Stock-based Compensation

9 Months Ended

May 01, 2011

Stock-based Compensation

Stock-based Compensation

15.  Stock-based Compensation

The company provides compensation benefits by issuing unrestricted stock, restricted stock and restricted stock units (including EPS performance restricted stock/units and total shareowner return (TSR) performance restricted stock/units). In previous fiscal years, the company also issued stock options and stock appreciation rights to provide compensation benefits.

Total pre-tax stock-based compensation recognized in the Consolidated Statements of Earnings was $23 for the three-month periods ended May 1, 2011, and May 2, 2010.  Tax-related benefits of $9 and $8 were also recognized for the three-month periods ended May 1, 2011, and May 2, 2010, respectively.  Total pre-tax stock-based compensation recognized in the Consolidated Statements of Earnings was $69 and $68 for the nine-month periods ended May 1, 2011, and May 2, 2010, respectively.  Tax-related benefits of $26 and $25 were also recognized for the nine-month periods ended May 1, 2011, and May 2, 2010, respectively.  Cash received from the exercise of stock options was $54 and $75 for the nine-month periods ended May 1, 2011, and May 2, 2010, 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 May 1, 2011:

				Weighted-
		Weighted-		Average
		Average		Remaining	Aggregate
		Exercise		Contractual	Intrinsic
	Options	Price		Life	Value
	(Options in thousands)
Outstanding at August 1, 2010	12,473		$  26.47
Granted	—		$        —
Exercised	(2,221)		$  26.63
Terminated	(29)		$  34.21
Outstanding at May 1, 2011	10,223		$  26.41	2.2	$  73
Exercisable at May 1, 2011	10,223		$  26.41	2.2	$  73

The total intrinsic value of options exercised during the nine-month periods ended May 1, 2011, and May 2, 2010, was $19 and $17, 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 and EPS performance restricted stock/units as of May 1, 2011:

		Weighted-
		Average
		Grant-Date
	Shares/Units	Fair Value
	(Restricted stock/units in thousands)
Nonvested at August 1, 2010	2,395	$  35.05
Granted	1,163	$  36.01
Vested	(1,110)	$  35.75
Forfeited	(96)	$  35.11
Nonvested at May 1, 2011	2,352	$  35.19

The fair value of time-lapse restricted stock/units and EPS performance restricted stock/units is determined based on the number of shares granted and the quoted price of the company's stock at the date of grant.  Time-lapse restricted stock/units granted in fiscal 2006 and forward 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.

As of May 1, 2011, total remaining unearned compensation related to nonvested time-lapse restricted stock/units and EPS performance restricted stock/units was $40, 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 May 1, 2011, and May 2, 2010, was $40 and $31, respectively. The weighted-average grant-date fair value of the restricted stock/units granted during the nine-month period ended May 2, 2010, was $32.21.

The following table summarizes TSR performance restricted stock/units as of May 1, 2011:

		Weighted-
		Average
		Grant-Date
	Shares/Units	Fair Value
	(Restricted stock/units in thousands)
Nonvested at August 1, 2010	3,581	$  38.02
Granted	1,255	$  43.18
Vested	(1,062)	$  34.65
Forfeited	(225)	$  39.50
Nonvested at May 1, 2011	3,549	$   40.76

The company estimates 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:

	2011	2010
Risk-free interest rate	0.59%	1.27%
Expected dividend yield	3.00%	3.06%
Expected volatility	23.71%	24.83%
Expected term	3 yrs.	3 yrs.

Expense is recognized on a straight-line basis over the service period.  As of May 1, 2011, total remaining unearned compensation related to TSR performance restricted stock/units was $67, which will be amortized over the weighted-average remaining service period of 1.9 years.  In the first quarter of fiscal 2011, recipients of TSR performance restricted stock/units earned 100% of their initial grants based upon the company's TSR ranking in a performance peer group during a three-year period ended July 30, 2010.  The total fair value of TSR performance restricted stock/units vested during the nine-month periods ended May 1, 2011, and May 2, 2010, was $38 and $31, respectively.  The grant-date fair value of TSR performance restricted stock/units granted during the nine-month period ended May 2, 2010, was $33.84.

Prior to fiscal 2009, employees could elect to defer all types of restricted stock awards. These awards were classified as liabilities because of the possibility that they may be settled in cash. The fair value was adjusted quarterly. As of October 2010, these awards were fully vested.Total cash paid to settle the liabilities during the nine-month periods ended May 1, 2011, and May 2, 2010, was not material.

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 May 1, 2011, and May 2, 2010, were $7 and $6, respectively.