following table includes information related to restricted stock, performance share awards and stock options for the nine months ended March 31, 2017:



	Restricted Stock				Performance Share Awards				Stock Options
	Number of Awards		Weighted Average Fair Value at Grant Date		Number of Awards		Weighted Average Fair Value at Grant Date		Number of Options		Weighted Average Exercise Price
Outstanding at June 30, 2016	403,117		$	33.86	1,443,708		$	30.02	3,314,661		$	30.04
Granted	265,852		$	31.57	902,736		$	29.72	524,709		$	31.59
Vested/exercised	(47,114	)	$	32.83	(1,181,820	)	$	27.00	(123,586	)	$	27.57
Forfeited	(38,980	)	$	33.77	(74,101	)	$	33.91	(121,811	)	$	34.22
Outstanding at March 31, 2017	582,875		$	32.91	1,090,523		$	32.78	3,593,973		$	30.21

Stock options outstanding and exercisable at March 31, 2017									2,429,376		$	28.77

Restricted stock units and restricted stock awards issued and outstanding generally vest over a three-year period for employees and a one-year period for directors. Performance share awards issued and outstanding generally vest over three years if performance targets are met. Stock options have a term of ten years from the date of grant. Vested stock options will expire either after twelve months of an employee's termination with Premier or immediately upon an employee's termination with Premier, depending on the termination circumstances. Stock options generally vest in equal annual installments over three years.

Unrecognized stock-based compensation expense at March 31, 2017 was as follows (in thousands):



	Unrecognized Stock-Based Compensation Expense		Weighted Average Amortization Period
Restricted stock	$	10,815	1.83 years
Performance share awards	19,535		1.91 years
Stock options	9,737		1.83 years
Total unrecognized stock-based compensation expense	$	40,087	1.87 years

The aggregate intrinsic value of stock options at March 31, 2017 was as follows (in thousands):



	Intrinsic Value of Stock Options
Outstanding and exercisable	$	8,556
Expected to vest	170
Total outstanding	$	8,726

Exercised during the nine months ended March 31, 2017	$	621

The Company estimated the fair value of each stock option on the date of grant using a Black-Scholes option-pricing model, applying the following assumptions, and amortized expense over each option's vesting period using the straight-line attribution approach:



	Nine Months Ended March 31,
	2017	2016
Expected life ^(a)	6 years	6 years
Expected dividend ^(b)	—	—
Expected volatility ^(c)	32.01% - 33.00%	32.70% - 33.50%
Risk-free interest rate ^(d)	1.31% - 2.13%	1.37% - 1.82%
Weighted average option grant date fair value	$10.48 - $11.28	$11.19 - $12.40


(a)	The six-year expected life (estimated period of time outstanding) of stock options granted was estimated using the "Simplified Method" which utilizes the midpoint between the vesting date and the end of the contractual term. This method was utilized for the stock options due to the lack of historical exercise behavior of Premier's employees.


(b)	No dividends are expected to be paid over the contractual term of the stock options granted, resulting in the use of a zero expected dividend rate.


(c)	The expected volatility rate is based on the observed historical volatilities of comparable companies.


(d)	The risk-free interest rate was interpolated from the five-year and seven-year Constant Maturity Treasury rate published by the United States Treasury as of the date of the grant.