SHARE-BASED COMPENSATION

Financial statement impact

The Company recognized share-based compensation expense of $6.0 million and $16.9 million for the thirteen and thirty-nine weeks ended November 3, 2018, respectively, and $5.4 million and $15.8 million for the thirteen and thirty-nine weeks ended October 28, 2017, respectively. The Company recognized tax benefits associated with share-based compensation expense of $1.3 million and $3.4 million for the thirteen and thirty-nine weeks ended November 3, 2018, respectively, and $2.0 million and $6.0 million for the thirteen and thirty-nine weeks ended October 28, 2017, respectively.

Restricted stock units

The following table summarizes activity for restricted stock units for the thirty-nine weeks ended November 3, 2018:



	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 February 3, 2018	2,520,160		$	15.35	690,174		$	11.82	383,980		$	16.50
Granted	764,213		21.79		197,979		21.77		142,014		33.69
Adjustments for performance achievement	—		—		(43,999	)	20.10		(36,817	)	19.04
Vested	(923,378	)	17.19		—		—		(7,185	)	19.04
Forfeited	(154,812	)	15.41		(12,998	)	12.17		(12,999	)	17.28
Unvested at November 3, 2018	2,206,183		$	16.83	831,156		$	13.74	468,993		$	21.45

⁽¹⁾

Includes 449,923 unvested restricted stock units as of November 3, 2018, 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 or more installments of the award if the cumulative performance requirements are met in a subsequent year. Unvested shares related to restricted stock units with performance-based and market-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.

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 awards 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.

Service-based restricted stock units are expensed on a straight-line basis over the total award’s requisite service period. Performance-based restricted stock units subject to graded vesting are expensed on an accelerated attribution basis. Performance share award expense is primarily recognized in the performance period of the award’s requisite service period. Market-based restricted stock units without graded vesting features are expensed on a straight-line basis over the award’s requisite service period. Compensation expense for stock options had been, and stock appreciation rights is, recognized on a straight-line basis over the award’s requisite service period. The Company adjusts share-based compensation expense on a quarterly basis for actual forfeitures. Unrecognized compensation expense presented excludes the effect of potential forfeitures, and will be adjusted for actual forfeitures as they occur.

As of November 3, 2018, there was $27.6 million, $8.0 million and $5.5 million of total unrecognized compensation cost, 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, 12 months and 13 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 the vesting of restricted stock units was $0.4 million and $5.3 million for the thirteen and thirty-nine weeks ended November 3, 2018, respectively, and $0.2 million and $2.7 million for the thirteen and thirty-nine weeks ended October 28, 2017, respectively.

Additional information pertaining to restricted stock units for the thirty-nine weeks ended November 3, 2018 and October 28, 2017 follows:



(in thousands)	November 3, 2018		October 28, 2017
Service-based restricted stock units:
Total grant date fair value of awards granted	$	16,652	$	16,551
Total grant date fair value of awards vested	15,873		17,531

Performance-based restricted stock units:
Total grant date fair value of awards granted	$	4,310	$	4,774
Total grant date fair value of awards vested	—		—

Market-based restricted stock units:
Total grant date fair value of awards granted	$	4,784	$	2,793
Total grant date fair value of awards vested	137		—

The weighted-average assumptions used for market-based restricted stock units in the Monte Carlo simulation during the thirty-nine weeks ended November 3, 2018 and October 28, 2017 were as follows:



	November 3, 2018			October 28, 2017
Grant date market price	$	23.59		$	11.43
Fair value	$	33.69		$	11.79
Assumptions:
Price volatility	54		%	47		%
Expected term (years)	2.9			2.9
Risk-free interest rate	2.4		%	1.5		%
Dividend yield	3.4		%	7.0		%
Average volatility of peer companies	37.4		%	35.2		%
Average correlation coefficient of peer companies	0.2709			0.2664

Stock appreciation rights

The following table summarizes stock appreciation rights activity for the thirty-nine weeks ended November 3, 2018:



	Number of Underlying Shares		Weighted-Average Exercise Price		Aggregate Intrinsic Value		Weighted-Average Remaining Contractual Life (years)
Outstanding at February 3, 2018	3,010,720		$	49.35
Granted	—		—
Exercised	(50,190	)	22.21
Forfeited or expired	(1,903,746	)	56.65
Outstanding at November 3, 2018	1,056,784		$	37.68	$	15,525	4.0
Stock appreciation rights exercisable at November 3, 2018	965,488		$	39.09	$	11,644	3.8
Stock appreciation rights expected to become exercisable in the future as of November 3, 2018	87,897		$	22.85	$	3,460	6.4

As of November 3, 2018, there was $0.3 million of total unrecognized compensation cost related to stock appreciation rights. The unrecognized compensation cost is expected to be recognized over a weighted-average period of 3 months.

The grant date fair value of stock appreciation rights that were exercised during the thirty-nine weeks ended November 3, 2018 and October 28, 2017 was $1.3 million and $2.2 million, respectively.

Stock options

The following table summarizes stock option activity for the thirty-nine weeks ended November 3, 2018:



	Number of Underlying Shares		Weighted-Average Exercise Price		Aggregate Intrinsic Value		Weighted-Average Remaining Contractual Life (years)
Outstanding at February 3, 2018	87,200		$	78.20
Granted	—		—
Exercised	—		—
Forfeited or expired	(87,200	)	78.20
Outstanding at November 3, 2018	—		$	—	$	—	—
Stock options exercisable at November 3, 2018	—		$	—	$	—	—

As of November 3, 2018, there was no unrecognized compensation cost related to stock options.