Stock-based Compensation

Our total stock-based compensation expense is included in general and administrative expenses (G&A) in our unaudited consolidated statements of income. A summary of the expense related to stock-based compensation by award type is as follows for the periods presented:



	Three Months Ended December 31, 2015
(In millions)	2015			2014
Stock options expense	$	0.2		$	0.2
Restricted stock awards expense	1.6			1.2
Before tax stock-based compensation expense	1.8			1.4
Tax benefit	(0.6		)	(0.3		)
After tax stock-based compensation expense	$	1.2		$	1.1

During the three months ended December 31, 2015 and 2014, employees surrendered 14,536 shares and 9,807 shares, respectively, to us in payment of minimum tax obligations upon the vesting of stock awards under our stock incentive plans. We valued this stock at the market price on the date of surrender, for an aggregate value of approximately $201,000 and $184,000 for the three months ended December 31, 2015 and 2014, respectively.

Stock Options. The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes option-pricing model (Black-Scholes Model). The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price. As of December 31, 2015, our stock options outstanding had an intrinsic value of $0.1 million and the aggregate intrinsic value of exercisable stock options was $0.1 million. As of December 31, 2015 and September 30, 2015, there was $0.6 million and $0.5 million, respectively, of total unrecognized compensation cost related to nonvested stock options. The cost remaining at December 31, 2015 is expected to be recognized over a weighted average period of 1.6 years years.

During the three months ended December 31, 2015, we issued 40,600 stock options, each for one share of the Company's stock. These stock options vest ratably over three years from the date of grant. We used the following assumptions for stock options granted, which derived the fair value shown, for the period presented:



	Three Months Ended
	December 31, 2015
Expected life of options	4.3 years
Expected volatility	45.23		%
Expected dividends	—
Weighted average risk-free interest rate	1.70		%
Weighted average fair value	$	5.48

Activity related to stock options for the period presented is as follows:



	Three Months Ended
	December 31, 2015
	Shares	Weighted Average Exercise Price
Outstanding at beginning of period	643,907	$	18.13
Granted	40,600	14.24
Outstanding at end of period	684,507	$	17.90
Exercisable at end of period	591,844	$	18.04
Vested or expected to vest in the future	684,477	$	17.90

Restricted Stock Awards. The fair value of each restricted stock award with any market conditions is estimated on the date of grant using the Monte Carlo valuation method. The fair value of any restricted stock awards without market conditions is based on the market price of the Company's common stock on the date of grant. If applicable, the cash-settled component of any awards granted to employees are accounted for as a liability, which is adjusted to fair value each reporting period until vested.

As of December 31, 2015 and September 30, 2015, there was $17.1 million and $11.7 million, respectively, of total unrecognized compensation cost related to nonvested restricted stock awards. The cost remaining at December 31, 2015 is expected to be recognized over a weighted average period of 2.5 years.

During the three months ended December 31, 2015, we issued 231,624 shares of performance-based restricted stock (2016 Performance Shares) to our executive officers and certain other employees that also have market conditions. The 2016 Performance Shares are structured to be awarded based on the Company's performance under three pre-determined financial metrics at the end of the three-year performance period. After determining the number of shares earned based on the financial metrics, which can range from 0% to 175% of the targeted number of shares, the award will be subject to further upward or downward adjustment by as much as 20% based on the Company's relative total shareholder return (TSR) compared against the S&P Homebuilders Select Industry Index during the three-year performance period. The 2016 Performance Shares were valued using the Monte Carlo valuation model due to the existence of the TSR market condition and had an estimated fair value of $15.43 per share on the date of grant.

A Monte Carlo valuation model requires the following inputs: (1) the expected dividend yield on the underlying stock; (2) the expected price volatility of the underlying stock; (3) the risk-free interest rate for the period corresponding with the expected term of the award and (4) the fair value of the underlying stock. For the Company and each member of the peer group, the following inputs were used, as applicable, in the Monte Carlo valuation model to determine the fair value as of the grant date for the 2016 Performance Shares: 0% dividend yield for the Company, expected price volatility ranging from 29.9% to 151.2% and a risk-free interest rate of 1.21%. The methodology used to determine these assumptions is similar to the Black-Scholes Model; however, the expected term is determined by the model in the Monte Carlo simulation.

Any 2016 Performance Shares earned in excess of the target number of 231,624 may be settled in cash or additional shares at the discretion of the Compensation Committee. Any portion of the these that do not vest at the end of the period will be forfeited.

During three months ended December 31, 2015, we also issued 250,352 shares of time-based restricted stock (Restricted Shares) to our directors, executive officers and certain other employees. The Restricted Shares granted to our non-employee directors vest on the first anniversary of the grant, while the Restricted Shares granted to our executive officers and other employees vest ratably over three years from the date of grant.

Activity relating to all restricted stock awards is as follows for the periods presented:



	Three Months Ended
	December 31, 2015
	Shares		Weighted Average Grant Date Fair Value
Beginning of period	956,283		$	18.27
Granted	481,976		14.81
Vested	(114,253	)	18.79
Forfeited	(35,532	)	5.73
End of period	1,288,474		$	17.28