Share-Based Compensation | 1 1 . Share-Based Compensation Total compensation expense included in SG&A, and the associated tax benefits recognized related to the Company’s share-based compensation plans were as follows: Thirteen weeks ended Twenty-six weeks ended July 30, August 1, July 30, August 1, 2016 2015 2016 2015 ($ in millions) Options and shares purchased under the employee stock purchase plan $ 2 $ 3 $ 5 $ 6 Restricted stock and restricted stock units 4 2 6 5 Total share-based compensation expense $ 6 $ 5 $ 11 $ 11 Tax benefit recognized $ 2 $ 1 $ 3 $ 3 Excess income tax benefit from settled equity-classified share-based awards reported as a cash flow from financing activities $ 10 $ 24 Valuation Model and Assumptions The Company uses a Black-Scholes option-pricing model to estimate the fair value of share-based awards. The Black-Scholes option-pricing model incorporates various and highly subjective assumptions, including expected term and expected volatility. The following table shows the Company’s assumptions used to compute the share-based compensation expense for awards granted during the twenty-six weeks ended July 30, 2016 and August 1, 2015 : Stock Option Plans Stock Purchase Plan July 30, August 1, July 30, August 1, 2016 2015 2016 2015 Weighted-average risk free rate of interest 1.4 % 1.5 % 0.4 % 0.2 % Expected volatility 30 % 30 % 26 % 24 % Weighted-average expected award life (in years) 5.7 6.0 1.0 1.0 Dividend yield 1.7 % 1.6 % 1.7 % 1.7 % Weighted-average fair value $ 15.68 $ 16.01 $ 15.19 $ 9.53 The information in the following table covers options granted under the Company’s stock option plans for the twenty-six weeks ended July 30, 2016 : Weighted- Weighted- Number Average Average of Remaining Exercise Shares Contractual Life Price (in thousands) (in years) (per share) Options outstanding at the beginning of the year 3,694 $ 32.62 Granted 482 63.47 Exercised (669) 21.56 Expired or cancelled (54) 59.03 Options outstanding at July 30, 2016 3,453 5.7 $ 38.65 Options exercisable at July 30, 2016 2,420 4.3 $ 29.34 Options vested and expected to vest at July 30, 2016 3,413 5.6 $ 38.38 Options available for future grant at July 30, 2016 12,006 The total fair value of options vested as of July 30, 2016 and August 1, 2015 was $8 million and $14 million , respectively. The cash received from option exercises for the thirteen and twenty-six weeks ended July 30, 2016 was $7 million and $14 million , respectively. The cash received from option exercises for the thirteen and twenty-six weeks ended August 1, 2015 was $15 million and $38 million, respectively. The total intrinsic value of options exercised (the difference between the market price of the Company’s common stock on the exercise date and the price paid by the optionee to exercise the option) is presented below: Thirteen weeks ended Twenty-six weeks ended July 30, August 1, July 30, August 1, 2016 2015 2016 2015 ($ in millions) Exercised $ 12 $ 29 $ 26 $ 65 The total tax benefit realized from option exercises was $5 million and $10 million for the thirteen and twenty-six weeks ended July 30, 2016 , respectively, and was $11 million and $25 million for the corresponding prior-year periods. The aggregate intrinsic value for stock options outstanding, outstanding and exercisable, and vested and expected to vest (the difference between the Company’s closing stock price on the last trading day of the period and the exercise price of the options, multiplied by the number of in-the-money stock options) is presented below: Twenty-six weeks ended July 30, August 1, 2016 2015 ($ in millions) Outstanding $ 76 $ 173 Outstanding and exercisable $ 74 $ 152 Vested and expected to vest $ 76 $ 172 As of July 30, 2016 there was $9 million of total unrecognized compensation cost, net of estimated forfeitures, relate d to nonvested stock options, which is expected to be recognized over a remaining weighted-average period of 1.6 years . The following table summarizes information about stock options outstanding and exercisable at July 30, 2016 : Options Outstanding Options Exercisable Weighted- Average Weighted- Weighted- Remaining Average Average Number Contractual Exercise Number Exercise Range of Exercise Prices Outstanding Life Price Exercisable Price (in thousands, except prices per share and contractual life) $9.85 to $15.10 721 2.1 $ 12.99 721 $ 12.99 $18.80 to $30.92 710 3.6 23.76 710 23.76 $34.12 to $56.35 936 6.4 41.54 739 39.53 $62.02 to $73.21 1,086 8.7 62.92 250 62.15 3,453 5.7 $ 38.65 2,420 $ 29.34 Restricted Stock and Restricted Stock Units Restricted shares of the Company’s common stock and restricted stock units (“RSU”) may be awarded to certain officers, key employees of the Company, and to nonemployee directors. Additionally, RSU awards are made to employees in connection with the Company’s long-term incentive program. Each RSU represents the right to receive one share of the Company’s common stock provided that the performance and vesting conditions are satisfied. There were 671,690 a nd 581,713 RSU awards outstanding as of July 30, 2016 and August 1, 2015 , respectively. Generally, awards fully vest after the passage of time, typically three years. However, RSU awards made in connection with the Company’s long-term incentive program are earned after the attainment of certain performance metrics and vest after the passage of time. Restricted stock is c onsidered outstanding at the time of grant and the holders have voting rights. Dividends are paid to holders of restricted stock that vest with the passage of time. With regard to performance-based restricted stock, dividends will be accumulated and paid after the performance criteria are met. No dividends are paid or accumulated on RSU awards. Compensation expense is recognized using the market value at the date of grant and is amortized over the vesting period, provided the recipient continues to be employed by the Company. Restricted stock and RSU activity for the thirteen weeks ended July 30, 2016 is summarized as follows: Weighted- Average Number Remaining Weighted-Average of Contractual Grant Date Shares Life Fair Value (in thousands) (in years) (per share) Nonvested at beginning of year 803 $ 45.19 Granted 361 63.74 Vested (212) 36.54 Expired or cancelled (125) 39.28 Nonvested at July 30, 2016 827 1.5 $ 56.39 Aggregate value ($ in millions) $ 47 The total value of awards for which restrictions lapsed during the twenty-six weeks ended July 30, 2016 and August 1, 2015 was $8 million and $10 million, respectively. As of July 30, 2016 , there was $19 million of total unrecognized compensation cost net of forfeitures related to nonvested restricted awards. |