Note 13. Stock-Based Compensation

Barnes & Noble’s Equity Plans Prior to Spin-Off

Prior to the Spin-Off, certain of our employees were eligible to participate in Barnes & Noble, Inc. equity plans pursuant to which they were granted awards of Barnes & Noble, Inc. common stock. Under these equity plans, our employees were granted restricted stock units, restricted stock and stock options.

Barnes & Noble, Inc. recognized stock-based compensation costs, net of estimated forfeitures, for only those shares expected to vest on a straight-line basis over the requisite service period of the award. Barnes & Noble, Inc. estimated the forfeiture rates based on its historical experience. The fair market value of restricted stock was determined based on the closing price of Barnes & Noble, Inc.’s common stock on the grant date. Barnes & Noble, Inc. used the Black-Scholes option-pricing model to value Barnes & Noble, Inc.’s stock options for each stock option award.

The equity-based payments recorded by us prior to the Spin-Off included the expense associated with our employees.

Current Equity Plans

During the second quarter of Fiscal 2016, post Spin-Off, we reserved 2,409,345 shares of our Common Stock for future grants in accordance with the Barnes & Noble Education Inc. Equity Incentive Plan (the "Equity Incentive Plan"). Additionally, during the second quarter of Fiscal 2017 shareholders approved an amendment to the Equity Incentive Plan to increase the number of shares available for issuance by an additional 4,000,000 shares of our Common Stock, for an aggregate total of 6,409,345 shares.

Types of equity awards that can be granted under the Equity Incentive Plan include options, restricted stock ("RS"), restricted stock units ("RSU") and performance shares ("PS"). We have not granted options under the Equity Incentive Plan.

A restricted stock award is an award of common stock that is subject to certain restrictions during a specified period. Restricted stock awards are generally subject to forfeiture if employment terminates prior to the release of the restrictions. The grantee cannot transfer the shares before the restricted shares vest. Shares of unvested restricted stock have the same voting rights as common stock, are entitled to receive dividends and other distributions thereon and are considered to be currently issued and outstanding. Restricted stock awards vest over a period of one year.

A restricted stock unit is a grant valued in terms of our common stock, but no stock is issued at the time of grant. Each restricted stock unit may be redeemed for one share of our common stock once vested. Restricted stock units are generally subject to forfeiture if employment terminates prior to the release of the restrictions. The grantee cannot transfer the units except in very limited circumstances and with the consent of the compensation committee. Shares of unvested restricted stock units have no voting rights but are entitled to receive dividends and other distributions thereon. Restricted stock units vest over a period of three years.

We recognize compensation expense for awards ratably over the requisite service period of the award, which is generally three years. We recognize compensation expense based on the number of awards expected to vest using an estimated average forfeiture rate. We calculate the fair value of stock-based awards based on the closing price on the date the award was granted.

Stock-Based Compensation Activity

During Fiscal 2017 we granted the following awards:

•

406,078 PS awards were granted to employees that will only vest based upon the achievement of pre-established performance goals related to Adjusted EBITDA and new business achieved measured over a period of time. The PS will vest based on company performance during Fiscal 2017 - Fiscal 2018 with one additional year of time-based vesting. The number of PS awards that will vest range from 0%-150% of the target award based on actual performance.


•	1,157,586 RSU awards were granted to employees with a three year vesting period in accordance with Equity Incentive Plan;


•	49,484 RSU awards and 12,371 RS awards were granted to the current Board of Directors ("BOD") members for annual compensation with a one year vesting period in accordance with Equity Incentive Plan.

The following table presents a summary of restricted stock awards and restricted stock units activity related to our current Equity Incentive Plan:



	Restricted Stock Awards				Restricted Stock Units				Performance Shares
	Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares		Weighted Average Grant Date Fair Value		Number of Shares	Weighted Average Grant Date Fair Value
Balance, August 2, 2015	—		$	—	—		$	—	—	$	—
Granted (a)	73,352		$	13.08	1,681,552		$	10.12	—	$	—
Vested	(27,272	)	$	13.19	(431,106	)	$	7.29	—	$	—
Forfeited	—		$	—	(8,979	)	$	9.92	—	$	—
Balance, April 30, 2016	46,080		$	13.02	1,241,467		$	11.10	—	$	—
Granted	12,371		$	9.70	1,207,070		$	9.70	406,078	$	9.52
Vested	(46,080	)	$	13.02	(680,489	)	$	9.72	—	$	—
Forfeited	—		$	—	(36,425	)	$	9.69	—	$	—
Balance, April 29, 2017	12,371		$	9.70	1,731,623		$	10.70	406,078	$	9.52


(a)	Restricted Stock Units include the 877,426 converted RSU shares issued during Fiscal 2016 related to our spin-off from Barnes & Noble, Inc.

Total fair value of shares of restricted stock awards and restricted stock units that vested since the inception of Equity Incentive Plan was $960 and $9,759, respectively.

Stock-Based Compensation Expense

We recognized stock-based compensation expense for equity-based awards in selling and administrative expenses as follows:



	Fiscal 2017		Fiscal 2016		Fiscal 2015
Restricted Stock Expense	$	280	$	840	$	306
Restricted Stock Units Expense	8,431		5,710		3,757
Performance Shares Expense	655		—		—
Stock Option Expense	—		120		678
Stock-Based Compensation Expense	$	9,366	$	6,670	$	4,741

In the 13 weeks ended August 1, 2015 and for Fiscal 2015 (periods presented prior to the Spin-Off), Barnes & Noble allocated stock compensation expense to us, which includes stock compensation expense related to our employees, as well as an allocation from Barnes & Noble for our pro-rated share of corporate employees.

Total unrecognized compensation cost related to unvested awards as of April 29, 2017 was $14,933 and is expected to be recognized over a weighted-average period of 2 years.