Stock-based Compensation

The company provides compensation benefits by issuing unrestricted stock, restricted stock and restricted stock units (including time-lapse restricted stock units, EPS performance restricted stock units, total shareholder return (TSR) performance restricted stock units and strategic performance restricted stock units). In 2014, the company issued time-lapse restricted stock units, EPS performance restricted stock units, TSR performance restricted stock units and strategic performance restricted stock units. In previous years, the company also issued stock options and stock appreciation rights.

Total pre-tax stock-based compensation expense recognized in Earnings from continuing operations was $9 and $30 for the three-month periods ended April 27, 2014, and April 28, 2013, respectively. The pre-tax stock-based compensation expense recognized in Earnings from discontinued operations was $1 for the three-month period ended April 28, 2013. Tax-related benefits of $3 and $12 were also recognized for the three-month periods ended April 27, 2014, and April 28, 2013, respectively. Total pre-tax stock-based compensation expense recognized in Earnings from continuing operations was $45 and $79 for the nine-month periods ended April 27, 2014, and April 28, 2013, respectively. The pre-tax stock-based compensation expense recognized in Earnings from discontinued operations was $1 and $3 for the nine-month periods ended April 27, 2014, and April 28, 2013, respectively. Tax-related benefits of $17 and $31 were also recognized for the nine-month periods ended April 27, 2014, and April 28, 2013, respectively. Cash received from the exercise of stock options was $14 and $78 for the nine-month periods ended April 27, 2014, and April 28, 2013, respectively, and is reflected in cash flows from financing activities in the Consolidated Statements of Cash Flows.

The following table summarizes stock option activity as of April 27, 2014:



	Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
	(Options in thousands)				(In years)
Outstanding at July 28, 2013	1,101		$	27.25
Granted	—		$	—
Exercised	(513	)	$	26.61
Terminated	—		$	—
Outstanding at April 27, 2014	588		$	27.82	0.8	$	10
Exercisable at April 27, 2014	588		$	27.82	0.8	$	10

The total intrinsic value of options exercised during the nine-month periods ended April 27, 2014, and April 28, 2013, was $8 and $32, respectively. As of January 2009, compensation related to stock options was fully expensed. The company measured the fair value of stock options using the Black-Scholes option pricing model.

The following table summarizes time-lapse restricted stock units, EPS performance restricted stock units and strategic performance restricted stock units as of April 27, 2014:



	Units		Weighted- Average Grant-Date Fair Value
	(Restricted stock units in thousands)
Nonvested at July 28, 2013	4,208		$	34.05
Granted	1,679		$	39.83
Vested	(2,565	)	$	33.23
Forfeited	(282	)	$	37.57
Nonvested at April 27, 2014	3,040		$	37.61

The fair value of time-lapse restricted stock units, EPS performance restricted stock units, and strategic performance restricted stock units is determined based on the quoted price of the company’s stock at the date of grant. Time-lapse restricted stock units are expensed on a straight-line basis over the vesting period, except for awards issued to retirement-eligible participants, which are expensed on an accelerated basis. EPS performance restricted stock units are expensed on a graded-vesting basis, except for awards issued to retirement-eligible participants, which are expensed on an accelerated basis. There were approximately 251 thousand EPS performance target grants outstanding at April 27, 2014 with a weighted-average grant-date fair value of $37.49. Strategic performance restricted stock units are expensed on a straight-line basis over the service period. Awards of the strategic performance restricted stock units will be earned based upon the achievement of two key metrics, net sales and EPS growth, compared to strategic plan objectives during a two-year period for grants in 2013 and during a three-year period for grants in 2014. There were approximately 927 thousand strategic performance target grants outstanding at April 27, 2014 with a weighted-average grant-date fair value of $37.86. The actual number of EPS performance restricted stock units and strategic performance restricted stock units issued at the vesting date could range from 0% to 100% and 0% to 200%, respectively, of the initial grant, depending on actual performance achieved. Expense is estimated based on the number of awards expected to vest.

As of April 27, 2014, total remaining unearned compensation related to nonvested time-lapse restricted stock units, EPS performance restricted stock units and strategic performance restricted stock units was $44, which will be amortized over the weighted-average remaining service period of 1.8 years. The fair value of restricted stock units vested during the nine-month periods ended April 27, 2014, and April 28, 2013, was $105 and $39, respectively. The weighted-average grant-date fair value of the restricted stock units granted during nine-month period ended April 28, 2013 was $35.13.

The following table summarizes TSR performance restricted stock units as of April 27, 2014:



	Units		Weighted- Average Grant-Date Fair Value
	(Restricted stock units in thousands)
Nonvested at July 28, 2013	1,458		$	41.88
Granted	458		$	36.26
Vested	—		$	—
Forfeited	(1,006	)	$	42.75
Nonvested at April 27, 2014	910		$	38.14

The company estimated the fair value of TSR performance restricted stock units at the grant date using a Monte Carlo simulation. Assumptions used in the Monte Carlo simulation were as follows:



	2014	2013
Risk-free interest rate	0.60%	0.30%
Expected dividend yield	2.98%	3.26%
Expected volatility	15.76%	15.07%
Expected term	3 years	3 years

Compensation expense is recognized on a straight-line basis over the service period. As of April 27, 2014, total remaining unearned compensation related to TSR performance restricted stock units was $19, which will be amortized over the weighted-average remaining service period of 2.0 years. In the first quarter of 2014, recipients of TSR performance restricted stock units earned 0% of the initial grants based upon the company’s TSR ranking in a performance peer group during a three-year period ended July 26, 2013. The grant-date fair value of the TSR performance restricted stock units granted during 2013 was $39.76.

The excess tax benefits on the exercise of stock options and vested restricted stock presented as cash flows from financing activities for the nine-month periods ended April 27, 2014 and April 28, 2013 were $11 and $9, respectively.