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 September 30, 2017 and March 31, 2017. The table below outlines common shares reserved for future issuance:



	September 30, 2017	March 31, 2017
	(Amounts in millions)
Stock options outstanding, Class A voting shares average exercise price $26.84, Class B non-voting shares average exercise price $19.76 (March 31, 2017 - Class A voting shares average exercise price $26.67, Class B non-voting shares average exercise price $19.43)	31.8	32.6
Restricted stock and restricted share units — unvested	2.4	2.7
Common shares available for future issuance under Lionsgate plan⁽¹⁾	10.9	0.8
Common shares available for future issuance under Starz plan	—	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	47.2	50.0

____________________


(1)	As of September 30, 2017, amounts represent common shares reserved for issuance under the Company's current 2017 Performance Incentive Plan. As of March 31, 2017, amounts represent common shares reserved for issuance under the Company's former 2012 Performance Incentive Plan. See below for further information.

On September 12, 2017, the Company’s shareholders approved the Lions Gate Entertainment Corp. 2017 Performance Incentive Plan (the “2017 Plan”) previously adopted by the Board of Directors (the “Board”) of the Company.

The Board or one or more committees appointed by the Board will administer the 2017 Plan. The Board has delegated general administrative authority for the 2017 Plan to the Compensation Committee of the Board. The administrator of the 2017 Plan has broad authority under the 2017 Plan to, among other things, select participants and determine the type(s) of award(s) that they are to receive, and determine the number of shares that are to be subject to awards and the terms and conditions of awards, including the price (if any) to be paid for the shares or the award.

Persons eligible to receive awards under the 2017 Plan include 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.

The maximum number of the Company’s common shares (the “Common Shares”) that may be issued or transferred pursuant to awards under the 2017 Plan (the “Share Limit”) equals: (1) the number of Common Shares that were available for award grant purposes under the Lions Gate Entertainment Corp. 2012 Performance Incentive Plan (the “2012 Plan”) as of September 12, 2017 (the date of shareholder approval of the 2017 Plan), plus (2) the number of Common Shares that were available for award grant purposes under the Starz 2016 Omnibus Incentive Plan (the “Starz 2016 Plan”) as of September 12, 2017, plus (3) the number of any shares subject to stock options and share appreciation rights granted under any of the 2012 Plan, the Starz 2016 Plan, the Starz 2011 Nonemployee Director Incentive Plan (Amended and Restated as of October 15, 2013), or the Starz 2011 Incentive Plan (Amended and Restated as of October 15, 2013) (collectively, the “Prior Plans”) and outstanding on September 12, 2017 which expire, or for any reason are cancelled or terminated, after that date without being exercised, plus (4) the number of any shares subject to restricted stock and restricted share unit awards granted under any of the Prior Plans that are outstanding and unvested as of September 12, 2017 which are forfeited, terminated, cancelled, or otherwise reacquired after that date without having become vested. No new awards may be granted under any of the Prior Plans. As of September 12, 2017 (immediately prior to the shareholder approval of the 2017 Plan), the total number of Common Shares available for award grant purposes under the 2012 Plan and the Starz 2016 Plan was 12,973,816 shares, and the total number of Common Shares subject to then-outstanding awards granted under the Prior Plans was 34,790,628 shares.

The Common Shares available for issuance under the 2017 Plan may be either the Class A Voting Common Shares of the Company (“Class A Shares”) or the Class B Non-Voting Common Shares of the Company (“Class B Shares”), as determined by administrator of the 2017 Plan and set forth in the applicable award agreement. However, in no event may the combined number of Class A Shares and Class B Shares issued under the 2017 Plan exceed the Share Limit described above.

Shares that are subject to or underlie awards which expire or for any reason are cancelled or terminated, are forfeited, fail to vest, or for any other reason are not paid or delivered under the 2017 Plan will again be available for subsequent awards under the 2017 Plan. Shares that are exchanged by a participant or withheld by the Company to pay the exercise price of an award granted under the 2017 Plan or any of the Prior Plans, as well as any shares exchanged or withheld to satisfy the tax withholding obligations related to any award granted under the 2017 Plan or any of the Prior Plans, will again be available for subsequent awards under the 2017 Plan. To the extent that an award is settled in cash or a form other than shares, the shares that would have been delivered had there been no such cash or other settlement will again be available for subsequent awards under the 2017 Plan. In the event that shares are delivered in respect of a dividend equivalent right, the actual number of shares delivered with respect to the award shall be counted against the share limits of the 2017 Plan. To the extent that shares are delivered pursuant to the exercise of a share appreciation right or stock option, the number of underlying shares as to which the exercise related shall be counted against the applicable share limits, as opposed to only counting the shares actually issued.

The types of awards that may be granted under the 2017 Plan include stock options, share appreciation rights ("SARs"), restricted stock, restricted share units, stock bonuses and other forms of awards granted or denominated in Common Shares or units of Common Shares, as well as certain cash bonus awards.

As is customary in incentive plans of this nature, each share limit and the number and kind of shares available under the 2017 Plan and any outstanding awards, as well as the exercise or purchase prices of awards, and performance targets under certain types of performance-based awards, are subject to adjustment in the event of certain reorganizations, mergers, combinations, recapitalizations, stock splits, stock dividends, or other similar events that change the number or kind of shares outstanding, and extraordinary dividends or distributions of property to the shareholders.

(b) Share-based Compensation

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



	Three Months Ended						Six Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
	(Amounts in millions)
Compensation Expense:
Stock options	$	11.7		$	8.5		$	24.0		$	16.2
Restricted share units and other share-based compensation	9.9			6.4			20.2			12.3
Share appreciation rights	2.0			—			3.2			—
	23.6			14.9			47.4			28.5
Immediately vested restricted share units issued under annual bonus program⁽¹⁾	—			6.7			—			15.3
Impact of accelerated vesting on equity awards⁽²⁾	—			2.4			—			2.4
Total share-based compensation expense	$	23.6		$	24.0		$	47.4		$	46.2

Tax impact⁽³⁾	(8.3		)	(8.4		)	(16.8		)	(16.0		)
Reduction in net income	$	15.3		$	15.6		$	30.6		$	30.2

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(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 impact of the acceleration of certain vesting schedules for equity awards pursuant to certain severance arrangements.


(3)	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				Six Months Ended
	September 30,				September 30,
	2017		2016		2017		2016
	(Amounts in millions)
Share-Based Compensation Expense:
Direct operating	$	0.2	$	—	$	0.5	$	—
Distribution and marketing	0.2		—		0.4		—
General and administration	23.2		21.6		46.5		43.8
Restructuring and other	—		2.4		—		2.4
	$	23.6	$	24.0	$	47.4	$	46.2

The following table sets forth the stock option, equity-settled SARs, restricted stock and restricted share unit activity during the six months ended September 30, 2017:



	Stock Options and Equity-Settled SARs						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	24,301,704		$19.63	519,148		$27.85	2,258,006		$26.07
Granted	346,336		$29.45	874,691		$26.82	64,946		$27.36	297,428		$26.91
Options exercised or restricted stock or RSUs vested	(78,263	)	$17.44	(1,308,356	)	$16.11	(219,493	)	$27.72	(473,324	)	$26.63
Forfeited or expired	(6,732	)	$31.00	(147,456	)	$24.82	(5,335	)	$33.43	(88,708	)	$26.19
Outstanding at September 30, 2017	9,351,256		$26.84	23,720,583		$20.06	359,266		$27.77	1,993,402		$26.06

The Company recognized excess tax benefits of $0.2 million associated with its equity awards in its tax benefit during the six months ended September 30, 2017 (2016 - none).

Total unrecognized compensation cost related to unvested stock options, and related to restricted stock and restricted share unit awards at September 30, 2017 are $63.6 million and $35.3 million, respectively, and are expected to be recognized over a weighted average period of 2.4 and 1.6 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.