Stock Compensation Plans

3 Months Ended

Nov. 30, 2014

Stock Compensation Plans [Abstract]

Stock Compensation Plans

Note 12.  Stock Compensation Plans

The Walgreen Co. Omnibus Incentive Plan (the Omnibus Plan), which became effective in fiscal 2013, provides for incentive compensation to Walgreens non-employee directors, officers and employees, and consolidates into a single plan several previously existing equity compensation plans.  A total of 60.4 million shares became available for delivery under the Omnibus Plan.

The Company granted 4,102,510 and 6,385,078 stock options under the Omnibus Plan during the quarters ended November 30, 2014 and 2013, respectively.  Stock-based compensation expense, which includes stock option, restricted stock unit and performance share grants, was $31 million and $21 million for the quarters ended November 30, 2014 and 2013, respectively.  Compensation expense for any individual quarter may not be representative of compensation expense for the entire fiscal year.  Stock options granted in the current fiscal year had a weighted-average grant-date fair value of $14.64 using weighted average volatility, dividend yield and expected option life assumptions of 25.51%, 1.79% and 6.68 years, respectively, using the Black Scholes option pricing model.  In accordance with ASC Topic 718 Compensation – Stock Compensation, compensation expense is recognized on a straight-line basis over the employee's vesting period or to the employee's retirement eligible date, if earlier.  The recognized retiree eligible expense recorded in the quarters ended November 30, 2014 and 2013 was $1 million and $3 million, respectively.

The Company granted 904,952 and 610,887 restricted stock units under the Omnibus Plan for the quarters ended November 30, 2014 and 2013, respectively.  Restricted stock units granted in the current fiscal year had a weighted average grant date stock price of $63.83.  Dividends issued under the program, paid in the form of additional restricted stock units, totaled 20,554 units for the quarter ended November 30, 2014 and 21,298 units for the same period last year.  The Company also granted 480,323 and 697,132 performance shares under the Omnibus Plan for the quarters ended November 30, 2014 and 2013, respectively.  Performance shares granted in the current fiscal year had a weighted average grant date stock price of $65.31.  In accordance with ASC Topic 718, compensation expense is recognized on a straight line basis based on a three year cliff vesting schedule for restricted stock unit awards and straight line over a three year performance period, based on performance targets, for performance share awards.   For the quarters ended November 30, 2014 and 2013, respectively, the Company recognized $19 million and $10 million, of expense related to these plans, respectively.