17. Stock-Based Compensation

In 2003, shareowners approved the 2003 Long-Term Incentive Plan, which authorized the issuance of 28 million shares to satisfy awards of stock options, stock appreciation rights, unrestricted stock, restricted stock/units (including performance restricted stock) and performance units. Approximately 3.2 million shares available under a previous long-term plan were rolled into the 2003 Long-Term Incentive Plan, making the total number of available shares approximately 31.2 million. In November 2005, shareowners approved the 2005 Long-Term Incentive Plan, which authorized the issuance of an additional 6 million shares to satisfy the same types of awards.

Awards under the 2003 and 2005 Long-Term Incentive Plans may be granted to employees and directors. The term of a stock option granted under these plans may not exceed ten years from the date of grant. Options granted under these plans vest cumulatively over a three-year period at a rate of 30%, 60% and 100%, respectively. The option price may not be less than the fair market value of a share of common stock on the date of the grant.

Pursuant to the 2003 Long-Term Incentive Plan, in July 2005 the company adopted a long-term incentive compensation program which provides for grants of total shareowner return (TSR) performance restricted stock/units, EPS performance restricted stock/units, and time-lapse restricted stock/units. Initial grants made in accordance with this program were approved in September 2005. Under the program, awards of TSR performance restricted stock/units will be earned by comparing the company's total shareowner return during a three-year period to the respective total shareowner returns of companies in a performance peer group. Based upon the company's ranking in the performance peer group, a recipient of TSR performance restricted stock/units may earn a total award ranging from 0% to 225% of the initial grant. Awards of EPS performance restricted stock/units will be earned based upon the company's achievement of annual earnings per share goals. During the three-year vesting period, a recipient of EPS performance restricted stock/units may earn a total award ranging from 0% to 100% of the initial grant. Awards of time-lapse restricted stock/units will vest ratably over the three-year period. In addition, the company may issue special grants of time-lapse restricted stock/units to attract and retain executives which vest ratably over various periods. Awards are generally granted annually in October. Annual stock option grants are not part of the long-term incentive compensation program for 2009, 2010, and 2011. However, stock options may still be granted on a selective basis under the 2003 and 2005 Long-Term Incentive Plans.

Total pre-tax stock-based compensation expense recognized in Earnings from continuing operations was $87 for 2011, $88 for 2010, and $84 for 2009. Tax related benefits of $32 were recognized for 2011, $33 were recognized for 2010 and $31 were recognized for 2009.

Information about stock options and related activity is as follows:


	2011	Weighted- Average Exercise Price	Weighted- Average Remaining Contractual Life		Aggregate Intrinsic Value
	(Options in thousands)			(In years)
Beginning of year	12,473	$ 26.47
Granted	—	$ —
Exercised	(3,737)	$ 26.97
Terminated	(30)	$ 33.82
End of year	8,706	$ 26.23	2.2		$ 59
Exercisable at end of year	8,706	$ 26.23	2.2		$ 59

The total intrinsic value of options exercised during 2011, 2010, and 2009 was $29, $33, and $30, 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 activity:


	Shares/Units	Weighted-Average Grant-Date Fair Value
	(Restricted stock/units in thousands)
Nonvested at August 1, 2010	2,395	$ 35.05
Granted	1,585	$ 35.64
Vested	(1,113)	$ 35.74
Forfeited	(157)	$ 35.11
Nonvested at July 31, 2011	2,710	$ 35.11

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 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.

On July 1, 2011, the company issued approximately 400,000 special retention time-lapse restricted stock units to certain executives to support the successful execution of the company's shift in strategic direction and leadership transition. The awards vest over a two-year period. The grant-date fair value was $34.65 and is included in the table above.

As of July 31, 2011, total remaining unearned compensation related to nonvested time-lapse restricted stock/units and EPS performance restricted stock/units was $46, which will be amortized over the weighted-average remaining service period of 1.7 years. The fair value of restricted stock/units vested during 2011, 2010, and 2009 was $40, $32, and $47, respectively. The weighted-average grant-date fair value of restricted stock/units granted during 2010 and 2009 was $32.25 and $39.50, respectively.

The following table summarizes TSR performance restricted stock/units activity:


	Shares/Units	Weighted-Average Grant-Date 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	(343)	$ 39.74
Nonvested at July 31, 2011	3,431	$ 40.78

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	2009
Risk-free interest rate	0.59%	1.27%	2.06%
Expected dividend yield	3.00%	3.06%	2.46%
Expected volatility	23.71%	24.83%	18.57%
Expected term	3 yrs.	3 yrs.	3 yrs.

Compensation expense is recognized on a straight-line basis over the service period. As of July 31, 2011, total remaining unearned compensation related to TSR performance restricted stock/units was $53, which will be amortized over the weighted-average remaining service period of 1.7 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 2011, 2010 and 2009 was $38, $31 and $58, respectively. The grant-date fair value of TSR performance restricted stock/units granted during 2010 and 2009 was $33.84 and $47.20, respectively. In the first quarter of 2012, recipients of TSR performance restricted stock/units will receive 0% of the initial grant based upon the company's TSR ranking in a performance peer group during the three-year period ended July 31, 2011.

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. The total cash paid to settle the liabilities in 2011, 2010, and 2009 was not material.

The excess tax benefits on the exercise of stock options and vested restricted stock presented as cash flows from financing activities were $11 in 2011 and 2010 and $18 in 2009. Cash received from the exercise of stock options was $96, $139, and $72, for 2011, 2010, and 2009, respectively, and is reflected in cash flows from financing activities in the Consolidated Statements of Cash Flows.