STOCK-BASED COMPENSATION

The Brown-Forman 2013 Omnibus Compensation Plan is our incentive compensation plan, designed to reward participants (including eligible officers, employees, and non-employee directors) for company performance. Under the Plan, we can grant stock-based incentive awards for up to 20,750,000 shares of common stock to eligible participants until July 28, 2023. As of April 30, 2018, awards for approximately 14,791,000 shares remain available for issuance under the Plan. We try to limit the source of shares delivered to participants under the Plan to treasury shares that we purchase from time to time on the open market (at times in connection with a publicly announced share repurchase program), in private transactions, or otherwise.

The following table presents information about stock options and stock-settled stock appreciation rights (SSARs) granted under the Plan (or its predecessor plans) as of April 30, 2018, and for the year then ended.



	Number of Underlying Shares (in thousands)		Weighted Average Exercise Price per Award		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value
Outstanding at April 30, 2017	8,278		$	25.74
Granted	1,059		39.07
Exercised	(2,116	)	17.11
Forfeited or expired	(6	)	36.05
Outstanding at April 30, 2018	7,215		$	29.67	5.4	$	190
Exercisable at April 30, 2018	4,335		$	23.17	3.7	$	142

The total intrinsic value of options and SSARs exercised during 2016, 2017, and 2018 was $47, $28, and $73, respectively.

We grant stock options and SSARs at an exercise price equal to the market price of the underlying stock on the grant date. Stock options and SSARs become exercisable after three years from the first day of the fiscal year of grant and expire seven years after that date. The grant-date fair values of these awards granted during 2016, 2017, and 2018 were $7.62, $5.73, and $6.79 per award, respectively. We estimated the fair values using the Black-Scholes pricing model with the following assumptions:



	2016		2017		2018
Risk-free interest rate	2.1	%	1.4	%	2.2	%
Expected volatility	19.1	%	16.3	%	15.6	%
Expected dividend yield	1.6	%	1.6	%	1.5	%
Expected term (years)	6.75		7.00		7.00

We have also granted restricted stock units (RSUs), deferred stock units (DSUs), and shares of performance-based restricted stock (PBRS) under the Plan (or its predecessor plans). Approximately 670,000 shares underlying these awards, with a weighted-average remaining vesting period of 0.8 years, were nonvested at April 30, 2018. The following table summarizes the changes in the number of shares underlying these awards during 2018.



	Number of Underlying Shares (in thousands)		Weighted Average Fair Value at Grant Date
Nonvested at April 30, 2017	601		$	36.50
Granted	165		33.68
Adjusted for dividends or performance	43		50.47
Vested	(136	)	34.52
Forfeited	(3	)	39.40
Nonvested at April 30, 2018	670		$	39.84

For PBRS awards, performance is measured based on the relative ranking of the total shareholder return of our Class B common stock during the three-year performance period compared to that of the companies within the Standard & Poor’s Consumer Staples Index at the end of the performance period, with specific payout levels ranging from 50% to 150%.

The total fair value of RSUs, PBRS awards, and DSUs vested during 2016, 2017, and 2018 was $10, $8, and $6, respectively.

The accompanying consolidated statements of operations reflect compensation expense related to stock-based incentive awards on a pre-tax basis of $15 in 2016, $14 in 2017, and $19 in 2018, partially offset by deferred income tax benefits of $6 in 2016, $5 in 2017, and $6 in 2018. As of April 30, 2018, there was $7 of total unrecognized compensation cost related to non-vested stock-based compensation. That cost is expected to be recognized over a weighted-average period of 1.3 years.