XML 41 R22.htm IDEA: XBRL DOCUMENT v3.3.1.900
Stock-Based Compensation
 11 Months Ended
Jan. 01, 2016
Stock-Based Compensation
Stock-Based Compensation:
Plan Summaries. At January 1, 2016, the Company had stock-based compensation awards outstanding under the following plans: the 2006 Equity Incentive Plan, the Management Stock Compensation Plan, the Stock Compensation Plan and the 2006 Employee Stock Purchase Plan ("ESPP"). Leidos issues new shares upon the issuance of stock awards, vesting of stock units or exercise of stock options under these plans.
The 2006 Equity Incentive Plan provides the Company’s and its affiliates' employees, directors and consultants the opportunity to receive various types of stock-based compensation and cash awards. As of January 1, 2016, the Company has issued stock options, vested stock awards, restricted stock awards including restricted stock units ("vesting stock"), performance-based awards and cash awards under this plan. The 2006 Equity Incentive Plan provides that in the event of the Company's merger with or into another corporation, a sale of substantially all of its assets or the transfer of more than 50% of Leidos' outstanding shares by tender offer or similar transaction, the successor entity may assume or substitute all outstanding awards. If the successor entity does not assume or substitute all outstanding awards, the vesting of all awards will accelerate and any repurchase rights on awards will terminate. If a successor entity assumes or substitutes all awards and a participant is involuntarily terminated by the successor entity for any reason other than death, disability or cause within 18 months following the change of control, all outstanding awards of the terminated participant will immediately vest and be exercisable for a period of six months following termination. In the event of a change of control, the vesting of all awards held by non-employee directors of the Company will accelerate. Stock awards granted under the plan prior to fiscal 2015 generally vest or become exercisable 20% a year for the first three years and 40% in the fourth year. In fiscal 2015, the Company began granting awards that generally vest or become exercisable 25% a year over four years. As of January 1, 2016, 4.7 million shares of Leidos' stock were reserved for future issuance under the 2006 Equity Incentive Plan.
The Company has a Management Stock Compensation Plan and a Stock Compensation Plan, together referred to as the Stock Compensation Plans. The Board of Directors may at any time amend or terminate the Stock Compensation Plans. The Stock Compensation Plans provide for awards in share units to eligible employees. Benefits from these plans are payable in shares of Leidos' stock that are held in a trust for the purpose of funding benefit payments to the plans' participants. The fair value of the awards granted under the Stock Compensation Plans, which are vesting share unit awards, is based on the fair value of the award on the date of grant. Compensation expense is measured at grant date and generally recognized over the vesting period of four years. Awards granted vest 100% after four years following the date of the award. Upon a change in control of the Company (as defined by the Stock Compensation Plans), participant accounts will become fully vested and shares of Leidos stock held in the accounts will be immediately distributed. The Stock Compensation Plans do not provide for a maximum number of shares available for future issuance.
The Company has an ESPP which allows eligible employees to purchase shares of Leidos' stock at a discount of up to 15% of the fair market value on the date of purchase. During the 11-month period ended January 1, 2016, fiscal 2015, and fiscal 2014, the discount was 5% of the fair market value on the date of purchase, thereby resulting in the ESPP being non-compensatory. As of January 1, 2016, 13.8 million shares of Leidos' stock were authorized and reserved for future issuance under the ESPP.
Stock-Based Compensation and Related Tax Benefits Recognized. Stock-based compensation and related tax benefits recognized under all plans were as follows:
 
11 Months Ended
 
12 Months Ended
 
January 1,
2016

January 30,
2015

January 31,
2014
 
(in millions)
Stock-based compensation expense:
 
 
 
 
 
Stock options
$
3

 
$
5

 
$
10

Vesting stock awards
27

 
35

 
46

Vested stock awards
—

 
2

 
—

Total stock-based compensation expense recorded in continuing operations
$
30

 
$
42

 
$
56

Total stock-based compensation expense recorded in discontinued operations
$
—

 
$
—

 
$
21

Tax benefits recognized from stock-based compensation
$
12

 
$
16

 
$
22


New SAIC Spin-off Adjustments. As a result of the separation of New SAIC, effective September 27, 2013, all outstanding equity awards related to New SAIC employees were assumed by New SAIC. Also, in connection with the separation, adjustments were made to the share amounts and exercise prices of all remaining outstanding Leidos stock options, and the share amounts for vesting stock awards and performance-based stock awards as of the Distribution Date such that the adjustments were generally made to preserve the aggregate intrinsic value at the Distribution Date pursuant to the terms of the stock based compensation plans under which they were issued. Taking into account the change in the value of the Company's common stock as a result of the distribution of the New SAIC shares, the conversion ratio applied to all outstanding equity awards at the Distribution Date was 1.4523. In addition, all outstanding equity awards reflected the Company’s one-for-four reverse stock split.
As a result of the spin-off adjustments, a modification was made on September 27, 2013 to Leidos and New SAIC stock options outstanding as of the Distribution Date by which additional stock-based compensation expense was recognized, as the fair value of the outstanding options immediately following the spin-off was greater than the fair value immediately prior to the spin-off. An increase of expense related to the modification of $3 million was recorded for awards that were fully vested on the modification date, and an additional $3 million of incremental fair value will be recorded in future periods for unvested awards that will continue to vest, resulting in a total additional stock compensation cost of $6 million with a weighted average modification fair value of $1.02 related to continuing Leidos stock options outstanding.
The spin-off adjustments are reflected in the tables below as well as the one-for-four stock split discussed in Note 1.
Stock Options. Stock options are granted with exercise prices equal to the fair value of Leidos' common stock on the date of grant and for terms not greater than ten years. Beginning in fiscal 2012, stock options granted under the 2006 Equity Incentive Plan have a term of seven years and a vesting period of four years, except for stock options granted to the Company’s outside directors, which have a vesting period of the earlier of one year from grant date or the next annual meeting of stockholders following grant date. Prior to fiscal 2012, stock options granted under the 2006 Equity Incentive Plan had a term of five years.
The fair value of the Company's stock option awards is estimated on the date of grant using the Black-Scholes-Merton option-pricing model. The fair value of the Company’s stock option awards is generally expensed on a straight-line basis over the vesting period of four years, except for stock options granted to the Company's outside directors, which is recognized over the vesting period of one year or less.
Prior to the Company's separation transaction, the expected term of all stock option awards granted was derived from the Company's historical experience with the exception of stock option awards granted to our outside directors prior to fiscal 2013, which were derived utilizing the "simplified" method presented in SEC Staff Accounting Bulletin Nos. 107 and 110, "Share-Based Payment." Expected volatility was based on an average of the historical volatility of Leidos' stock and the implied volatility from traded options on Leidos stock. The risk-free interest rate was based on the yield curve of a zero-coupon U.S. Treasury bond with a maturity equal to the expected term of the stock option on the date of grant. The Company used historical data to estimate forfeitures.
After the separation transaction, the expected term for all stock option awards granted was derived utilizing the "simplified" method due to the lack of historical experience post separation. Expected volatility was estimated as of each grant date during fiscal 2014 and 2015, based on a weighted average historical volatility of a group of publicly-traded peer companies for a period consistent with the expected option term due to lack of historical volatility post separation. In the 11-month period ended January 1, 2016, the expected volatility was estimated using a blended volatility method for a period consistent with the expected term based more significantly on the weighted average historical volatility of a group of publicly-traded peer companies and the weighted average implied volatility from traded options on Leidos stock for a time period prior to the grant date. The Company will continue to use peer group volatility information, until sufficient historical volatility of the Company's common stock is relevant, to measure expected volatility for future option grants. The risk-free rate is derived in the same manner as prior to the separation transaction. The Company uses historical data to estimate forfeitures.
The weighted average grant-date fair value and assumptions used to determine fair value of stock options granted for the 11-month period ended January 1, 2016, fiscal 2015 and fiscal 2014 were as follows:
 
11 Months Ended
 
12 Months Ended
 
January 1,
2016
 
January 30,
2015
 
January 31, 2014 (Grants After Spin)
 
January 31, 2014 (Grants Before Spin)
Weighted average grant-date fair value
$
6.72

 
$
6.15

 
$
9.04

 
$
9.48

Expected term (in years)
4.7

 
4.7

 
4.8

 
5.0

Expected volatility
24.5
%
 
25.1
%
 
29.5
%
 
30.0
%
Risk-free interest rate
1.4
%
 
1.6
%
 
1.4
%
 
1.4
%
Dividend yield
2.9
%
 
2.9
%
 
2.4
%
 
2.8
%






Stock option activity for each of the periods presented was as follows:
 
Shares of
stock under
stock options
 
Weighted
average
exercise  price
 
Weighted
average
remaining
contractual
term
 
Aggregate
intrinsic value
 
(in millions)
 
 
 
(in years)
 
(in millions)
Outstanding at January 31, 2013
4.9

 
$
67.24

 
3.0
 
—

Options granted
1.4

 
54.86

 
 
 
 
Special dividend adjustments
0.4

 
 
 
 
 
 
Options forfeited or expired
(1.3
)
 
71.80

 
 
 
 
Spin-off Adjustment
(1.9
)
 
57.85

 
 
 


Outstanding at September 27, 2013 (before spin)
3.5

 
$
59.25

 
3.9
 
$
24

Outstanding at September 28, 2013 (after spin)
4.9

*
$
40.20

*
3.9
 
$
24

Options granted
0.2

 
45.16

 
 
 
 
Options forfeited or expired
(0.4
)
 
39.43

 
 
 
 
Options exercised
(0.2
)
 
43.10

 
 
 
1

Outstanding at January 31, 2014
4.5

 
$
40.32

 
3.8
 
$
25

Options granted
0.7

 
37.25

 
 
 
 
Options forfeited or expired
(1.5
)
 
43.90

 
 
 
 
Options exercised
(0.1
)
 
34.89

 
 
 
1

Outstanding at January 30, 2015
3.6

 
$
38.50

 
4.0
 
$
14

Options granted
0.6

 
42.64

 
 
 
 
Options forfeited or expired
(0.9
)
 
42.03

 
 
 
 
Options exercised
(0.9
)
 
38.53

 
 
 
9

Outstanding at January 1, 2016
2.4

 
$
38.21

 
4.5
 
$
43

Exercisable at January 1, 2016
0.8

 
$
38.39

 
3.6
 
$
15

Vested and expected to vest in the future as of January 1, 2016
2.3

 
$
38.11

 
4.5
 
$
41

*Adjusted for Conversion Ratio of 1.4523
As of January 1, 2016, there was $4 million of unrecognized compensation cost, net of estimated forfeitures, related to stock options, which is expected to be recognized over a weighted-average period of 2.4 years. The tax benefits realized from exercises of stock options for the 11-month period ended January 1, 2016, were $1 million; and immaterial for fiscal 2015, and fiscal 2014, respectively. The fair value of stock surrendered in payment of the exercise price for stock options exercised during the 11-month period ended January 1, 2016, and the year ended January 31, 2014, was $3 million and $1 million, respectively. The fair value of stock surrendered in payment of the exercise price for stock options exercised during the year ended January 30, 2015, was immaterial.
Vesting Stock Awards. Compensation expense is measured at the grant date fair value and generally recognized over the vesting period of four years based upon required service conditions and in some cases performance conditions.
Vesting stock award activity for each of the periods presented was as follows:
 
Shares of stock
under stock
awards
 
Weighted
average grant-
date fair value
 
 
(in millions)

 
 
 
Unvested at January 31, 2013
3.1

 
$
60.78

 
Awards granted
2.1

 
53.51

 
Awards forfeited
(0.4
)
 
58.28

 
Awards vested
(0.9
)
 
64.76

 
Spin-off Adjustment
(1.5
)
 
57.04

 
Unvested at September 27, 2013 (before spin)
2.4

 
$
59.98

 
Unvested stock awards at September 28, 2013 (after spin)
3.5

*
$
41.54

*
Awards granted
0.4


45.41


Awards forfeited
(0.2
)
 
39.75

 
Unvested stock awards at January 31, 2014
3.7

 
$
39.58

 
Awards granted
0.8


37.06


Awards forfeited
(0.5
)

39.05


Awards vested
(1.0
)

41.08


Unvested stock awards at January 30, 2015
3.0


$
38.51


Awards granted
0.5

 
42.95

 
Awards forfeited
(0.4
)
 
40.10

 
Awards vested
(0.8
)
 
40.05

 
Unvested stock awards at January 1, 2016
2.3

 
$
38.97

 

* Adjusted for Conversion Ratio of 1.4523
As of January 1, 2016, there was $31 million of unrecognized compensation cost, net of estimated forfeitures, related to vesting stock awards, which is expected to be recognized over a weighted average period of 2.0 years. The fair value of vesting stock awards that vested in the 11-month period ended January 1, 2016, fiscal 2015, and fiscal 2014 was $29 million, $34 million and $49 million, respectively.
Performance-Based Stock Awards. The Company grants performance-based stock awards to certain officers and key employees of the Company under the 2006 Equity Incentive Plan. The Company's performance-based stock awards vest and the stock is issued at the end of a three-year period based upon the achievement of specific performance criteria, with the number of shares ultimately awarded, if any, ranging up to 150% of the specified target awards. If performance is below the threshold level of performance, no shares will be issued.
For the fiscal 2015 awards granted, one-third of the target number of shares of stock granted under the awards will be allocated to each fiscal year over the three-year performance period and the actual number of shares to be issued with respect to each fiscal year will be based upon the achievement of that fiscal year's performance criteria. For the 11-month period ended January 1, 2016, awards granted, the target number of shares of stock granted under the awards will vest and the stock will be issued at the end of a three-year period based on a three-year cycle performance period and the actual number of shares to be issued will be based upon the achievement of the three-year cycle’s performance criteria. Also, during the 11-month period ended January 1, 2016, the Company granted performance-based awards with market conditions. These market conditions grants represent the target number of shares and the actual number of shares to be awarded upon vesting may be higher or lower depending upon the achievement of the relevant market conditions. The target number of shares granted under the market conditions grants will vest and the stock will be issued at the end of a three-year period based on the attainment of certain total shareholder return performance measures and the employee's continued service through the vest date.
Performance-based stock award activity for each of the periods presented was as follows:
 
Expected number
of shares of stock
to be issued under
performance-based
stock awards
 
Weighted
average grant-
date fair value
 
 
(in millions)
 
 
 
Unvested at January 31, 2013
0.3

 
$
52.96

 
Awards canceled
(0.2
)
 
53.11

 
Unvested at January 31, 2014
0.1

*
$
36.65

*
Awards granted
0.1

 
37.64

 
Awards vested
(0.1
)
 
36.69

 
Unvested at January 30, 2015
0.1

 
$
37.70

 
Awards granted
0.2

 
44.30

 
Awards forfeited
(0.1
)
 
43.49

 
Unvested at January 1, 2016
0.2

 
$
43.35

 


*Adjusted for Conversion Ratio of 1.4523
The weighted average grant date fair value for performance-based stock, excluding those with a market condition, during the 11-month period ended January 1, 2016, and fiscal 2015 was $43.78 and $36.88, respectively. There were no grants for performance-based stock awards during fiscal 2014. The weighted average grant date fair value for performance-based stock with market conditions that were first granted during the 11-month period ended January 1, 2016, was $45.00 and was calculated using the Monte Carlo simulation. The Monte Carlo simulation used various assumptions including expected volatility of 27.67%, a risk free rate of return of 0.82% and a weighted average grant date stock price of $42.61.
As of January 1, 2016, there was $6 million of unrecognized compensation cost, net of estimated forfeitures, related to performance-based stock awards granted under the 2006 Equity Incentive Plan, which is expected to be recognized over a weighted average period of 1.8 years. There were no performance-based stock awards that vested in the 11-month period ended January 1, 2016. The fair value of performance-based stock awards that vested in fiscal 2015 and fiscal 2014 was $2 million for each period.
Leidos, Inc.  
Stock-Based Compensation
Stock-Based Compensation:
Plan Summaries. At January 1, 2016, the Company had stock-based compensation awards outstanding under the following plans: the 2006 Equity Incentive Plan, the Management Stock Compensation Plan, the Stock Compensation Plan and the 2006 Employee Stock Purchase Plan ("ESPP"). Leidos issues new shares upon the issuance of stock awards, vesting of stock units or exercise of stock options under these plans.
The 2006 Equity Incentive Plan provides the Company’s and its affiliates' employees, directors and consultants the opportunity to receive various types of stock-based compensation and cash awards. As of January 1, 2016, the Company has issued stock options, vested stock awards, restricted stock awards including restricted stock units ("vesting stock"), performance-based awards and cash awards under this plan. The 2006 Equity Incentive Plan provides that in the event of the Company's merger with or into another corporation, a sale of substantially all of its assets or the transfer of more than 50% of Leidos' outstanding shares by tender offer or similar transaction, the successor entity may assume or substitute all outstanding awards. If the successor entity does not assume or substitute all outstanding awards, the vesting of all awards will accelerate and any repurchase rights on awards will terminate. If a successor entity assumes or substitutes all awards and a participant is involuntarily terminated by the successor entity for any reason other than death, disability or cause within 18 months following the change of control, all outstanding awards of the terminated participant will immediately vest and be exercisable for a period of six months following termination. In the event of a change of control, the vesting of all awards held by non-employee directors of the Company will accelerate. Stock awards granted under the plan prior to fiscal 2015 generally vest or become exercisable 20% a year for the first three years and 40% in the fourth year. In fiscal 2015, the Company began granting awards that generally vest or become exercisable 25% a year over four years. As of January 1, 2016, 4.7 million shares of Leidos' stock were reserved for future issuance under the 2006 Equity Incentive Plan.
The Company has a Management Stock Compensation Plan and a Stock Compensation Plan, together referred to as the Stock Compensation Plans. The Board of Directors may at any time amend or terminate the Stock Compensation Plans. The Stock Compensation Plans provide for awards in share units to eligible employees. Benefits from these plans are payable in shares of Leidos' stock that are held in a trust for the purpose of funding benefit payments to the plans' participants. The fair value of the awards granted under the Stock Compensation Plans, which are vesting share unit awards, is based on the fair value of the award on the date of grant. Compensation expense is measured at grant date and generally recognized over the vesting period of four years. Awards granted vest 100% after four years following the date of the award. Upon a change in control of the Company (as defined by the Stock Compensation Plans), participant accounts will become fully vested and shares of Leidos stock held in the accounts will be immediately distributed. The Stock Compensation Plans do not provide for a maximum number of shares available for future issuance.
The Company has an ESPP which allows eligible employees to purchase shares of Leidos' stock at a discount of up to 15% of the fair market value on the date of purchase. During the 11-month period ended January 1, 2016, fiscal 2015, and fiscal 2014, the discount was 5% of the fair market value on the date of purchase, thereby resulting in the ESPP being non-compensatory. As of January 1, 2016, 13.8 million shares of Leidos' stock were authorized and reserved for future issuance under the ESPP.
Stock-Based Compensation and Related Tax Benefits Recognized. Stock-based compensation and related tax benefits recognized under all plans were as follows:
 
11 Months Ended
 
12 Months Ended
 
January 1,
2016

January 30,
2015

January 31,
2014
 
(in millions)
Stock-based compensation expense:
 
 
 
 
 
Stock options
$
3

 
$
5

 
$
10

Vesting stock awards
27

 
35

 
46

Vested stock awards
—

 
2

 
—

Total stock-based compensation expense recorded in continuing operations
$
30

 
$
42

 
$
56

Total stock-based compensation expense recorded in discontinued operations
$
—

 
$
—

 
$
21

Tax benefits recognized from stock-based compensation
$
12

 
$
16

 
$
22


New SAIC Spin-off Adjustments. As a result of the separation of New SAIC, effective September 27, 2013, all outstanding equity awards related to New SAIC employees were assumed by New SAIC. Also, in connection with the separation, adjustments were made to the share amounts and exercise prices of all remaining outstanding Leidos stock options, and the share amounts for vesting stock awards and performance-based stock awards as of the Distribution Date such that the adjustments were generally made to preserve the aggregate intrinsic value at the Distribution Date pursuant to the terms of the stock based compensation plans under which they were issued. Taking into account the change in the value of the Company's common stock as a result of the distribution of the New SAIC shares, the conversion ratio applied to all outstanding equity awards at the Distribution Date was 1.4523. In addition, all outstanding equity awards reflected the Company’s one-for-four reverse stock split.
As a result of the spin-off adjustments, a modification was made on September 27, 2013 to Leidos and New SAIC stock options outstanding as of the Distribution Date by which additional stock-based compensation expense was recognized, as the fair value of the outstanding options immediately following the spin-off was greater than the fair value immediately prior to the spin-off. An increase of expense related to the modification of $3 million was recorded for awards that were fully vested on the modification date, and an additional $3 million of incremental fair value will be recorded in future periods for unvested awards that will continue to vest, resulting in a total additional stock compensation cost of $6 million with a weighted average modification fair value of $1.02 related to continuing Leidos stock options outstanding.
The spin-off adjustments are reflected in the tables below as well as the one-for-four stock split discussed in Note 1.
Stock Options. Stock options are granted with exercise prices equal to the fair value of Leidos' common stock on the date of grant and for terms not greater than ten years. Beginning in fiscal 2012, stock options granted under the 2006 Equity Incentive Plan have a term of seven years and a vesting period of four years, except for stock options granted to the Company’s outside directors, which have a vesting period of the earlier of one year from grant date or the next annual meeting of stockholders following grant date. Prior to fiscal 2012, stock options granted under the 2006 Equity Incentive Plan had a term of five years.
The fair value of the Company's stock option awards is estimated on the date of grant using the Black-Scholes-Merton option-pricing model. The fair value of the Company’s stock option awards is generally expensed on a straight-line basis over the vesting period of four years, except for stock options granted to the Company's outside directors, which is recognized over the vesting period of one year or less.
Prior to the Company's separation transaction, the expected term of all stock option awards granted was derived from the Company's historical experience with the exception of stock option awards granted to our outside directors prior to fiscal 2013, which were derived utilizing the "simplified" method presented in SEC Staff Accounting Bulletin Nos. 107 and 110, "Share-Based Payment." Expected volatility was based on an average of the historical volatility of Leidos' stock and the implied volatility from traded options on Leidos stock. The risk-free interest rate was based on the yield curve of a zero-coupon U.S. Treasury bond with a maturity equal to the expected term of the stock option on the date of grant. The Company used historical data to estimate forfeitures.
After the separation transaction, the expected term for all stock option awards granted was derived utilizing the "simplified" method due to the lack of historical experience post separation. Expected volatility was estimated as of each grant date during fiscal 2014 and 2015, based on a weighted average historical volatility of a group of publicly-traded peer companies for a period consistent with the expected option term due to lack of historical volatility post separation. In the 11-month period ended January 1, 2016, the expected volatility was estimated using a blended volatility method for a period consistent with the expected term based more significantly on the weighted average historical volatility of a group of publicly-traded peer companies and the weighted average implied volatility from traded options on Leidos stock for a time period prior to the grant date. The Company will continue to use peer group volatility information, until sufficient historical volatility of the Company's common stock is relevant, to measure expected volatility for future option grants. The risk-free rate is derived in the same manner as prior to the separation transaction. The Company uses historical data to estimate forfeitures.
The weighted average grant-date fair value and assumptions used to determine fair value of stock options granted for the 11-month period ended January 1, 2016, fiscal 2015 and fiscal 2014 were as follows:
 
11 Months Ended
 
12 Months Ended
 
January 1,
2016
 
January 30,
2015
 
January 31, 2014 (Grants After Spin)
 
January 31, 2014 (Grants Before Spin)
Weighted average grant-date fair value
$
6.72

 
$
6.15

 
$
9.04

 
$
9.48

Expected term (in years)
4.7

 
4.7

 
4.8

 
5.0

Expected volatility
24.5
%
 
25.1
%
 
29.5
%
 
30.0
%
Risk-free interest rate
1.4
%
 
1.6
%
 
1.4
%
 
1.4
%
Dividend yield
2.9
%
 
2.9
%
 
2.4
%
 
2.8
%






Stock option activity for each of the periods presented was as follows:
 
Shares of
stock under
stock options
 
Weighted
average
exercise  price
 
Weighted
average
remaining
contractual
term
 
Aggregate
intrinsic value
 
(in millions)
 
 
 
(in years)
 
(in millions)
Outstanding at January 31, 2013
4.9

 
$
67.24

 
3.0
 
—

Options granted
1.4

 
54.86

 
 
 
 
Special dividend adjustments
0.4

 
 
 
 
 
 
Options forfeited or expired
(1.3
)
 
71.80

 
 
 
 
Spin-off Adjustment
(1.9
)
 
57.85

 
 
 


Outstanding at September 27, 2013 (before spin)
3.5

 
$
59.25

 
3.9
 
$
24

Outstanding at September 28, 2013 (after spin)
4.9

*
$
40.20

*
3.9
 
$
24

Options granted
0.2

 
45.16

 
 
 
 
Options forfeited or expired
(0.4
)
 
39.43

 
 
 
 
Options exercised
(0.2
)
 
43.10

 
 
 
1

Outstanding at January 31, 2014
4.5

 
$
40.32

 
3.8
 
$
25

Options granted
0.7

 
37.25

 
 
 
 
Options forfeited or expired
(1.5
)
 
43.90

 
 
 
 
Options exercised
(0.1
)
 
34.89

 
 
 
1

Outstanding at January 30, 2015
3.6

 
$
38.50

 
4.0
 
$
14

Options granted
0.6

 
42.64

 
 
 
 
Options forfeited or expired
(0.9
)
 
42.03

 
 
 
 
Options exercised
(0.9
)
 
38.53

 
 
 
9

Outstanding at January 1, 2016
2.4

 
$
38.21

 
4.5
 
$
43

Exercisable at January 1, 2016
0.8

 
$
38.39

 
3.6
 
$
15

Vested and expected to vest in the future as of January 1, 2016
2.3

 
$
38.11

 
4.5
 
$
41

*Adjusted for Conversion Ratio of 1.4523
As of January 1, 2016, there was $4 million of unrecognized compensation cost, net of estimated forfeitures, related to stock options, which is expected to be recognized over a weighted-average period of 2.4 years. The tax benefits realized from exercises of stock options for the 11-month period ended January 1, 2016, were $1 million; and immaterial for fiscal 2015, and fiscal 2014, respectively. The fair value of stock surrendered in payment of the exercise price for stock options exercised during the 11-month period ended January 1, 2016, and the year ended January 31, 2014, was $3 million and $1 million, respectively. The fair value of stock surrendered in payment of the exercise price for stock options exercised during the year ended January 30, 2015, was immaterial.
Vesting Stock Awards. Compensation expense is measured at the grant date fair value and generally recognized over the vesting period of four years based upon required service conditions and in some cases performance conditions.
Vesting stock award activity for each of the periods presented was as follows:
 
Shares of stock
under stock
awards
 
Weighted
average grant-
date fair value
 
 
(in millions)

 
 
 
Unvested at January 31, 2013
3.1

 
$
60.78

 
Awards granted
2.1

 
53.51

 
Awards forfeited
(0.4
)
 
58.28

 
Awards vested
(0.9
)
 
64.76

 
Spin-off Adjustment
(1.5
)
 
57.04

 
Unvested at September 27, 2013 (before spin)
2.4

 
$
59.98

 
Unvested stock awards at September 28, 2013 (after spin)
3.5

*
$
41.54

*
Awards granted
0.4


45.41


Awards forfeited
(0.2
)
 
39.75

 
Unvested stock awards at January 31, 2014
3.7

 
$
39.58

 
Awards granted
0.8


37.06


Awards forfeited
(0.5
)

39.05


Awards vested
(1.0
)

41.08


Unvested stock awards at January 30, 2015
3.0


$
38.51


Awards granted
0.5

 
42.95

 
Awards forfeited
(0.4
)
 
40.10

 
Awards vested
(0.8
)
 
40.05

 
Unvested stock awards at January 1, 2016
2.3

 
$
38.97

 

* Adjusted for Conversion Ratio of 1.4523
As of January 1, 2016, there was $31 million of unrecognized compensation cost, net of estimated forfeitures, related to vesting stock awards, which is expected to be recognized over a weighted average period of 2.0 years. The fair value of vesting stock awards that vested in the 11-month period ended January 1, 2016, fiscal 2015, and fiscal 2014 was $29 million, $34 million and $49 million, respectively.
Performance-Based Stock Awards. The Company grants performance-based stock awards to certain officers and key employees of the Company under the 2006 Equity Incentive Plan. The Company's performance-based stock awards vest and the stock is issued at the end of a three-year period based upon the achievement of specific performance criteria, with the number of shares ultimately awarded, if any, ranging up to 150% of the specified target awards. If performance is below the threshold level of performance, no shares will be issued.
For the fiscal 2015 awards granted, one-third of the target number of shares of stock granted under the awards will be allocated to each fiscal year over the three-year performance period and the actual number of shares to be issued with respect to each fiscal year will be based upon the achievement of that fiscal year's performance criteria. For the 11-month period ended January 1, 2016, awards granted, the target number of shares of stock granted under the awards will vest and the stock will be issued at the end of a three-year period based on a three-year cycle performance period and the actual number of shares to be issued will be based upon the achievement of the three-year cycle’s performance criteria. Also, during the 11-month period ended January 1, 2016, the Company granted performance-based awards with market conditions. These market conditions grants represent the target number of shares and the actual number of shares to be awarded upon vesting may be higher or lower depending upon the achievement of the relevant market conditions. The target number of shares granted under the market conditions grants will vest and the stock will be issued at the end of a three-year period based on the attainment of certain total shareholder return performance measures and the employee's continued service through the vest date.
Performance-based stock award activity for each of the periods presented was as follows:
 
Expected number
of shares of stock
to be issued under
performance-based
stock awards
 
Weighted
average grant-
date fair value
 
 
(in millions)
 
 
 
Unvested at January 31, 2013
0.3

 
$
52.96

 
Awards canceled
(0.2
)
 
53.11

 
Unvested at January 31, 2014
0.1

*
$
36.65

*
Awards granted
0.1

 
37.64

 
Awards vested
(0.1
)
 
36.69

 
Unvested at January 30, 2015
0.1

 
$
37.70

 
Awards granted
0.2

 
44.30

 
Awards forfeited
(0.1
)
 
43.49

 
Unvested at January 1, 2016
0.2

 
$
43.35

 


*Adjusted for Conversion Ratio of 1.4523
The weighted average grant date fair value for performance-based stock, excluding those with a market condition, during the 11-month period ended January 1, 2016, and fiscal 2015 was $43.78 and $36.88, respectively. There were no grants for performance-based stock awards during fiscal 2014. The weighted average grant date fair value for performance-based stock with market conditions that were first granted during the 11-month period ended January 1, 2016, was $45.00 and was calculated using the Monte Carlo simulation. The Monte Carlo simulation used various assumptions including expected volatility of 27.67%, a risk free rate of return of 0.82% and a weighted average grant date stock price of $42.61.
As of January 1, 2016, there was $6 million of unrecognized compensation cost, net of estimated forfeitures, related to performance-based stock awards granted under the 2006 Equity Incentive Plan, which is expected to be recognized over a weighted average period of 1.8 years. There were no performance-based stock awards that vested in the 11-month period ended January 1, 2016. The fair value of performance-based stock awards that vested in fiscal 2015 and fiscal 2014 was $2 million for each period.