STOCK-BASED COMPENSATION

The Company expenses the fair value of all stock awards over their respective vesting periods, ensuring that, the amount of cumulative compensation cost recognized at any date is at least equal to the portion of the grant-date value of the award that is vested at that date. The Company has elected to adjust compensation expense for an estimated forfeiture rate for those shares not expected to vest and to recognize compensation cost on a straight-line basis for awards that only have a service requirement with multiple vest dates.

The Company has granted the following types of stock awards to employees at management levels and above:

Time vesting stock awards ("Deferred Awards") which are in the form of restricted stock units which only require each recipient to complete a service period; Deferred awards generally vest over three years or in full after a three year period. The fair value of Deferred Awards is based on the closing price of the Company's common stock on the grant date and is reduced for estimated forfeitures of those awards not expected to vest due to employee turnover.


ii.	Stock option awards ("Option Awards") which provide the recipient with the option to purchase a set number of shares at a stated exercise price over the term of the contract, which is 10 years for all Option Awards granted.

iii.

Performance-based stock awards ("Performance Awards") which are in the form of restricted stock units which have, in addition to a service requirement, performance criteria that must be achieved for the awards to be earned. Performance Awards have annual vesting, but due to the performance criteria, are not eligible for straight-line expensing. Therefore, Performance Awards are amortized using a graded expense process. Similar to the Deferred Awards, Performance Awards fair value is based on the closing price of the Company’s common stock on the grant date and the compensation expense is reduced for estimated forfeitures of those awards not expected to vest due to employee turnover.

The following table provides a summary of the Company's stock-based compensation expense, which is included in Selling and administrative expense in the Condensed Consolidated Statements of Operations:



	13 Weeks Ended
(in thousands)	April 28, 2017		April 29, 2016
Deferred Awards	$	421	$	479
Option Awards	91		—
Performance Awards	67		234
Total stock-based compensation expense	$	579	$	713

The following table provides a summary of the activities for stock awards for First Quarter 2017:



	Option Awards			Deferred Awards				Performance Awards
(in thousands, except per share amounts)	Number of Shares	Weighted Average Exercise price per Share		Number of Shares		Weighted Average Grant Date Fair Value per Share		Number of Shares		Weighted Average Grant Date Fair Value per Share
Outstanding as of January 27, 2017	—	$	—	252		$	24.42	69		$	26.38
Granted	294	18.10		124		17.75		—		—
Vested	—	—		—		—		—		—
Exercised	—	—		—		—		—		—
Forfeited or expired	—	—		(33	)	25.12		(28	)	23.47
Outstanding as of April 28, 2017	294	18.10		343		22.01		41		28.33

Total unrecognized stock-based compensation expense related to unvested Option Awards, Deferred Awards and Performance Awards was approximately $2.4 million, $5.5 million and $0.1 million, respectively, as of April 28, 2017, which is expected to be recognized ratably over a weighted average period of 3.8 years, 2.4 years and 0.1 years, respectively.

During First Quarter 2017, the Company granted long-term incentive awards to employees consisting of 294,118 Option Awards and 124,226 Deferred Awards with respective weighted average grant date fair values per share of $8.49 and $17.75. The Option Awards vest ratably over 4.0 years and the contract to buy Option Awards extends for another 6.0 years. Based on the closing price of Lands' End common stock on the grant date, the weighted average option exercise price is $18.10. The fair value of each Option Award was estimated on the grant date using the Black-Scholes option pricing model. No Option Awards were exercisable as of April 28, 2017. Deferred Awards granted to various employees during First Quarter 2017 generally vest ratably for a period between fifteen months to four years.

The fair value of stock options is determined on the grant date utilizing a Black-Scholes option pricing model. The following weighted average assumptions were utilized in deriving the fair value for Option Awards for First Quarter 2017:



Risk-free interest rate	1.90%
Expected dividend yield	—%
Volatility	46.12%
Expected life (in years)	6.25
Weighted average grant date fair value per share	$8.49

The simplified method was used to calculate the Expected life (in years) to be utilized in the Black-Scholes option pricing model applied to the First Quarter 2017 Option Awards granted. The simplified method was used as the company does not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term of the Option Awards due to the limited period of time its equity shares have been publicly held.