SHARE-BASED COMPENSATION

The Company recognized share-based compensation expense of $5.5 million and $10.4 million for the thirteen and twenty-six weeks ended July 29, 2017, respectively, and $4.4 million and $11.0 million for the thirteen and twenty-six weeks ended July 30, 2016, respectively. The tax benefit associated with share-based compensation expense was $2.1 million and $4.0 million for the thirteen and twenty-six weeks ended July 29, 2017, respectively, and $1.7 million and $4.1 million for the thirteen and twenty-six weeks ended July 30, 2016, respectively.

Stock Options

The following table summarizes stock option activity for the twenty-six weeks ended July 29, 2017:



	Number of Underlying Shares		Weighted-Average Exercise Price		Aggregate Intrinsic Value		Weighted-Average Remaining Contractual Life
Outstanding at January 28, 2017	189,800		$	76.62
Granted	—		—
Exercised	—		—
Forfeited or expired	(86,600	)	74.65
Outstanding at July 29, 2017	103,200		$	78.27	$	—	0.6
Stock options exercisable at July 29, 2017	103,200		$	78.27	$	—	0.6

Stock Appreciation Rights

The following table summarizes stock appreciation rights activity for the twenty-six weeks ended July 29, 2017:



	Number of Underlying Shares		Weighted-Average Exercise Price		Aggregate Intrinsic Value		Weighted-Average Remaining Contractual Life
Outstanding at January 28, 2017	4,079,050		$	47.49
Granted	—		—
Exercised	—		—
Forfeited or expired	(945,276	)	43.28
Outstanding at July 29, 2017	3,133,774		$	48.89	$	—	2.5
Stock appreciation rights exercisable at July 29, 2017	2,857,250		$	51.14	$	—	2.0
Stock appreciation rights expected to become exercisable in the future as of July 29, 2017	240,735		$	25.68	$	—	7.5

As of July 29, 2017, there was $1.7 million of total unrecognized compensation cost, net of estimated forfeitures, related to stock appreciation rights. The unrecognized compensation cost is expected to be recognized over a weighted-average period of 9 months.

The grant date fair value of stock appreciation rights that vested during the twenty-six weeks ended July 29, 2017 and July 30, 2016 was $2.2 million and $4.0 million, respectively.

Restricted Stock Units

The following table summarizes activity for restricted stock units for the twenty-six weeks ended July 29, 2017:



	Service-based Restricted Stock Units				Performance-based Restricted Stock Units				Market-based Restricted Stock Units
	Number of Underlying Shares⁽¹⁾		Weighted- Average Grant Date Fair Value		Number of Underlying Shares		Weighted- Average Grant Date Fair Value		Number of Underlying Shares		Weighted- Average Grant Date Fair Value
Unvested at January 28, 2017	1,915,461		$	25.47	203,923		$	22.53	184,892		$	26.89
Granted	1,617,440		9.86		524,030		9.11		236,872		11.79
Adjustments for performance achievement	—		—		—		—		—		—
Vested	(639,503	)	26.28		—		—		—		—
Forfeited	(230,744	)	23.15		(37,779	)	21.75		(37,784	)	26.14
Unvested at July 29, 2017	2,662,654		$	15.93	690,174		$	11.82	383,980		$	16.50


⁽¹⁾	This includes 724,440 unvested restricted stock units as of July 29, 2017 that are subject to the requirement that the Company must achieve at least $1.00 of GAAP net income attributable to A&F for the fiscal year in order to vest.

Fair value of both service-based and performance-based restricted stock units is calculated using the market price of the underlying common stock on the date of grant reduced for anticipated dividend payments on unvested shares. In determining fair value, the Company does not take into account performance-based vesting requirements. Performance-based vesting requirements are taken into account in determining the number of awards expected to vest. For market-based restricted stock units, fair value is calculated using a Monte Carlo simulation with the number of shares that ultimately vest dependent on the Company’s total stockholder return measured against the total stockholder return of a select group of peer companies over a three-year period. For an award with performance-based or market-based vesting requirements, the number of shares that ultimately vest can vary from 0% to 200% of target depending on the level of achievement of performance criteria. Unvested shares related to restricted stock units with performance-based vesting conditions are reflected at 100% of their target vesting amount in the table above.

Service-based restricted stock units are expensed on a straight-line basis over the total requisite service period, net of forfeitures. Performance-based restricted stock units subject to graded vesting are expensed on an accelerated attribution basis, net of forfeitures. Market-based restricted stock units without graded vesting features are expensed on a straight-line basis over the requisite service period, net of forfeitures.

As of July 29, 2017, there was $29.6 million, $4.2 million and $4.5 million of total unrecognized compensation cost, net of estimated forfeitures, related to service-based, performance-based and market-based restricted stock units, respectively. The unrecognized compensation cost is expected to be recognized over a weighted-average period of 16 months, 17 months and 14 months for service-based, performance-based and market-based restricted stock units, respectively.

The tax benefit associated with restricted stock vesting during the thirteen and twenty-six weeks ended July 29, 2017 was $0.5 million and $2.5 million, respectively. The tax benefit associated with restricted stock vesting during the thirteen and twenty-six weeks ended July 30, 2016 was $1.5 million and $6.4 million, respectively.

Additional information pertaining to restricted stock units for the twenty-six weeks ended July 29, 2017 and July 30, 2016 follows:



(in thousands)	July 29, 2017		July 30, 2016
Service-based restricted stock units:
Total grant date fair value of awards granted	$	15,948	$	26,823
Total grant date fair value of awards vested	16,806		17,735

Performance-based restricted stock units:
Total grant date fair value of awards granted	$	4,774	$	3,057
Total grant date fair value of awards vested	—		1,178

Market-based restricted stock units:
Total grant date fair value of awards granted	$	2,793	$	3,835
Total grant date fair value of awards vested	—		—

The weighted-average assumptions used for market-based restricted stock units in the Monte Carlo simulation during the twenty-six weeks ended July 29, 2017 and July 30, 2016 were as follows:



	July 29, 2017			July 30, 2016
Grant date market price	$	11.43		$	29.56
Fair value	$	11.79		$	34.12
Assumptions:
Price volatility	47		%	44		%
Expected term (years)	2.9			2.8
Risk-free interest rate	1.5		%	1.1		%
Dividend yield	7.0		%	2.8		%
Average volatility of peer companies	35.2		%	34.5		%
Average correlation coefficient of peer companies	0.2664			0.3389