Share-Based Compensation

12 Months Ended

Dec. 28, 2024

Share-Based Payment Arrangement [Abstract]

In April 2024, our shareholders approved our 2024 Long-Term Incentive Plan (the 2024 Plan), which replaced our 2015 Long-Term Incentive Plan (the 2015 Plan). Under the 2024 Plan, consistent with the 2015 Plan, we have authorization to provide awards to selected employees and non-employee directors in the form of stock options, restricted stock, restricted stock units, stock appreciation rights, performance stock, performance share units and other awards. A maximum of 10 million shares is authorized for issuance for all purposes under the 2024 Plan plus any shares that become available upon cancellation, forfeiture or expiration of awards granted under the 2015 Plan. Under the 2024 Plan, the maximum number of shares that may be issued pursuant to awards payable in shares, such as restricted stock, restricted stock units, performance stock, performance share units, or other awards is 3.127 million, plus any shares that become available upon cancellation, forfeiture or expiration of such awards which were granted under the 2015 Plan. For 2024, 2023 and 2022, the awards granted under these plans primarily included stock options, restricted stock units and performance share units.

Share-based compensation costs are reflected primarily in selling and administrative expense. Compensation expense included in net income for our share-based compensation plans is as follows:


(In millions)	2024		2023		2022
Compensation expense	$	66	$	94	$	66
Income tax benefit	(16)		(23)		(16)
Total compensation expense included in net income	$	50	$	71	$	50

Compensation cost for awards subject only to service conditions that vest ratably is recognized on a straight-line basis over the requisite service period for each separately vesting portion of the award utilizing an estimated forfeiture rate. Our awards include continued vesting provisions for retirement eligible employees. Upon reaching retirement eligibility, the service requirement for these individuals is considered to have been satisfied and compensation expense for future awards is recognized on the date of the grant.

As of December 28, 2024, we had not recognized $27 million of total compensation costs associated with unvested awards subject only to service conditions. We expect to recognize compensation expense for these awards over a weighted-average period of approximately two years. We typically grant stock appreciation rights to selected non-U.S. employees. At December 28, 2024, outstanding stock appreciation rights totaled 391,414 with a weighted-average exercise price of $64.09 and a weighted-average remaining contractual life of 6.1 years; these units had an intrinsic value of $6 million, compared to $12 million at December 30, 2023.

Stock Options

Stock option compensation expense was $25 million, $23 million and $22 million in 2024, 2023 and 2022, respectively. Options to purchase our shares have a maximum term of ten years and generally vest ratably over a three-year period. Stock option compensation cost is calculated under the fair value approach using the Black-Scholes option-pricing model to determine the fair value of options granted on the date of grant. The expected volatility used in this model is based on historical volatilities and implied volatilities from traded options on our common stock. The expected term is based on historical option exercise data, which is adjusted to reflect any anticipated changes in expected behavior.

We grant options annually on the first day of March. The assumptions used in our option-pricing model for these grants and the weighted-average fair value for these options are as follows:


	2024		2023		2022
Fair value of options at grant date	$	27.69	$	23.83	$	19.95
Dividend yield	0.1%		0.1%		0.1%
Expected volatility	27.2%		29.4%		29.2%
Risk-free interest rate	4.3%		4.2%		1.9%
Expected term (in years)	4.8		4.8		4.8

The stock option activity during 2024 is provided below:


(Options in thousands)	Number of Options	Weighted- Average Exercise Price
Outstanding at beginning of year	7,515	$	54.25
Granted	1,094	88.01
Exercised	(1,904)	(46.95)
Forfeited or expired	(56)	(77.72)
Outstanding at end of year	6,649	$	61.70
Exercisable at end of year	4,585	$	53.37

At December 28, 2024, our outstanding options had an aggregate intrinsic value of $115 million and a weighted-average remaining contractual life of 5.7 years. Our exercisable options had an aggregate intrinsic value of $109 million and a weighted-average remaining contractual life of 4.5 years at December 28, 2024. The total intrinsic value of options exercised during 2024, 2023 and 2022 was $78 million, $50 million and $32 million, respectively.

Restricted Stock Units

We issue restricted stock units that include the right to receive dividend equivalents and are settled in either cash or stock. Beginning in 2020, new grants of restricted stock units vest in full on the third anniversary of the grant date. Restricted stock units granted prior to 2020 vest one-third each in the third, fourth and fifth year following the year of the grant. Compensation cost is determined using the fair value of these units based on the trading price of our common stock. For units payable in stock, we use the trading price on the grant date, while units payable in cash are remeasured using the price at each reporting period date.

The 2024 activity for restricted stock units is provided below:


	Units Payable in Stock			Units Payable in Cash
(Shares/Units in thousands)	Number of Shares	Weighted- Average Grant Date Fair Value		Number of Units	Weighted- Average Grant Date Fair Value
Outstanding at beginning of year, nonvested	396	$	61.73	810	$	63.06
Granted	110	89.45		221	88.69
Vested	(175)	(53.16)		(373)	(52.50)
Forfeited	—	—		(27)	(74.80)
Outstanding at end of year, nonvested	331	$	75.50	631	$	77.75

The fair value of the restricted stock unit awards that vested and/or amounts paid under these awards is as follows:


(In millions)	2024		2023		2022
Fair value of awards vested	$	42	$	45	$	25
Cash paid	33		34		17

Performance Share Units

The fair value of share-based compensation awards accounted for as liabilities includes performance share units, which are generally paid in cash in the first quarter of the year following vesting. Performance share units are subject to performance goals set at the beginning of the three-year performance period and vest at the end of the performance period. These units are remeasured to fair value at the end of each reporting period based on the trading price of our common stock and the number of units, as adjusted based on assumptions with respect to performance on the relevant metrics.

The 2024 activity for our performance share units is as follows:


(Units in thousands)	Number of Units	Weighted- Average Grant Date Fair Value
Outstanding at beginning of year, nonvested	366	$	72.23
Granted	194	88.68
Vested	(166)	(71.07)

Outstanding at end of year, nonvested	394	$	80.81

The fair value of the performance share units that vested and/or amounts paid under these awards is as follows:


(In millions)	2024		2023		2022
Fair value of awards vested	$	13	$	19	$	19
Cash paid	35		27		15