SHARE-BASED COMPENSATION

Financial Statement Impact

The Company recognized share-based compensation expense of $22.1 million, $22.1 million and $28.4 million for Fiscal 2017, Fiscal 2016 and Fiscal 2015, respectively. The Company recognized tax benefits associated with share-based compensation expense of $8.0 million, $8.3 million and $10.6 million for Fiscal 2017, Fiscal 2016 and Fiscal 2015, respectively.

The effect of adjustments for forfeitures was $2.9 million, $3.4 million and $5.6 million for Fiscal 2017, Fiscal 2016 and Fiscal 2015, respectively.

Plans

As of February 3, 2018, the Company had two primary share-based compensation plans: (i) the 2016 Directors LTIP, with 750,000 shares of the Company’s Common Stock authorized for issuance, under which the Company is authorized to grant restricted stock, restricted stock units, stock appreciation rights, stock options and deferred stock awards to non-associate members of the Company’s Board of Directors; and (ii) the 2016 Associates LTIP, with 4,700,000 shares of the Company’s Common Stock authorized for issuance, under which the Company is authorized to grant restricted stock, restricted stock units, performance share awards, stock appreciation rights and stock options to associates of the Company. The Company also has six other share-based compensation plans under which it granted restricted stock, restricted stock units, performance share awards, stock appreciation rights and stock options to associates of the Company and restricted stock units, stock options and deferred stock awards to non-associate members of the Company’s Board of Directors in prior years.

The 2016 Directors LTIP, a stockholder-approved plan, permits the Company to annually grant awards to non-associate directors, subject to the following limits:


•	For non-associate directors: awards with an aggregate fair market value on the date of the grant of no more than $300,000;


•	For the non-associate director occupying the role of Non-Executive Chairman of the Board (if any): additional awards with an aggregate fair market value on the date of grant of no more than $500,000; and


•	For the non-associate director occupying the role of Executive Chairman of the Board (if any): additional awards with an aggregate fair market value on the date of grant of no more than $2,500,000.

Under the 2016 Directors LTIP, restricted stock units are subject to a minimum vesting period ending no sooner than the earlier of (i) the first anniversary of the grant date or (ii) the date of the next regularly scheduled annual meeting of stockholders held after the grant date. Any stock appreciation rights or stock options granted under this plan have the same minimum vesting period requirements as restricted stock units and, in addition, must have a term that does not exceed a period of ten years from the grant date, subject to forfeiture under the terms of the 2016 Directors LTIP.

The 2016 Associates LTIP, a stockholder-approved plan, permits the Company to annually grant one or more types of awards covering up to an aggregate for all awards of 1.0 million of underlying shares of the Company’s Common Stock to any associate of the Company. Under the 2016 Associates LTIP, for restricted stock units that have performance-based vesting, performance must be measured over a period of at least one year and for restricted stock units that do not have performance-based vesting, vesting in full may not occur more quickly than in pro-rata installments over a period of three years from the date of the grant, with the first installment vesting no sooner than the first anniversary of the date of the grant. In addition, any stock options or stock appreciation rights granted under this plan must have a minimum vesting period of one year and a term that does not exceed a period of ten years from the grant date, subject to forfeiture under the terms of the2016 Associates LTIP.

Each of the 2016 Directors LTIP, and the 2016 Associates LTIP, provides for accelerated vesting of awards if there is a change of control and certain other conditions specified in each plan are met.

Restricted Stock Units

The following table summarizes activity for restricted stock units for Fiscal 2017:



	Service-based Restricted Stock Units				Performance-based Restricted Stock Units				Market-based Restricted Stock Units
	Number of Underlying Shares		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	1,698,803		9.96		524,030		9.11		236,872		11.79
Adjustments for performance achievement	—		—		—		—		—		—
Vested	(746,118	)	25.62		—		—		—		—
Forfeited	(347,986	)	22.20		(37,779	)	21.75		(37,784	)	26.14
Unvested at February 3, 2018 ^{(1) (2)}	2,520,160		$	15.35	690,174		$	11.82	383,980		$	16.50

⁽¹⁾

Includes 704,703 unvested service-based restricted stock units subject to vesting requirements related to the achievement of certain performance metrics, such as operating income and net income, for the fiscal year immediately preceding the vesting date. Holders of these restricted stock units have the opportunity to earn back one of more installments of the award if cumulative performance requirements are met in a subsequent year.


⁽²⁾	Unvested shares related to restricted stock units with performance-based vesting conditions can achieve up to 200% of their target vesting amount and are reflected at 100% of their target vesting amount in the table above.

As of February 3, 2018, there was $24.6 million, $5.2 million and $3.2 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 14 months, 13 months and 11 months for service-based, performance-based and market-based restricted stock units, respectively.

The actual tax benefit realized for tax deductions related to the issuance of shares associated with restricted stock unit vesting was $2.8 million, $7.0 million and $5.9 million for Fiscal 2017, Fiscal 2016, and Fiscal 2015, respectively.

Additional information pertaining to restricted stock units for Fiscal 2017, Fiscal 2016 and Fiscal 2015 follows:



(in thousands)	Fiscal 2017		Fiscal 2016		Fiscal 2015
Service-based restricted stock units:
Total grant date fair value of awards granted	$	16,920	$	29,047	$	23,101
Total grant date fair value of awards vested	$	19,116	$	20,314	$	23,608

Performance-based restricted stock units:
Total grant date fair value of awards granted	$	4,774	$	3,334	$	2,278
Total grant date fair value of awards vested	$	—	$	1,178	$	1,861

Market-based restricted stock units:
Total grant date fair value of awards granted	$	2,793	$	4,023	$	2,158
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 Fiscal 2017, Fiscal 2016 and Fiscal 2015 were as follows:



	Fiscal 2017			Fiscal 2016			Fiscal 2015
Grant date market price	$	11.43		$	28.06		$	22.46
Fair value	$	11.79		$	31.01		$	19.04
Assumptions:
Price volatility	47		%	45		%	45		%
Expected term (years)	2.9			2.7			2.8
Risk-free interest rate	1.5		%	1.0		%	0.9		%
Dividend yield	7.0		%	3.0		%	3.5		%
Average volatility of peer companies	35.2		%	34.5		%	34.0		%
Average correlation coefficient of peer companies	0.2664			0.3415			0.3288

Stock Appreciation Rights

The following table summarizes stock appreciation rights activity for Fiscal 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	(1,068,330	)	42.59
Outstanding at February 3, 2018	3,010,720		$	49.35	$	29,097	1.9
Stock appreciation rights exercisable at February 3, 2018	2,783,169		$	51.31	$	15,771	1.5
Stock appreciation rights expected to become exercisable in the future as of February 3, 2018	214,132		$	25.68	$	8,870	7.0

No stock appreciation rights were granted during Fiscal 2017 and Fiscal 2016. The weighted-average assumptions used in the Black-Scholes option-pricing model for stock appreciation rights granted during Fiscal 2015 were as follows:



	Fiscal 2015
	Executive Officers			All Other Associates
Grant date market price	$	22.46		$	22.42
Exercise price	$	22.46		$	22.42
Fair value	$	9.11		$	8.00
Assumptions:
Price volatility	49		%	49		%
Expected term (years)	6.1			4.3
Risk-free interest rate	1.5		%	4.2		%
Dividend yield	1.7		%	1.7		%

As of February 3, 2018, there was $1.0 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 7 months.

No stock appreciation rights were exercised in Fiscal 2017 and the total intrinsic value of stock appreciation rights exercised was insignificant during Fiscal 2016 and $4.3 million during Fiscal 2015. The grant date fair value of stock appreciation rights that vested during Fiscal 2017, Fiscal 2016 and Fiscal 2015 was $2.4 million, $4.3 million and $4.9 million, respectively.

Stock Options

The following table summarizes stock option activity for Fiscal 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	(102,600	)	75.27
Outstanding at February 3, 2018	87,200		$	78.20	$	—	0.1
Stock options exercisable at February 3, 2018	87,200		$	78.20	$	—	0.1

No stock options were granted during during Fiscal 2017, Fiscal 2016 and Fiscal 2015. The total intrinsic value of stock options exercised was insignificant during Fiscal 2016 and Fiscal 2015 and no stock options were exercised in Fiscal 2017. As of February 3, 2018, there was no unrecognized compensation cost related to currently outstanding stock options.