SHARE-BASED COMPENSATION:


(a)	Employee share purchase plans:

The Company has employee share purchase plans which allow eligible employees to authorize payroll deductions of up to 10% of their salary to purchase from Treasury, common shares of the Company at a price of 90% of the then current share price as defined in the plans. Employees purchasing shares under the plans subsequent to January 1, 2008 must hold the shares for a minimum of two years. The Company has reserved 5,000,000 common shares for issuance under the plans. As at December 30, 2018, a total of 910,159 shares (December 31, 2017 - 852,255) were issued under these plans. Included as compensation costs in selling, general and administrative expenses is $0.2 million (2017 - $0.2 million) relating to the employee share purchase plans.


(b)	Stock options and restricted share units:

The Company’s Long-Term Incentive Plan (the "LTIP") includes stock options and restricted share units. The LTIP allows the Board of Directors to grant stock options, dilutive restricted share units ("Treasury RSUs") and non-dilutive restricted share units ("non-Treasury RSUs") to officers and other key employees of the Company and its subsidiaries. The number of common shares that are issuable pursuant to the exercise of stock options and the vesting of Treasury RSUs for the LTIP is fixed at 12,000,632. As at December 30, 2018, 1,524,965 common shares remained authorized for future issuance under this plan.

The exercise price payable for each common share covered by a stock option is determined by the Board of Directors at the date of the grant, but may not be less than the closing price of the common shares of the Company on the trading day immediately preceding the effective date of the grant. Stock options granted since fiscal 2007 vest equally beginning on the second, third, fourth, and fifth anniversary of the grant date, with limited exceptions.

Holders of Treasury RSUs, non-Treasury RSUs and deferred share units are entitled to dividends declared by the Company which are recognized in the form of additional equity awards equivalent in value to the dividends paid on common shares. The vesting conditions of the additional equity awards are subject to the same performance objectives and other terms and conditions as the underlying equity awards. The additional awards related to outstanding Treasury RSUs and non-Treasury RSUs expected to be settled in common shares are credited to contributed surplus when the dividends are declared.

15. SHARE-BASED COMPENSATION (continued):


(b)	Stock options and restricted share units (continued):

Outstanding stock options were as follows:



Stock options issued in Canadian dollars and to be exercised on the TSX:
		Number		Weighted exercise price (CA$)

Stock options outstanding, January 1, 2017		2,532			$	31.18
Changes in outstanding stock options:
	Exercised	(269	)		16.43
Stock options outstanding, December 31, 2017		2,263			32.94
Changes in outstanding stock options:
	Exercised	(110	)		19.98
	Forfeited	(160	)		33.58
Stock options outstanding, December 30, 2018		1,993			$	33.60


Stock options issued in U.S. dollars and to be exercised on the NYSE:
		Number		Weighted exercise price (US$)

Stock options outstanding, January 1, 2017		—			$	—
Changes in outstanding stock options:
	Granted	759			29.01
Stock options outstanding, December 31, 2017		759			29.01
Changes in outstanding stock options:
	Forfeited	(90	)		29.01
Stock options outstanding, December 30, 2018		669			$	29.01

As at December 30, 2018, 915,628 outstanding options, all of which were issued in Canadian dollars and to be exercised on the TSX, were exercisable at the weighted average exercise price of CA$30.22 (December 31, 2017 - 599,562 options at CA$26.68). For stock options exercised during fiscal 2018, the weighted average share price at the date of exercise was CA$39.79 (2017 - CA$39.23). Based on the Black-Scholes option pricing model, the grant date weighted average fair value of options granted during fiscal 2017 was $5.15. There were no options granted during fiscal 2018. The following table summarizes the assumptions used in the Black-Scholes option pricing model for the stock option grants for fiscal 2017:



			2017

Exercise price			US$29.01
Risk-free interest rate			1.90%
Expected volatility			20.78%
Expected life			4.63 years
Expected dividend yield			1.29%

Expected volatilities are based on the historical volatility of Gildan’s share price. The risk-free rate used for stock options issued in Canadian dollars and to be exercised on the TSX is equal to the yield available on Government of Canada bonds at the date of grant with a term equal to the expected life of the options. The risk-free rate used for stock options issued in U.S. dollars and to be exercised on the NYSE is equal to the yield available on U.S Department of Treasury bonds at the date of grant with a term equal to the expected life of the options.

15. SHARE-BASED COMPENSATION (continued):


(b)	Stock options and restricted share units (continued):

The following table summarizes information about stock options issued and outstanding and exercisable at December 30, 2018:



	Options issued and outstanding		Options exercisable
Exercise prices	Number	Remaining contractual life (yrs)	Number

CA$15.59	71	1	71
CA$24.22	239	2	239
CA$30.46	254	3	191
CA$33.01	635	5	159
CA$38.01	511	4	256
CA$42.27	283	7	—
	1,993		916
US$29.01	669	6	—
	2,662		916

A Treasury RSU represents the right of an individual to receive one common share on the vesting date without any monetary consideration being paid to the Company. All Treasury RSUs awarded to date vest within a five-year vesting period. The vesting of at least 50% of each Treasury RSU grant is contingent on the achievement of performance conditions that are based on the Company’s average return on assets performance for the period as compared to the S&P/TSX Capped Consumer Discretionary Index, excluding income trusts.

Outstanding Treasury RSUs were as follows:



		Number		Weighted average fair value per unit

Treasury RSUs outstanding, January 1, 2017		249			$	20.70
Changes in outstanding Treasury RSUs:
	Granted for dividends declared	2			29.04
	Settled through the issuance of common shares	(149	)		14.12
Treasury RSUs outstanding, December 31, 2017		102			30.46
Changes in outstanding Treasury RSUs:
	Granted	20			30.10
	Granted for dividends declared	2			29.94
	Forfeited	(18	)		27.93
Treasury RSUs outstanding, December 30, 2018		106			$	30.82

As at December 30, 2018 and December 31, 2017, none of the awarded and outstanding Treasury RSUs were vested.

The compensation expense included in operating income for fiscal 2018 was $2.9 million (2017 - $3.8 million) in respect of the stock options and $0.5 million (2017 - $0.9 million) in respect of Treasury RSUs, and the counterpart has been recorded as contributed surplus. When the underlying shares are issued to the employees, the amounts previously credited to contributed surplus are transferred to share capital.

15. SHARE-BASED COMPENSATION (continued):


(b)	Stock options and restricted share units (continued):

Outstanding non-Treasury RSUs were as follows:



		Number		Weighted average fair value per unit

Non-Treasury RSUs outstanding, January 1, 2017		1,047			$	27.18
Changes in outstanding non-Treasury RSUs:
	Granted	471			29.38
	Granted for performance	88			28.42
	Granted for dividends declared	13			29.86
	Settled - common shares	(215	)		28.34
	Settled - payment of withholding taxes	(142	)		28.42
	Forfeited	(62	)		27.66
Non-Treasury RSUs outstanding, December 31, 2017		1,200			27.79
Changes in outstanding non-Treasury RSUs:
	Granted	573			29.82
	Granted for performance	109			28.46
	Granted for dividends declared	24			29.81
	Settled - common shares	(226	)		28.47
	Settled - payment of withholding taxes	(151	)		28.47
	Forfeited	(155	)		27.99
Non-Treasury RSUs outstanding, December 30, 2018		1,374			$	28.52

Non-Treasury RSUs have the same features as Treasury RSUs, except that their vesting period is a maximum of three years and they can be settled in cash based on the Company’s share price on the vesting date, or through the delivery of common shares purchased on the open market, at the Company's option. Non-Treasury RSUs are settled in common shares purchased on the open market, and to the extent that the Company has an obligation under tax laws to withhold an amount for an employee’s tax obligation associated with the share-based payment the Company settles non-Treasury RSUs on a net basis. 100% of the non-Treasury RSUs awarded to executive officers have vesting conditions that are dependent upon the financial performance of the Company relative to a benchmark group of Canadian publicly listed companies, or other performance metrics. In addition, up to two times the actual number of non-Treasury RSUs awarded to executive officers can vest if exceptional financial performance is achieved. As at December 30, 2018 and December 31, 2017, none of the outstanding non-Treasury RSUs were vested.

The compensation expense included in operating income, in respect of the non-Treasury RSUs, for fiscal 2018 was $16.4 million (2017 - $11.2 million), and the counterpart has been recorded as contributed surplus. When the underlying common shares are delivered to employees for settlement upon vesting, the amounts previously credited to contributed surplus are transferred to share capital.

15. SHARE-BASED COMPENSATION (continued):

The Company has a deferred share unit plan for independent members of the Company’s Board of Directors who must receive at least 50% of their annual board retainers in the form of deferred share units ("DSUs"). The value of these DSUs is based on the Company’s share price at the time of payment of the retainers or fees. DSUs granted under the plan will be redeemable and the value thereof payable in cash only after the director ceases to act as a director of the Company. As at December 30, 2018, there were 274,794 (December 31, 2017 - 292,873) DSUs outstanding at a value of $8.3 million (December 31, 2017 - $9.5 million). This amount is included in accounts payable and accrued liabilities based on a fair value per deferred share unit of $30.24 (December 31, 2017 - $32.30). The DSU obligation is adjusted each quarter based on the market value of the Company’s common shares. The Company includes the cost of the DSU plan in selling, general and administrative expenses, which for fiscal 2018 was $1.7 million (2017 - $1.1 million).

Changes in outstanding DSUs were as follows:



	2018		2017

DSUs outstanding, beginning of fiscal year	293		255
Granted	54		35
Granted for dividends declared	4		3
Redeemed	(76	)	—
DSUs outstanding, end of fiscal year	275		293