Equity Incentive Programs

The shareholders of the Company approved the Quad/Graphics, Inc. 2010 Omnibus Incentive Plan ("Omnibus Plan") for two complementary purposes: (1) to attract and retain outstanding individuals to serve as directors, officers and employees; and (2) to increase shareholder value. The Omnibus Plan provides for an aggregate 10,871,652 shares of class A common stock reserved for issuance under the Omnibus Plan. Awards under the Omnibus Plan may consist of incentive awards, stock options, stock appreciation rights, performance shares, performance share units, shares of class A common stock, restricted stock, restricted stock units, deferred stock units or other stock-based awards as determined by the Company's Board of Directors. Each stock option granted has an exercise price of no less than 100% of the fair market value of the class A common stock on the date of grant. As of March 31, 2017, there were 2,097,584 shares available for issuance under the Omnibus Plan.

The Company recognizes compensation expense based on estimated grant date fair values for all share-based awards issued to employees and non-employee directors, including stock options, performance shares, performance share units, restricted stock, restricted stock units and deferred stock units. The Company recognizes these compensation costs for only those awards expected to vest, on a straight-line basis over the requisite three to four year service period of the awards, except deferred stock units, which are fully vested and expensed on the grant date. The Company estimated the number of awards expected to vest based, in part, on historical forfeiture rates and also based on management's expectations of employee turnover within the specific employee groups receiving each type of award. Forfeitures are estimated at the time of grant and revised in subsequent periods if actual forfeitures differ from those estimates.

Equity Incentive Compensation Expense

The total compensation expense recognized related to all equity incentive programs was $6.0 million and $5.2 million for the three months ended March 31, 2017 and 2016, respectively, and was recorded in selling, general and administrative expenses in the condensed consolidated statements of operations. Total future compensation expense related to all equity incentive programs granted as of March 31, 2017, was estimated to be $27.0 million. Estimated future compensation expense is $10.2 million for 2017, $9.9 million for 2018, $6.0 million for 2019 and $0.9 million for 2020.

Net tax benefit (expense) on equity award activity was a benefit of $1.7 million and an expense of $0.6 million during the three months ended March 31, 2017 and 2016, respectively. See Note 20, "New Accounting Pronouncements," for further discussion of the adoption of the new accounting standard related to share-based compensation and its impacts to the condensed consolidated financial statements.

Stock Options

Options vest over four years, with no vesting in the first year and one-third vesting upon the second, third and fourth anniversary dates. As defined in the individual grant agreements, acceleration of vesting may occur under a change in control, death, disability or normal retirement of the grantee. Options expire no later than the tenth anniversary of the grant date, 24 months after termination for death, 36 months after termination for normal retirement or disability and 90 days after termination of employment for any other reason. Options are not credited with dividend declarations, except for the November 18, 2011 grants. Stock options are only to be granted to employees.

There were no stock options granted, and no compensation expense was recognized related to stock options for the three months ended March 31, 2017 and 2016. There is no future compensation expense for stock options as of March 31, 2017.

The following table is a summary of the stock option activity for the three months ended March 31, 2017:



	Shares Under Option		Weighted Average Exercise Price		Weighted Average Remaining Contractual Term (years)	Aggregate Intrinsic Value (millions)
Outstanding at December 31, 2016	1,702,866		$	23.00	3.3	$	12.3
Granted	—		—
Exercised	(74,803	)	17.98
Canceled/forfeited/expired	(12,392	)	31.67
Outstanding and exercisable at March 31, 2017	1,615,671		$	23.17	3.1	$	10.0

The intrinsic value of options outstanding and exercisable at March 31, 2017, and December 31, 2016, was based on the fair value of the stock price. All outstanding options were vested as of March 31, 2017.

The following table is a summary of the stock option exercises and vesting activity for the three months ended March 31, 2017 and 2016:



	Three Months Ended March 31,
	2017		2016
Total intrinsic value of stock options exercised	$	0.7	$	—
Cash received from stock option exercises	1.3		—
Total grant date fair value of stock options vested	—		0.3

Restricted Stock and Restricted Stock Units

Restricted stock ("RS") and restricted stock unit ("RSU") awards consist of shares or the rights to shares of the Company's class A common stock which are awarded to employees of the Company. The awards are restricted such that they are subject to substantial risk of forfeiture and to restrictions on their sale or other transfer by the employee. RSU awards are typically granted to eligible employees outside of the United States. As defined in the individual grant agreements, acceleration of vesting may occur under a change in control, death, disability or normal retirement of the grantee. Grantees receiving RS grants are able to exercise full voting rights and receive full credit for dividends during the vesting period. All such dividends will be paid to the RS grantee within 45 days of full vesting. Grantees receiving RSUs are not entitled to vote, but do earn dividends. Upon vesting, RSUs will be settled either through cash payment equal to the fair market value of the RSUs on the vesting date or through issuance of the Company's class A common stock.

The following table is a summary of RS and RSU award activity for the three months ended March 31, 2017:



	Restricted Stock					Restricted Stock Units
	Shares		Weighted- Average Grant Date Fair Value Per Share		Weighted- Average Remaining Contractual Term (years)	Units		Weighted- Average Grant Date Fair Value Per Share		Weighted- Average Remaining Contractual Term (years)
Nonvested at December 31, 2016	2,485,389		$	15.89	1.5	235,886		$	11.04	1.8
Granted	659,866		26.88			71,438		26.88
Vested	(612,395	)	23.44			(10,529	)	23.45
Forfeited	(8,131	)	15.06			—		—
Nonvested at March 31, 2017	2,524,729		$	16.94	2.0	296,795		$	14.41	1.9

In general, RS and RSU awards will vest on the third anniversary of the grant date, provided the holder of the share is continuously employed by the Company until the vesting date. Compensation expense recognized for RS and RSUs was $5.1 million and $4.4 million for the three months ended March 31, 2017 and 2016, respectively. Total future compensation expense for all RS and RSUs granted as of March 31, 2017, is approximately $27.0 million. Estimated future compensation expense is $10.2 million for 2017, $9.9 million for 2018, $6.0 million for 2019 and $0.9 million for 2020.

Deferred Stock Units

Deferred stock units ("DSU") are awards of rights to shares of the Company's class A common stock and are awarded to non-employee directors of the Company. The following table is a summary of DSU award activity for the three months ended March 31, 2017:



	Deferred Stock Units
	Units	Weighted-Average Grant Date Fair Value Per Share
Outstanding at December 31, 2016	249,739	$	16.98
Granted	34,656	26.86
Dividend equivalents granted	3,373	25.05
Settled	—	—
Forfeited	—	—
Outstanding at March 31, 2017	287,768	$	18.27

Each DSU award entitles the grantee to receive one share of class A common stock upon the earlier of the separation date of the grantee or the second anniversary of the grant date, but could be subject to acceleration for a change in control, death or disability as defined in the individual DSU grant agreement. Grantees of DSU awards may not exercise voting rights, but are credited with dividend equivalents, and those dividend equivalents will be converted into additional DSU awards based on the closing price of the class A common stock. There was $0.9 million and $0.8 million of compensation expense recorded for DSUs during the three months ended March 31, 2017 and 2016, respectively. As DSU awards are fully vested on the grant date, all compensation expense was recognized at the date of grant.

Other information

Authorized unissued shares or treasury shares may be used for issuance under the Company's equity incentive programs. The Company intends to use treasury shares of its class A common stock to meet the stock requirements of its awards in the future.