STOCK-BASED COMPENSATION AND BENEFIT PLANS

Stock-based compensation plans

The Company's eligible employees participate in various stock-based compensation plans, which are provided by the Company directly.

In June 2014, the Company's stockholders approved the adoption of the lululemon athletica inc. 2014 Equity Incentive Plan ("2014 Plan"). The 2014 Plan provides for awards in the form of stock options, stock appreciation rights, restricted stock purchase rights, restricted share bonuses, restricted stock units, performance shares, performance-based restricted stock units, cash-based awards, other stock-based awards, and deferred compensation awards to employees (including officers and directors who are also employees), consultants, and directors of the Company.

The awards granted under the 2007 Equity Incentive Plan ("2007 Plan") remain outstanding and continue to vest under their original conditions. No further awards will be granted under the 2007 Plan.

The Company has granted stock options, performance-based restricted stock units, restricted stock units, and restricted shares. Stock options granted to date generally have a four-year vesting period and vest at a rate of 25% each year on the anniversary date of the grant. Stock options generally expire on the earlier of seven years from the date of grant, or a specified period of time following termination, in accordance with the 2014 Plan and the related grant agreement. Performance-based restricted stock units issued generally vest three years from the grant date and restricted shares generally vest one year from the grant date. Restricted stock units granted generally have a three-year vesting period and vest at a certain percentage each year on the anniversary date of the grant.

The Company issues previously unissued shares upon the exercise of Company options, vesting of performance-based restricted stock units or restricted stock units, and granting of restricted shares.

Stock-based compensation expense charged to income for the plans was $17.6 million, $16.8 million, and $10.4 million for the years ended January 28, 2018, January 29, 2017, and January 31, 2016, respectively.

Total unrecognized compensation cost for all stock-based compensation plans was $44.6 million as of January 28, 2018, which is expected to be recognized over a weighted-average period of 2.0 years, and was $35.8 million as of January 29, 2017 over a weighted-average period of 2.2 years.

Company stock options, performance-based restricted stock units, restricted shares and restricted stock units

A summary of the Company's stock option, performance-based restricted stock unit, restricted share and restricted stock unit activity as of January 28, 2018, January 29, 2017, and January 31, 2016, and changes during the fiscal years then ended is presented below:



	Stock Options			Performance-Based Restricted Stock Units			Restricted Shares			Restricted Stock Units
	Number	Weighted-Average Exercise Price		Number	Weighted-Average Grant Date Fair Value		Number	Weighted-Average Grant Date Fair Value		Number	Weighted-Average Grant Date Fair Value
	(In thousands, except per share amounts)
Balance at February 1, 2015	879	$	39.25	452	$	59.27	62	$	42.86	186	$	45.75
Granted	399	57.43		156	63.35		19	66.07		238	61.60
Exercised/vested	235	20.26		58	67.50		46	42.73		41	46.04
Forfeited/expired	176	55.22		155	62.06		4	38.25		50	53.35
Balance at January 31, 2016	867	$	49.54	395	$	58.58	31	$	57.67	333	$	55.91
Granted	428	68.63		164	68.64		17	69.94		216	68.15
Exercised/vested	191	36.76		7	64.36		34	58.39		91	56.87
Forfeited/expired	186	58.87		162	62.54		—	—		98	55.95
Balance at January 29, 2017	918	$	59.20	390	$	61.05	14	$	70.54	360	$	62.99
Granted	619	52.34		192	52.38		24	52.38		336	52.83
Exercised/vested	109	51.62		—	—		14	70.29		135	60.64
Forfeited/expired	311	58.09		253	55.30		3	51.72		134	57.28
Balance at January 28, 2018	1,117	$	56.44	329	$	60.42	21	$	52.45	427	$	57.54

A total of 13.8 million shares of the Company's common stock have been authorized for future issuance under the Company's 2014 Equity Incentive Plan.

The Company's performance-based restricted stock units are awarded to eligible employees and entitle the grantee to receive a maximum of two shares of common stock per performance-based restricted stock unit if the Company achieves specified performance goals and the grantee remains employed during the vesting period. The fair value of performance-based restricted stock units is based on the closing price of the Company's common stock on the award date. Expense for performance-based restricted stock units is recognized when it is probable that the performance goal will be achieved.

In January 2018, the Company determined that the impact of the ivivva restructuring would be excluded from the measurement of performance for its performance-based restricted stock awards. This resulted in a modification of the awards for accounting purposes, impacting approximately 250 employees, and resulting in a total incremental stock-based compensation expense of $10.1 million. This expense will be recognized over the remaining service period of the affected awards and $0.1 million was recognized during the year ended January 28, 2018.

The fair value of the restricted shares and restricted stock units is based on the closing price of the Company's common stock on the award date.

The fair value of each stock option granted is estimated on the date of grant using the Black-Scholes model. The assumptions used to calculate the fair value of the options granted are evaluated and revised, as necessary, to reflect market conditions and the Company's historical experience. The expected term of the options is based upon the historical experience of similar awards, giving consideration to expectations of future employee behavior. Expected volatility is based upon the historical volatility of the Company's common stock for the period corresponding with the expected term of the options. The risk-free interest rate is based on the U.S. Treasury yield curve for the period corresponding with the expected term of the options. The following assumptions were used in calculating the fair value of stock options granted in fiscal 2017, 2016, and 2015:



	Fiscal Year Ended
	January 28, 2018		January 29, 2017		January 31, 2016
Expected term	4.00 years		4.00 years		4.00 years
Expected volatility	38.28	%	40.07	%	42.73	%
Risk-free interest rate	1.72	%	1.08	%	0.98	%
Dividend yield	—	%	—	%	—	%

The following table summarizes information about stock options outstanding and exercisable as of January 28, 2018:



	Outstanding					Exercisable
Range of Exercise Prices	Number of Options		Weighted-Average Exercise Price		Weighted-Average Remaining Life (Years)	Number of Options		Weighted-Average Exercise Price		Weighted-Average Remaining Life (Years)
	(In thousands, except per share amounts and years)
$11.75 - $51.72	151		$	43.32	4.0	85		$	39.93	3.3
$51.87 - $51.87	431		51.87		6.2	—		—		0.0
$52.39 - $64.46	175		54.69		4.3	85		53.97		3.8
$64.83 - $67.68	80		65.13		4.3	35		65.00		4.3
$68.69 - $78.86	280		69.15		5.0	78		69.80		4.5
	1,117		$	56.44	5.2	283		$	55.44	3.9
Intrinsic value	$	25,287				$	6,679

As of January 28, 2018, the unrecognized compensation cost related to these options was $11.7 million, which is expected to be recognized over a weighted-average period of 2.6 years. The weighted-average grant date fair value of options granted during the years ended January 28, 2018, January 29, 2017, and January 31, 2016 was $16.88, $22.39, and $19.76, respectively.

The following table summarizes the intrinsic value of options exercised and awards that vested during fiscal 2017, 2016, and 2015:



	Fiscal Year Ended
	January 28, 2018		January 29, 2017		January 31, 2016
	(In thousands)
Stock options	$	1,856	$	6,072	$	10,554
Performance-based restricted stock units	—		471		3,592
Restricted shares	743		2,283		2,739
Restricted stock units	7,447		6,084		2,230
	$	10,046	$	14,910	$	19,115

Employee share purchase plan

The Company's board of directors and stockholders approved the Company's Employee Share Purchase Plan ("ESPP") in September 2007. Contributions are made by eligible employees, subject to certain limits defined in the ESPP, and the Company matches one-third of the contribution. The maximum number of shares authorized to be purchased under the ESPP is 6.0 million shares. All shares purchased under the ESPP are purchased in the open market. During the year ended January 28, 2018, there were 0.1 million shares purchased.

Defined contribution pension plans

During fiscal 2016, the Company began offering defined contribution pension plans to its eligible employees in Canada and the United States. Participating employees may elect to defer and contribute a portion of their eligible compensation to a plan up to limits stated in the plan documents, not to exceed the dollar amounts set by applicable laws. The Company matches 50% to 75% of the contribution depending on the participant's length of service, and the contribution is subject to a two year vesting period. The Company's net expense for the defined contribution plans was $5.2 million and $3.2 million for the years ended January 28, 2018 and January 29, 2017, respectively.