Stock-based Compensation

We provide compensation benefits by issuing stock options, unrestricted 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 2017, we issued stock options, time-lapse restricted stock units, unrestricted stock, EPS performance restricted stock units and TSR performance restricted stock units. We have not issued strategic performance restricted stock units or special performance restricted stock units in 2017.

Pre-tax stock-based compensation expense and tax-related benefits recognized in the Consolidated Statement of Earnings were as follows:



	Three Months Ended				Six Months Ended
	January 29, 2017		January 31, 2016		January 29, 2017		January 31, 2016
Total pre-tax stock-based compensation expense	$	18	$	21	$	32	$	34
Tax-related benefits	$	7	$	8	$	12	$	13

Cash received from the exercise of stock options was $2 for the six-month periods ended January 29, 2017, and January 31, 2016, 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 January 29, 2017:



	Options		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
	(Options in thousands)				(In years)
Outstanding at July 31, 2016	681		$	50.21
Granted	489		$	54.65
Exercised	(33	)	$	50.21
Terminated	(95	)	$	52.49
Outstanding at January 29, 2017	1,042		$	52.08	9.1	$	11
Exercisable at January 29, 2017	194		$	50.21	8.7	$	2

The total intrinsic value of options exercised during the six-month period ended January 29, 2017, was not material. During the six-month period ended January 31, 2016, the total intrinsic value of options exercised was $2. 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 assumptions and grant-date fair values for grants in 2017 and 2016 were as follows:



	2017	2016
Risk-free interest rate	1.28%	1.68%
Expected dividend yield	2.26%	2.46%
Expected volatility	18.64%	18.35%
Expected term	6 years	6 years
Grant-date fair value	$7.51	$6.86

We expense stock options on a straight-line basis over the vesting period, except for awards issued to retirement eligible participants, which we expense on an accelerated basis. As of January 29, 2017, total remaining unearned compensation related to nonvested stock options was $3, which will be amortized over the weighted-average remaining service period of 1.4 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 January 29, 2017:



	Units		Weighted- Average Grant-Date Fair Value
	(Restricted stock units in thousands)
Nonvested at July 31, 2016	2,004		$	45.08
Granted	557		$	54.73
Vested	(919	)	$	43.89
Forfeited	(343	)	$	43.04
Nonvested at January 29, 2017	1,299		$	50.61

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 155 thousand EPS performance target grants outstanding at January 29, 2017, with a weighted-average grant-date fair value of $49.89. The actual number of EPS performance restricted stock units issued at the vesting date could range from 0% or 100% of the initial grant, depending on actual performance achieved. We estimate expense based on the number of awards expected to vest. In the first quarter of 2017, recipients of strategic performance restricted stock units earned 35% of the initial grants based on actual performance achieved during a three-year period ended July 31, 2016. There were no strategic performance restricted stock units outstanding at January 29, 2017.

In 2015, we issued special performance restricted stock units for which vesting was contingent upon meeting various financial goals and performance milestones to support innovation and growth initiatives. These awards vested in the first quarter of 2017 and are included in the table above. Recipients of special performance restricted stock units earned 0% of the initial grants based upon financial goals and 100% of the initial grants based upon performance milestones to support innovation and growth initiatives.

As of January 29, 2017, total remaining unearned compensation related to nonvested time-lapse restricted stock units and EPS performance restricted stock units was $34, 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 six-month periods ended January 29, 2017, and January 31, 2016, was $51 and $40, respectively. The weighted-average grant-date fair value of the restricted stock units granted during the six-month period ended January 31, 2016, was $50.00.

The following table summarizes TSR performance restricted stock units as of January 29, 2017:



	Units		Weighted- Average Grant-Date Fair Value
	(Restricted stock units in thousands)
Nonvested at July 31, 2016	1,641		$	49.13
Granted	606		$	39.53
Vested	(251	)	$	36.26
Forfeited	(170	)	$	43.57
Nonvested at January 29, 2017	1,826		$	48.23

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:



	2017	2016
Risk-free interest rate	0.85%	0.92%
Expected dividend yield	2.26%	2.46%
Expected volatility	17.78%	17.25%
Expected term	3 years	3 years

We recognize compensation expense on a straight-line basis over the service period. As of January 29, 2017, total remaining unearned compensation related to TSR performance restricted stock units was $40, which will be amortized over the weighted-average remaining service period of 1.9 years. In the first quarter of 2017, recipients of TSR performance restricted stock units earned 75% of the initial grants based upon our TSR ranking in a performance peer group during a three-year period ended July 29, 2016. In the first quarter of 2016, recipients of TSR performance restricted stock units earned 100% of the initial grants based upon our TSR ranking in a performance peer group during a three-year period ended July 31, 2015. The fair value of TSR performance restricted stock units vested during the six-month periods ended January 29, 2017, and January 31, 2016, was $14 and $22, respectively. The grant-date fair value of the TSR performance restricted stock units granted during 2016 was $62.44.

The excess tax benefits on the exercise of stock options and vested restricted stock presented as cash flows from operating activities for the six-month periods ended January 29, 2017, and January 31, 2016, were $6 and $7, respectively