12.STOCK OPTION PLANS

The Company grants options for common shares (“stock options”) to employees under various plans at an option price equal to the fair market value of the stock at the date of grant. The Company accounts for stock options under the fair value recognition provisions. Under this method, the Company recognizes compensation expense for all share-based payments granted. The Company recognizes share-based compensation expense, net of an estimated forfeiture rate, over the requisite service period of the award. Excess tax benefits related to share-based payments are recognized in the provision for income taxes. Equity awards may be made at one of four meetings of its Board of Directors occurring shortly after the Company’s release of quarterly earnings. The 2016 primary grant was made in conjunction with the June meeting of the Company’s Board of Directors. Certain changes to the stock option compensation strategy were put into effect in 2015, which resulted in a reduction to the number of stock options granted in 2016 and 2015, compared to 2014.

Stock options typically expire 10 years from the date of grant. Stock options vest between one and five years from the date of grant. At January 28, 2017, approximately 33 million common shares were available for future option grants under the 2008, 2011 and 2014 Long-Term Incentive Plans (the “Plans”).

In addition to the stock options described above, the Company awards restricted stock to employees and non-employee directors under various plans. The restrictions on these awards generally lapse between one and five years from the date of the awards. The Company records expense for restricted stock awards in an amount equal to the fair market value of the underlying shares on the grant date of the award, over the period the awards lapse. As of January 28, 2017, approximately 17 million common shares were available under the Plans for future restricted stock awards or shares issued to the extent performance criteria are achieved. The Company has the ability to convert shares available for stock options under the Plans to shares available for restricted stock awards. Under the Plans, four shares available for option awards can be converted into one share available for restricted stock awards.

All awards become immediately exercisable upon certain changes of control of the Company.

Stock Options

Changes in options outstanding under the stock option plans are summarized below:


	Shares	Weighted-
	subject	average
	to option	exercise
	(in millions)	price
Outstanding, year-end 2013	43.3	$	12.83
Granted	8.4	$	24.71
Exercised	(10.3)	$	11.56
Canceled or Expired	(0.6)	$	15.56

Outstanding, year-end 2014	40.8	$	15.56
Granted	3.4	$	38.40
Exercised	(8.9)	$	13.54
Canceled or Expired	(0.4)	$	19.98

Outstanding, year-end 2015	34.9	$	18.26
Granted	4.8	$	37.10
Exercised	(4.9)	$	14.20
Canceled or Expired	(0.5)	$	28.35

Outstanding, year-end 2016	34.3	$	21.32

A summary of options outstanding, exercisable and expected to vest at January 28, 2017 follows:


		Weighted-average			Aggregate
		remaining	Weighted-average		intrinsic
	Number of shares	contractual life	exercise price		value
	(in millions)	(in years)			(in millions)
Options Outstanding	34.3	6.04	$	21.32	447
Options Exercisable	21.7	4.84	$	16.00	381
Options Expected to Vest	12.3	8.09	$	30.45	65

Restricted stock

Changes in restricted stock outstanding under the restricted stock plans are summarized below:


	Restricted
	shares	Weighted-average
	outstanding	grant-date
	(in millions)	fair value
Outstanding, year-end 2013	9.6	$	16.16
Granted	6.1	$	24.76
Lapsed	(5.2)	$	16.52
Canceled or Expired	(0.3)	$	18.67

Outstanding, year-end 2014	10.2	$	21.04
Granted	3.2	$	38.34
Lapsed	(5.4)	$	21.49
Canceled or Expired	(0.4)	$	22.80

Outstanding, year-end 2015	7.6	$	28.01
Granted	3.6	$	37.03
Lapsed	(3.5)	$	28.52
Canceled or Expired	(0.3)	$	30.70

Outstanding, year-end 2016	7.4	$	32.09

The weighted-average grant date fair value of stock options granted during 2016, 2015 and 2014 was $7.48, $9.78 and $5.98, respectively. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option-pricing model, based on the assumptions shown in the table below. The Black-Scholes model utilizes accounting judgment and financial estimates, including the term option holders are expected to retain their stock options before exercising them, the volatility of the Company’s share price over that expected term, the dividend yield over the term and the number of awards expected to be forfeited before they vest. Using alternative assumptions in the calculation of fair value would produce fair values for stock option grants that could be different than those used to record stock-based compensation expense in the Consolidated Statements of Operations. The decrease in the fair value of the stock options granted during 2016, compared to 2015, resulted primarily from a decrease in the Company’s share price, which increased the expected dividend yield, and decreases in the weighted average expected volatitity and the weighted average risk free discount rate. The increase in the fair value of the stock options granted during 2015, compared to 2014, resulted primarily from an increase in the Company’s share price, which decreased the expected dividend yield, and an increase in the weighted average risk-free interest rate.

The following table reflects the weighted-average assumptions used for grants awarded to option holders:


	2016		2015		2014
Weighted average expected volatility	21.40	%	24.07	%	25.29	%
Weighted average risk-free interest rate	1.29	%	2.12	%	2.06	%
Expected dividend yield	1.40	%	1.20	%	1.51	%
Expected term (based on historical results)	7.2	years	7.2	years	6.6	years

The weighted-average risk-free interest rate was based on the yield of a treasury note as of the grant date, continuously compounded, which matures at a date that approximates the expected term of the options. The dividend yield was based on our history and expectation of dividend payouts. Expected volatility was determined based upon historical stock volatilities; however, implied volatility was also considered. Expected term was determined based upon historical exercise and cancellation experience.

Total stock compensation recognized in 2016, 2015 and 2014 was $141, $165 and $155, respectively. Stock option compensation recognized in 2016, 2015 and 2014 was $28, $31 and $32, respectively. Restricted shares compensation recognized in 2016, 2015 and 2014 was $113, $134 and $123, respectively.

The total intrinsic value of stock options exercised was $105, $217 and $142 in 2016, 2015 and 2014, respectively. The total amount of cash received in 2016 by the Company from the exercise of stock options granted under share-based payment arrangements was $68. As of January 28, 2017, there was $218 of total unrecognized compensation expense remaining related to non-vested share-based compensation arrangements granted under Plans. This cost is expected to be recognized over a weighted-average period of approximately two years. The total fair value of options that vested was $28, $33 and $26 in 2016, 2015 and 2014, respectively.

Shares issued as a result of stock option exercises may be newly issued shares or reissued treasury shares. Proceeds received from the exercise of options, and the related tax benefit, may be utilized to repurchase the Company’s common shares under a stock repurchase program adopted by the Company’s Board of Directors. During 2016, the Company repurchased approximately three million common shares in such a manner.