Stock-Based Compensation

3 Months Ended

Jan. 31, 2017

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-Based Compensation

Note 5: Stock-Based Compensation

Certain of Everett’s employees participate in stock-based compensation plans sponsored by Parent. Parent’s stock-based compensation plans include incentive compensation plans and an employee stock purchase plan (“ESPP”). All awards granted under the plans are based on Parent’s common shares and, as such, are not reflected in the Condensed Combined Statements of Equity. Stock-based compensation expense includes expense attributable to Everett based on the awards and terms previously granted under the incentive compensation plan to Everett’s employees and an allocation of Parent’s corporate and shared functional employee expenses. Accordingly, the amounts presented are not necessarily indicative of future awards and do not necessarily reflect the results that Everett would have experienced as an independent company for the periods presented.

Stock-based compensation expense and the resulting tax benefits recognized by Everett were as follows:

	Three months ended January 31
	2017		2016
	In millions
Stock-based compensation expense	$	47	$	58
Income tax benefit		—		—
Stock-based compensation expense, net of tax	$	47	$	58

Stock-based compensation expense includes an allocation of Parent’s corporate and shared functional employee expenses of $20 million for each of the three months ended January 31, 2017 and 2016.

In May 2016, in connection with the announcement of the Transaction, Parent modified its stock-based compensation program such that certain unvested equity awards outstanding on May 24, 2016 will vest upon the earlier of: (i) the termination of an employee’s employment with HPE as a direct result of an announced sale, divestiture or spin-off of a subsidiary, division or other business; (ii) the termination of an employee’s employment with HPE without cause; or (iii) June 1, 2018. This modification also includes changes to the performance and market conditions of certain performance-based awards. As a result, for the three months ended January 31, 2017, stock-based compensation expense in the table above includes pre-tax expense of $4 million, which has been recorded within Separation costs in the Condensed Combined Statements of Operations.