Stock-based Compensation

We provide compensation benefits by issuing stock options, 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, strategic performance restricted stock units and special performance restricted stock units). In 2016, we issued stock options, time-lapse restricted stock units, EPS performance restricted stock units and TSR performance restricted stock units. We did not issue strategic performance restricted stock units or special performance restricted stock units in 2016.

Total pre-tax stock-based compensation expense recognized in the Consolidated Statement of Earnings was $13 for the three-month periods ended November 1, 2015, and November 2, 2014. Tax-related benefits of $5 were also recognized for the three-month periods ended November 1, 2015, and November 2, 2014. Cash received from the exercise of stock options was $1 and $6 for the three-month periods ended November 1, 2015, and November 2, 2014, 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 November 1, 2015:



	Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
	(Options in thousands)				(In years)
Outstanding at August 2, 2015	74		$	29.91
Granted	711		$	50.21
Exercised	(21	)	$	29.91
Terminated	—		$	—
Outstanding at November 1, 2015	764		$	48.79	9.2	$	2
Exercisable at November 1, 2015	53		$	29.91	0.2	$	1

The total intrinsic value of options exercised during the three-month period ended November 1, 2015 was not material. During the three-month period ended November 2, 2014, the total intrinsic value of options exercised was $4. As of November 1, 2015, total remaining unearned compensation related to unvested stock options was $4, which will be amortized over the weighted-average remaining service period of 1.7 years. We measure the fair value of stock options using the Black-Scholes option pricing model. The expected term of options granted was based on the weighted average time of vesting and the end of the contractual term. We utilized this simplified method as we do not have sufficient historical exercise data to provide a reasonable basis upon which to estimate the expected term.

The following weighted-average assumptions were used for grants in 2016:



	2016
Risk-free interest rate	1.68%
Expected dividend yield	2.46%
Expected volatility	18.35%
Expected term	6 years

The following table summarizes time-lapse restricted stock units, EPS performance restricted stock units, strategic performance restricted stock units and special performance restricted stock units as of November 1, 2015:



	Units		Weighted- Average Grant-Date Fair Value
	(Restricted stock units in thousands)
Nonvested at August 2, 2015	2,410		$	41.40
Granted	659		$	49.94
Vested	(791	)	$	39.30
Forfeited	(118	)	$	42.46
Nonvested at November 1, 2015	2,160		$	44.72

We determine the fair value of time-lapse restricted stock units, EPS performance restricted stock units, strategic performance restricted stock units and special performance restricted stock units based on the quoted price of our stock at the date of grant. We expense time-lapse restricted stock units on a straight-line basis over the vesting period, except for awards issued to retirement-eligible participants, which we expense on an accelerated basis. We expense EPS performance restricted stock units on a graded-vesting basis, except for awards issued to retirement-eligible participants, which we expense on an accelerated basis. There were 211 thousand EPS performance target grants outstanding at November 1, 2015, with a weighted-average grant-date fair value of $45.32. We expense strategic performance restricted stock units on a straight-line basis over the service period. Awards of the strategic performance restricted stock units are earned based upon the achievement of two key metrics, net sales and EPS growth, compared to strategic plan objectives during a two- or three-year period. There were 346 thousand strategic performance target grants outstanding at November 1, 2015, with a grant-date fair value of $41.21. The actual number of EPS performance restricted stock units and strategic performance restricted stock units issued at the vesting date could range from either 0% or 100% and 0% to 200%, respectively, of the initial grant, depending on actual performance achieved. We estimate expense based on the number of awards expected to vest.

In 2015, we issued special performance restricted stock units for which vesting is contingent upon meeting various financial goals and performance milestones to support innovation and growth initiatives. These awards vest over a period of 2 years and are included in the table above. The actual number of special performance awards issued at the vesting date could range from 0% to 150%. There were 126 thousand special performance restricted stock units outstanding at November 1, 2015, with a grant-date fair value of $42.22.

As of November 1, 2015, total remaining unearned compensation related to nonvested time-lapse restricted stock units, EPS performance restricted stock units, strategic performance restricted stock units and special performance restricted stock units was $52, which will be amortized over the weighted-average remaining service period of 1.9 years. The fair value of restricted stock units vested during the three-month periods ended November 1, 2015, and November 2, 2014, was $40 and $52, respectively. The weighted-average grant-date fair value of the restricted stock units granted during the three months ended November 2, 2014 was $42.24.

The following table summarizes TSR performance restricted stock units as of November 1, 2015:



	Units		Weighted- Average Grant-Date Fair Value
	(Restricted stock units in thousands)
Nonvested at August 2, 2015	1,579		$	40.75
Granted	682		$	62.44
Vested	(438	)	$	39.76
Forfeited	(70	)	$	43.71
Nonvested at November 1, 2015	1,753		$	49.31

We 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:



	2016	2015
Risk-free interest rate	0.92%	0.97%
Expected dividend yield	2.46%	2.91%
Expected volatility	17.25%	16.20%
Expected term	3 years	3 years

We recognize compensation expense on a straight-line basis over the service period. As of November 1, 2015, total remaining unearned compensation related to TSR performance restricted stock units was $54, which will be amortized over the weighted-average remaining service period of 2.5 years. The fair value of TSR performance restricted stock units vested during the three-month period ended November 1, 2015 was $22. There were no TSR performance restricted stock units scheduled to vest in the three-month period ended November 2, 2014. The grant-date fair value of the TSR performance restricted stock units granted during 2015 was $43.39.

The excess tax benefits on the exercise of stock options and vested restricted stock presented as cash flows from financing activities for the three-month periods ended November 1, 2015 and November 2, 2014 were $6 and $5, respectively.