STOCK-BASED COMPENSATION

As approved by our shareholders, we established the Stage Stores, Inc. Second Amended and Restated 2008 Equity Incentive Plan (“2008 EIP”) and the Stage Stores 2017 Long-Term Incentive Plan (“2017 LTIP” and, collectively, the “Equity Incentive Plans”) to reward, retain and attract key personnel. The Equity Incentive Plans provide for grants of non-qualified or incentive stock options, SARs, performance shares or units, stock units and stock grants. To fund the 2008 EIP and the 2017 LTIP, 4,484,346 and 1,365,654 shares of our common stock were reserved for issuance upon exercise of awards, respectively. On June 1, 2017, the 2017 LTIP replaced the 2008 EIP and no new awards will be granted under the 2008 EIP. Outstanding shares reserved under the 2008 EIP are authorized for issuance under the 2017 LTIP and if not issued, become available under the 2017 LTIP when the shares are no longer subject to issuance under the 2008 EIP.

Stock-based compensation expense by type of grant for each period presented was as follows (in thousands):



	Fiscal Year
	2018		2017
Non-vested stock	$	3,978	$	5,626
Restricted stock units	808		434
Stock-settled performance share units	826		2,760
Cash-settled performance share units	94		—
Total stock-based compensation expense	5,706		8,820
Related tax benefit	—		(3,313		)
Stock-based compensation expense, net of tax	$	5,706	$	5,507

As of February 2, 2019, we had unrecognized compensation cost of $5.6 million related to stock-based compensation awards granted. That cost is expected to be recognized over a weighted average period of 2.0 years.

Non-vested Stock

We grant shares of non-vested stock to our employees and non-employee directors. Shares of non-vested stock awarded to employees vest 25% annually over a four-year period from the grant date. Shares of non-vested stock awarded to non-employee directors cliff vest after one year. At the end of the vesting period, shares of non-vested stock convert one for one to common stock. Certain non-vested stock awards have shareholder rights, including the right to vote and to receive dividends. The fair value of non-vested stock awards with dividend rights is based on the closing share price of our common stock on the grant date. The fair value of non-vested stock awards that do not have dividend rights is discounted for the present value of expected dividends during the vesting period. Compensation expense is recognized ratably over the vesting period.

The following table summarizes non-vested stock activity during 2018:



Non-vested Stock	Number of Shares		Weighted Average Grant Date Fair Value
Outstanding at February 3, 2018	1,637,037		$	6.67
Granted	631,266		2.41
Vested	(746,902	)	7.11
Forfeited	(141,785	)	7.08
Outstanding at February 2, 2019	1,379,616		4.43

The weighted-average grant date fair value for non-vested stock granted in 2018 and 2017, was $2.41 and $2.21, respectively. The aggregate intrinsic value of non-vested stock that vested during 2018 and 2017 was $0.7 million and $1.2 million, respectively. The payment of the employees’ tax liability for a portion of the vested shares was satisfied by withholding shares with a fair value equal to the tax liability. As a result, the actual number of shares issued during 2018 was 656,012.

Restricted Stock Units (“RSUs”)

We grant RSUs to our employees, which vest 25% annually over a four-year period from the grant date. Each vested RSU is settled in cash in an amount equal to the fair market value of one share of our common stock on the vesting date, not to exceed five times the per share fair market value of our common stock on the grant date. Unvested RSUs have the right to receive a dividend equivalent payment equal to cash dividends paid on our common stock. RSUs are accounted for as a liability in accordance with accounting guidance for cash settled stock awards. The liability for RSUs is remeasured based on the closing share price of our common stock at each reporting period until the award vests. Compensation expense is recognized ratably over the vesting period and adjusted with changes in the fair value of the liability.

The following table summarizes RSU activity during 2018:



Restricted Stock Units	Number of Units		Weighted Average Grant Date Fair Value
Outstanding at February 3, 2018	1,283,750		$	2.14
Granted	1,415,000		2.18
Vested	(387,186	)	2.15
Forfeited	(571,250	)	2.16
Outstanding at February 2, 2019	1,740,314		2.16

Stock-settled Performance Share Units (“Stock-settled PSUs”)

We grant stock-settled PSUs as a means of rewarding management for our long-term performance based on total shareholder return relative to a specific group of companies over a three-year performance cycle. These awards cliff vest following a three-year performance cycle, and if earned, are settled in shares of our common stock, unless otherwise determined by our Board of directors (“Board”), or its Compensation Committee. The actual number of shares of our common stock that may be earned ranges from zero to a maximum of twice the number of target units awarded to the recipient. Grant recipients do not have any shareholder rights on unvested or unearned stock-settled PSUs. The fair value of these PSUs is estimated using a Monte Carlo simulation, based on the expected term of the award, a risk-free rate, expected dividends, expected volatility, and share price of our common stock and the specified peer group. The expected term is estimated based on the vesting period of the awards, the risk-free rate is based on the yield on U.S. Treasury securities matching the vesting period, and the volatility is based on the historical volatility over the expected term. Compensation expense is recognized ratably over the corresponding vesting period for stock-settled PSUs.

The following table summarizes stock-settled PSU activity during 2018:



Period Granted	Target PSUs Outstanding at February 3, 2018	Target PSUs Granted	Target PSUs Vested and Earned		Target PSUs Vested and Unearned		Target PSUs Forfeited		Target PSUs Outstanding at February 2, 2019	Weighted Average Grant Date Fair Value per Target PSU
2016	321,706	—	(9,302	)	(240,052	)	(72,352	)	—	$	8.69
2017	600,000	—	—		—		(130,000	)	470,000	1.80
2018	—	280,000	—		—		—		280,000	3.05
Total	921,706	280,000	(9,302	)	(240,052	)	(202,352	)	750,000	2.27

The aggregate intrinsic value of stock-settled PSUs that vested and were earned during 2018 was $0.02 million. No stock-settled PSUs were earned in 2017. The payment of the employees’ tax liability for a portion of the vested shares was satisfied by withholding shares with a fair value equal to the tax liability. As a result, the actual number of stock-settled PSUs issued during 2018 was 7,036.

Cash-settled Performance Share Units (“Cash-settled PSUs”)

We grant cash-settled PSUs as a means of rewarding management for our long-term performance based on total shareholder return relative to a specific group of companies over a three-year performance cycle. These awards cliff vest following a three-year performance cycle, and if earned, are settled in cash. The amount of settlement ranges from zero to a maximum of twice the number of target units awarded multiplied by the fair market value of one share of our common stock on the vesting date. Grant recipients do not have any shareholder rights on unvested or unearned cash-settled PSUs. Cash-settled PSUs are accounted for as a liability in accordance with accounting guidance for cash settled stock awards. The liability for cash-settled PSUs is remeasured based on their fair value at each reporting period until the award vests, which is estimated using a Monte Carlo simulation. Assumptions used in the valuation include the expected term of the award, a risk-free rate, expected dividends, expected volatility, and share price of our common stock and the specified peer group. The expected term is estimated based on the vesting period of the awards, the risk-free rate is based on the yield on U.S. Treasury securities matching the vesting period, and the volatility is based on the historical volatility over the expected term. Compensation expense is recognized ratably over the corresponding vesting period and adjusted with changes in the fair value of the liability.

The following table summarizes cash-settled PSU activity during 2018:



Period Granted	Target PSUs Outstanding at February 3, 2018	Target PSUs Granted	Target PSUs Forfeited		Target PSUs Outstanding at February 2, 2019	Weighted Average Grant Date Fair Value per Target PSU
2018	—	460,000	(160,000	)	300,000	$	3.05

SARs

Prior to 2012, we granted SARs to our employees, which generally vested 25% annually over a four-year period from the grant date. Outstanding SARs expired, if not exercised or forfeited, within seven years from the grant date.

The following table summarizes SARs activity during 2018:

Number of
Outstanding Shares

Weighted Average
Exercise Price

Outstanding, vested and exercisable at February 3, 2018

Outstanding, vested and exercisable at February 2, 2019