Stock-based Compensation

The Company's stock-based compensation awards are currently issued under the 2010 Incentive Plan, which was approved by its stockholders on August 5, 2010. However, any prior awards granted under the 1997 Incentive Plan remain subject to the terms of that plan. Any awards that expire, are forfeited, or are surrendered to the Company in satisfaction of taxes are available for issuance under the 2010 Incentive Plan.

Refer to Note 20 in the Fiscal 2014 10-K for a detailed description of the Company's stock-based compensation awards, including information related to vesting terms, service and performance conditions, and payout percentages.

Impact on Results

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



	Three Months Ended						Six Months Ended
	September 27, 2014			September 28, 2013			September 27, 2014			September 28, 2013
	(millions)
Compensation expense	$	19		$	21		$	42		$	43
Income tax benefit	$	(8	)	$	(8	)	$	(16	)	$	(16	)

The Company issues its annual grants of stock-based compensation awards in the first half of each fiscal year. Due to the timing of the annual grants and other factors, stock-based compensation expense recognized during the three-month and six-month periods ended September 27, 2014 is not indicative of the level of compensation expense expected to be incurred for the full Fiscal 2015.

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 nonemployee directors. The Company's weighted average assumptions used to estimate the fair value of stock options granted during the six months ended September 27, 2014 and September 28, 2013 were as follows:



	Six Months Ended
	September 27, 2014		September 28, 2013
Expected term (years)	4.2		4.2
Expected volatility	30.2	%	33.3	%
Expected dividend yield	1.10	%	0.97	%
Risk-free interest rate	1.4	%	1.1	%
Weighted-average option grant date fair value	$37.91		$46.98

A summary of stock option activity under all plans for the six months ended September 27, 2014 is as follows:



	Number of Options
	(thousands)
Options outstanding at March 29, 2014	3,026
Granted	847
Exercised	(333	)
Cancelled/Forfeited	(71	)
Options outstanding at September 27, 2014	3,469

Service-based RSUs and Restricted Stock Awards

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 values 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, were $162.36 and $164.76 per share during the six-month periods ended September 27, 2014 and September 28, 2013, respectively. The weighted-average grant date fair value of service-based RSUs, which are not entitled to dividends, granted during the six-months ended September 27, 2014 was $153.05.

A summary of restricted stock and service-based RSU activity during the six months ended September 27, 2014 is as follows:



	Number of Shares
	Restricted Stock		Service-based RSUs
	(thousands)
Nonvested at March 29, 2014	5		7
Granted	3		12
Vested	(3	)	—
Nonvested at September 27, 2014	5		19

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. The weighted average assumptions used to estimate the fair value of performance-based RSUs with a TSR modifier granted during the six-month periods ended September 27, 2014 and September 28, 2013 were as follows:



	Six Months Ended
	September 27, 2014		September 28, 2013
Expected term (years)	3.0		3.0
Expected volatility	29.8	%	33.1	%
Expected dividend yield	1.09	%	0.96	%
Risk-free interest rate	0.9	%	0.4	%
Weighted-average grant date fair value per share	$169.47		$171.07

The weighted-average grant date fair values of performance-based RSUs that do not contain a TSR modifier granted during the six-month periods ended September 27, 2014 and September 28, 2013 were $157.09 and $172.91 per share, respectively.

A summary of performance-based RSU activity during the six months ended September 27, 2014 is as follows:



	Number of Shares
	Performance-based RSUs — without TSR Modifier		Performance-based RSUs — with TSR Modifier
	(thousands)
Nonvested at March 29, 2014	798		145
Granted	303		79
Change due to performance/market conditions achievement	83		—
Vested	(422	)	—
Forfeited	(40	)	(9	)
Nonvested at September 27, 2014	722		215