SHARE-BASED COMPENSATION

The Company recognized share-based compensation expense of $5.4 million and $15.8 million for the thirteen and thirty-nine weeks ended October 28, 2017, respectively, and $5.7 million and $16.7 million for the thirteen and thirty-nine weeks ended October 29, 2016, respectively. The Company recognized tax benefits associated with share-based compensation expense of $2.0 million and $6.0 million for the thirteen and thirty-nine weeks ended October 28, 2017, respectively, and $2.2 million and $6.3 million for the thirteen and thirty-nine weeks ended October 29, 2016, respectively.

Stock Options

The following table summarizes stock option activity for the thirty-nine weeks ended October 28, 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	(88,600	)	74.74
Outstanding at October 28, 2017	101,200		$	78.26	$	—	0.3
Stock options exercisable at October 28, 2017	101,200		$	78.26	$	—	0.3

Stock Appreciation Rights

The following table summarizes stock appreciation rights activity for the thirty-nine weeks ended October 28, 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	(982,928	)	42.85
Outstanding at October 28, 2017	3,096,122		$	49.09	$	—	2.2
Stock appreciation rights exercisable at October 28, 2017	2,846,623		$	51.14	$	—	1.7
Stock appreciation rights expected to become exercisable in the future as of October 28, 2017	225,010		$	25.87	$	—	7.2

As of October 28, 2017, there was $1.5 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 8 months.

The grant date fair value of stock appreciation rights that vested during the thirty-nine weeks ended October 28, 2017 and October 29, 2016 was $2.2 million and $4.1 million, respectively.

Restricted Stock Units

The following table summarizes activity for restricted stock units for the thirty-nine weeks ended October 28, 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	1,673,528		9.89		524,030		9.11		236,872		11.79
Adjustments for performance achievement	—		—		—		—		—		—
Vested	(676,345	)	25.92		—		—		—		—
Forfeited	(293,668	)	23.00		(37,779	)	21.75		(37,784	)	26.14
Unvested at October 28, 2017	2,618,976		$	15.61	690,174		$	11.82	383,980		$	16.50

⁽¹⁾

Includes 730,736 unvested restricted stock units as of October 28, 2017 which are subject to the vesting requirement that the Company must achieve at least $1.00 of GAAP net income attributable to A&F for the fiscal year immediately preceding the vesting date. Holders of these restricted stock units have the opportunity to earn back one or more installments of the award if the cumulative performance requirements are met in a subsequent year.

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 October 28, 2017, there was $30.1 million, $4.0 million and $3.7 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 15 months, 15 months and 13 months for service-based, performance-based and market-based restricted stock units, respectively.

The actual tax benefit realized for tax deductions associated with restricted stock units vesting was $0.2 million and $2.7 million for the thirteen and thirty-nine weeks ended October 28, 2017, respectively, and $0.2 million and $6.6 million for the thirteen and thirty-nine weeks ended October 29, 2016, respectively.

Additional information pertaining to restricted stock units for the thirty-nine weeks ended October 28, 2017 and October 29, 2016 follows:



(in thousands)	October 28, 2017		October 29, 2016
Service-based restricted stock units:
Total grant date fair value of awards granted	$	16,551	$	28,310
Total grant date fair value of awards vested	17,531		18,337

Performance-based restricted stock units:
Total grant date fair value of awards granted	$	4,774	$	3,334
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	$	4,023
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 thirty-nine weeks ended October 28, 2017 and October 29, 2016 were as follows:



	October 28, 2017			October 29, 2016
Grant date market price	$	11.43		$	28.06
Fair value	$	11.79		$	31.01
Assumptions:
Price volatility	47		%	45		%
Expected term (years)	2.9			2.7
Risk-free interest rate	1.5		%	1.0		%
Dividend yield	7.0		%	3.0		%
Average volatility of peer companies	35.2		%	34.5		%
Average correlation coefficient of peer companies	0.2664			0.3415