Stock-based Compensation

On August 5, 2010, the Company's stockholders approved the 2010 Incentive Plan, which replaced the 1997 Incentive Plan. Any new grants are being issued under the 2010 Incentive Plan. However, awards that were outstanding as of August 5, 2010 remain subject to the terms of the 1997 Incentive Plan. On September 24, 2013, the Company registered with the SEC an additional 1.7 million shares of its Class A common stock for issuance pursuant to the 2010 Incentive Plan.

Refer to Note 20 in the Fiscal 2013 10-K for a detailed description of the Company's stock-based compensation awards, including information related to the vesting terms, service and performance conditions, and payout percentages.

Impact on Results

A summary of the total compensation expense and the associated income tax benefits recognized related to stock-based compensation arrangements is as follows:



	Three Months Ended							Nine Months Ended
	December 28, 2013				December 29, 2012			December 28, 2013				December 29, 2012
	(millions)
Compensation expense	$	31		^(a)	$	22		$	74		^(a)	$	65
Income tax benefit	$	(11	)		$	(8	)	$	(27	)		$	(22	)


^(a)	Includes approximately $10 million of accelerated stock-based compensation expense recorded within restructuring and other charges in the Company's unaudited interim consolidated statements of income during the three-month and nine-month periods ended December 28, 2013 (see Note 10). All other stock-based compensation expense is recorded within SG&A expenses.

The Company issues its annual grants of stock-based compensation awards in the first half of the fiscal year. Due to the timing of the annual grants and other factors, stock-based compensation expense recognized during the three-month and nine-month periods ended December 28, 2013 is not indicative of the level of compensation expense expected to be incurred for the full Fiscal 2014.

Stock Options

Stock options are granted to employees and non-employee directors with exercise prices equal to the fair market value of the Company’s Class A common stock on the date of grant. Generally, options become exercisable ratably (graded-vesting schedule) over a three-year vesting period. Stock options generally expire seven years from the date of grant. The Company recognizes compensation expense for share-based awards that have graded vesting and no performance conditions on an accelerated basis.

The Company uses the Black-Scholes option pricing model to estimate the fair value of stock options granted, which requires the input of both subjective and objective assumptions. The Company develops its assumptions by analyzing the historical exercise behavior of employees and non-employee directors. The Company’s weighted average assumptions used to estimate the fair value of stock options granted during the nine months ended December 28, 2013 and December 29, 2012 were as follows:



	Nine Months Ended
	December 28, 2013		December 29, 2012
Expected term (years)	4.2		4.6
Expected volatility	33.1	%	44.4	%
Expected dividend yield	0.98	%	1.05	%
Risk-free interest rate	1.1	%	0.6	%
Weighted-average option grant date fair value	$46.37		$47.90

A summary of stock option activity for the nine months ended December 28, 2013 is as follows:



	Number of Options
	(thousands)
Options outstanding at March 30, 2013	2,954
Granted	792
Exercised	(601	)
Cancelled/Forfeited	(67	)
Options outstanding at December 28, 2013	3,078

Service-based RSUs and Restricted Stock Awards

A summary of restricted stock and service-based RSU activity for the nine months ended December 28, 2013 is as follows:



	Number of Shares
	Restricted Stock		Service-based RSUs
	(thousands)
Nonvested at March 30, 2013	5		98
Granted	3		—
Vested	(3	)	(88	)
Forfeited	—		(3	)
Nonvested at December 28, 2013	5		7

The fair values of restricted stock awards granted to non-employee directors are determined based on the fair value of the Company's Class A common stock on the date of grant. The weighted-average grant date fair value per share of restricted stock awards granted, which entitle holders to receive cash dividends in connection with the payments of dividends on the Company's Class A common stock, was $164.76 and $173.33 during the nine-month periods ended December 28, 2013 and December 29, 2012, respectively. No service-based RSUs were granted during the nine-month period ended December 28, 2013. The weighted-average grant date fair value of service-based RSUs granted during the the nine-month period ended December 29, 2012 was $150.17.

Performance-based RSUs

The fair value of the Company's performance-based RSUs that are not subject to a market condition in the form of a total shareholder return ("TSR") modifier is based on the fair value of the Company's Class A common stock on the date of grant, adjusted to reflect the absence of dividends for those securities that are not entitled to dividend equivalents. The fair value of the Company's performance-based RSUs with a TSR modifier is determined on the date of grant using a Monte Carlo simulation valuation model. This pricing model uses multiple simulations to evaluate the probability of the Company achieving various stock price levels to determine its expected TSR performance ranking. Expense is only recorded for awards that are expected to vest, net of estimated forfeitures. The assumptions used to estimate the fair value of performance-based RSUs with a TSR modifier granted during the nine months ended December 28, 2013 and December 29, 2012 were as follows:



	Nine Months Ended
	December 28, 2013		December 29, 2012
Expected term (years)	2.9		3.0
Expected volatility	32.6	%	34.0	%
Expected dividend yield	0.98	%	1.13	%
Risk-free interest rate	0.4	%	0.3	%
Weighted-average grant date fair value per share	$169.14		$136.16

The weighted-average grant date fair values per share of performance-based RSUs that do not contain a TSR modifier granted during the nine-month periods ended December 28, 2013 and December 29, 2012 were $172.55 and $137.45, respectively.

A summary of performance-based RSU activity during the nine months ended December 28, 2013 is as follows:



	Number of Shares
	Performance-based RSUs — without TSR Modifier		Performance-based RSUs — with TSR Modifier
	(thousands)
Nonvested at March 30, 2013	1,015		73
Granted	297		78
Change due to performance or market conditions achievement	141		—
Vested	(627	)	—
Forfeited	(33	)	(5	)
Nonvested at December 28, 2013	793		146