Capital Stock

(a) Common Shares

The Company had 500 million authorized Class A voting shares and 500 million authorized Class B non-voting shares at June 30, 2017 and March 31, 2017. The table below outlines common shares reserved for future issuance:



	June 30, 2017	March 31, 2017
	(Amounts in millions)
Stock options outstanding, Class A voting shares average exercise price $26.78, Class B non-voting shares average exercise price $19.54 (March 31, 2017 - Class A voting shares average exercise price $26.67, Class B non-voting shares average exercise price $19.43)	32.3	32.6
Restricted stock and restricted share units — unvested	2.4	2.7
Common shares available for future issuance under Lionsgate plan	1.0	0.8
Common shares available for future issuance under Starz plan	12.0	11.8
Shares issuable upon conversion of April 2013 1.25% Notes at conversion price of $29.19 per share (March 31, 2017 - $29.19)	2.1	2.1
Shares reserved for future issuance	49.8	50.0

The Company's 2012 Performance Incentive Plan, as amended on October 3, 2016 (the "2012 Plan") provides for the issuance of up to 31.6 million common shares of the Company, stock options, share appreciation rights, restricted shares, stock bonuses and other forms of awards granted or denominated in common shares or units of common shares of the Company, as well as certain cash bonus awards to eligible directors of the Company, officers or employees of the Company or any of its subsidiaries, and certain consultants and advisors to the Company or any of its subsidiaries. At the effective time of the closing of the merger, Starz had outstanding equity awards under the Starz Transitional Stock Adjustment Plan, Starz 2011 Incentive Plan, Starz 2011 Nonemployee Director Plan and Starz 2016 Omnibus Incentive Plan (collectively, the “Starz Plans”). In accordance with the Merger Agreement, at the effective time of the closing of the merger, Lions Gate assumed the Starz Plans and the restricted stock unit awards, unvested stock options and restricted stock awards, in each case, granted under the Starz Plans (collectively, the “Assumed Awards”). As a result of this assumption, at the effective time of the closing of the Merger, the Assumed Awards were converted into corresponding awards relating to Class B non-voting shares, after giving effect to appropriate adjustments to reflect the consummation of the merger. There are currently 26.8 million Class B non-voting shares issuable in connection with the Assumed Awards held by Starz employees and awards to be granted under the Starz Plans following the merger.

(b) Share-based Compensation

The Company recognized the following share-based compensation expense during the three months ended June 30, 2017, and 2016:



	Three Months Ended
	June 30,
	2017			2016
	(Amounts in millions)
Compensation Expense:
Stock options	$	12.3		$	7.7
Restricted share units and other share-based compensation	10.4			6.0
Share appreciation rights	1.1			—
	23.8			13.7
Immediately vested restricted share units issued under annual bonus program⁽¹⁾	—			8.5
Total share-based compensation expense	$	23.8		$	22.2

Tax impact⁽²⁾	(8.5		)	(8.1		)
Reduction in net income	$	15.3		$	14.1

___________________


(1)	Represents the impact of immediately vested stock awards granted as part of our annual bonus program, and issued in lieu of cash bonuses.


(2)	Represents the income tax benefit recognized in the statements of income for share-based compensation arrangements.

Share-based compensation expense, by expense category, consisted of the following:



	Three Months Ended
	June 30,
	2017		2016
	(Amounts in millions)
Compensation Expense:
Direct operating	$	0.2	$	—
Distribution and marketing	0.2		—
General and administration	23.4		22.2
	$	23.8	$	22.2

The following table sets forth the stock option, restricted stock and restricted share unit activity during the three months ended June 30, 2017:



	Stock Options						Restricted Stock and Restricted Share Units
	Class A Voting Shares			Class B Non-Voting Shares			Class A Voting Shares			Class B Non-Voting Shares
	Number of Shares		Weighted-Average Exercise Price	Number of Shares		Weighted-Average Exercise Price	Number of Shares		Weighted-Average Grant-Date Fair Value	Number of Shares		Weighted-Average Grant-Date Fair Value
Outstanding at March 31, 2017	9,089,915		$26.67	23,464,929		$19.43	519,148		$27.85	2,258,006		$26.07
Granted	230,303		$30.36	230,303		$29.35	43,860		$26.10	111,604		$24.04
Options exercised or restricted stock or RSUs vested	(19,547	)	$16.95	(511,084	)	$17.32	(135,052	)	$26.62	(329,795	)	$26.06
Forfeited or expired	(6,732	)	$31.00	(144,566	)	$24.79	(3,925	)	$37.53	(63,616	)	$26.42
Outstanding at June 30, 2017	9,293,939		$26.78	23,039,582		$19.54	424,031		$27.98	1,976,199		$25.95

During the three months ended June 30, 2017, the Company granted 0.3 million share-appreciation rights ("SARs"). The SARs are currently accounted for as cash-settled, and are revalued each reporting period until settlement using a closed-form option pricing model (Black Scholes).

The Company wrote off tax deficiencies of $0.4 million associated with its equity awards in its tax provision during the three months ended June 30, 2017 (2016 - none).

Total unrecognized compensation cost related to unvested stock options, and related to restricted stock and restricted share unit awards at June 30, 2017 are $66.4 million and $36.4 million, respectively, and are expected to be recognized over a weighted average period of 2.6 and 1.8 years, respectively.

In connection with an amendment of an affiliation agreement with a customer and effective upon the close of the Starz Merger (December 8, 2016), Lionsgate has agreed to issue to the customer three $16.67 million annual installments of equity (or cash at Lionsgate's election). The total value of the contract of $50 million is being amortized as a reduction of revenue over the period from December 8, 2016 to August 31, 2019.