12. SHARE-BASED PAYMENTS

Prior to the Separation Date, Lamb Weston employees participated in Conagra’s equity incentive plans, which issued equity awards, including stock options, restricted stock units and performance-based restricted stock units. In addition, certain Lamb Weston employees participated in Conagra’s employee stock purchase plan. All awards granted under these plans consisted of Conagra common shares. Lamb Weston’s Condensed Combined and Consolidated Statements of Earnings reflect compensation expense for these stock-based plans associated with the portion of Conagra’s incentive plans in which Lamb Weston employees participated and an allocation of stock-based compensation costs of certain Conagra employees who provided general and administrative services on our behalf.

After the Separation Date, outstanding awards granted to Lamb Weston employees under Conagra’s equity incentive plans were converted into Lamb Weston awards under Lamb Weston’s equity incentive plans based on a conversion ratio. The conversion ratio was calculated based on the average of the volume weighted average price (“VWAP”) per share of Conagra common stock for each of the five trading days ending with the second trading day immediately prior to November 9, divided by the VWAP per share of Lamb Weston common stock for the five trading days beginning with the first trading day immediately following the Separation Date, or November 10, 2016.

On November 8, 2016, the Board of Directors adopted the Lamb Weston Holdings, Inc. 2016 Stock Plan (the “Plan”). Under the terms of the Plan, equity awards, including stock options, cash and stock-settled restricted stock units, restricted stock awards, and performance-based restricted stock units, may be granted to our directors, officers, and employees. At November 27, 2016, we had 10.0 million shares authorized under our equity incentive plans, and 8.4 million were available for future grant. Forfeitures are added back to the pool of shares of common stock available to be granted at a future date.

The following table summarizes stock option activity for the twenty-six weeks ended November 27, 2016:


			Weighted-		Weighted-
			Average		Average
			Exercise		Remaining		Aggregate
			Price		Contractual		Intrinsic
	Shares		(per share)		Term (Years)		Value (a)
Outstanding at May 29, 2016		—		—
Converted on November 9, 2016		607,420	$	23.60
Granted		—		—
Exercised		—		—
Forfeited/cancelled		—		—
Outstanding at November 27, 2016		607,420	$	23.60		7.31	$	5.5

Exercisable at November 27, 2016		333,143	$	20.52		6.02	$	4.0

(a)

The aggregate intrinsic values represent the total pre-tax intrinsic value (the difference between our closing stock price on the last trading day of our fiscal 2017 second quarter, or November 25, 2016, and the exercise price, multiplied by the number of in-the-money options) that would have been received by the option holders had all option holders exercised their in-the-money options at the end of the quarter. The amount changes based on the fair market value of our stock.

The following table summarizes restricted stock unit and performance-based restricted stock unit activity for the twenty-six weeks ended November 27, 2016:


	Stock-Settled				Cash-Settled				Performance Units
			Weighted-				Weighted-				Weighted-
			Average				Average				Average
			Grant-				Grant-				Grant-
			Date Fair				Date Fair				Date Fair
	Shares		Value		Shares		Value		Shares		Value
Outstanding at May 29, 2016		—		—		—		—		—		—
Converted on November 9, 2016		449,716	$	25.05		469,837	$	25.33		56,050	$	25.84
Granted		—		—		—		—		—		—
Vested		—		—		—		—		—		—
Forfeited/expired/cancelled		—		—		—		—		—		—
Outstanding at November 27, 2016		449,716	$	25.05		469,837	$	25.33		56,050	$	25.84

Compensation Expense

Prior to the Separation Date, Conagra charged us for share-based compensation expense related to our direct employees and allocated to us costs (including share-based compensation) of certain employees of Conagra who provided general and administrative services on our behalf (see Note 3, Related Party Transactions). Our share-based compensation expense is recorded in “Selling, general and administrative expenses.” Compensation expense for share-based awards recognized in the Condensed Combined and Consolidated Statements of Earnings, net of forfeitures, was as follows (dollars in millions):


	Thirteen Weeks Ended				Twenty-Six Weeks Ended
	November 27,		November 29,		November 27,		November 29,
	2016		2015		2016		2015
Stock options	$	0.1	$	0.1	$	0.3	$	0.2
Stock-settled restricted stock units		0.9		0.6		1.6		1.2
Performance-based restricted stock units		(0.3)		—		—		—
Cash-settled restricted stock units (a)		1.8		1.0		3.3		2.9
Total compensation expense		2.5		1.7		5.2		4.3
Income tax benefit		(0.9)		(0.6)		(1.9)		(1.6)
Total compensation expense, net of tax benefit	$	1.6	$	1.1	$	3.3	$	2.7

(a)

All cash-settled restricted stock units are marked-to-market and presented within “Accrued liabilities” and “Other noncurrent liabilities” in our Condensed Combined and Consolidated Balance Sheets.

Based on estimates at November 27, 2016, total unrecognized compensation expense, net of estimated forfeitures, related to share-based payments was as follows (dollars in millions):



			Remaining
			Weighted
	Unrecognized		Average
	Compensation		Recognition
	Expense		Period (in years)
Stock options	$	0.8		1.5
Cash-settled restricted stock units		7.8		2.1
Stock-settled restricted stock units		7.3		2.1
Performance units		0.8		2.0
Total unrecognized share-based compensation expense	$	16.7		2.1