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Share-Based Compensation

6 Months Ended

Aug. 01, 2020

14. Share-Based Compensation

Total compensation expense, included in SG&A, and the associated tax benefits recognized related to our share-based compensation plans, were as follows:


	Thirteen weeks ended				Twenty-six weeks ended
($ in millions)	August 1, 2020		August 3, 2019		August 1, 2020		August 3, 2019
Options and shares purchased under stock purchase plan	$	2	$	2	$	4	$	4
Restricted stock units		2		4		3		9
Total share-based compensation expense	$	4	$	6	$	7	$	13

Tax benefit recognized	$	1	$	—	$	1	$	1

Valuation Model and Assumptions

We use the Black-Scholes option-pricing model to estimate the fair value of share-based awards. The Black-Scholes option-pricing model incorporates various and subjective assumptions, including expected term and expected volatility.

The following table shows assumptions used to compute share-based compensation expense for awards granted during the twenty-six weeks ended August 1, 2020 and August 3, 2019:


		Stock Option Plans						Stock Purchase Plan
	August 1,			August 3,			August 1,			August 3,
	2020			2019			2020			2019
Weighted-average risk free rate of interest		0.6	%		2.2	%		2.0	%		2.3	%
Expected volatility		42	%		38	%		48	%		57	%
Weighted-average expected award life (in years)		5.5			5.5			1.0			1.0
Dividend yield		4.9	%		2.6	%		4.0	%		2.8	%
Weighted-average fair value	$	5.03		$	17.19		$	15.03		$	20.33

The information in the following table covers option activity under our stock option plans for the twenty-six weeks ended August 1, 2020:


		Weighted-		Weighted-
	Number	Average		Average
	of	Remaining		Exercise
	Shares	Contractual Life		Price
	(in thousands)	(in years)		(per share)
Options outstanding at the beginning of the year	2,881			$	54.21
Granted	1,069				21.61
Exercised	(4)				15.10
Expired or cancelled	(57)				48.53
Options outstanding at August 1, 2020	3,889		6.4	$	45.37
Options exercisable at August 1, 2020	2,473		4.8	$	54.67
Options available for future grant at August 1, 2020	5,655

The total fair value of options vested during the thirteen weeks ended August 1, 2020 and August 3, 2019 was $5 million and $6 million, respectively. The cash received and related tax benefits realized from option exercises during the thirteen and twenty-six weeks ended August 1, 2020 was not significant.

The total intrinsic value of options exercised (the difference between the market price of our common stock on the exercise date and the price paid by the optionee to exercise the option) is presented below:


	Thirteen weeks ended				Twenty-six weeks ended
($ in millions)	August 1, 2020		August 3, 2019		August 1, 2020		August 3, 2019
Exercised	$	—	$	—	$	—	$	5

The aggregate intrinsic value for stock options outstanding, and outstanding and exercisable (the difference between our closing stock price on the last trading day of the period and the exercise price of the options, multiplied by the number of in-the-money stock options) is presented below:

As of August 1, 2020 there was $6 million of total unrecognized compensation cost related to nonvested stock options, which is expected to be recognized over a remaining weighted-average period of 1.6 years.

The following table summarizes information about stock options outstanding and exercisable at August 1, 2020:


	Options Outstanding				Options Exercisable
		Weighted-
		Average	Weighted-			Weighted-
		Remaining	Average			Average
Range of Exercise	Number	Contractual	Exercise		Number	Exercise
Prices	Outstanding	Life	Price		Exercisable	Price
	(in thousands, except prices per share and contractual life)
$18.84 to $23.09	1,176	8.8	$	21.33	117	$	18.84
$24.75 to $36.51	376	2.6		32.13	333		31.77
$44.78 to $45.75	561	5.7		44.91	454		44.94
$46.64 to $62.11	904	5.8		60.00	697		60.51
$63.33 to $73.21	872	5.9		68.60	872		68.60
	3,889	6.4	$	45.37	2,473	$	54.67

Restricted Stock Units

Restricted stock units (“RSU”) may be awarded to certain officers and key employees of the Company. Additionally, RSU awards are made to employees in connection with our long-term incentive program, and to nonemployee directors. Each RSU award represents the right to receive one share of our common stock provided that the applicable performance and vesting conditions are satisfied.

Generally, awards fully vest after the passage of time, typically three years. However, RSU awards made in connection with our performance-based long-term incentive program are earned after the attainment of certain performance metrics and, with regards to certain awards, vest after an additional one-year period. No dividends are paid or accumulated on any RSU awards.

Compensation expense is recognized using the market value at the date of grant and is amortized over the vesting period, provided the recipient continues to be employed by the Company.

RSU activity for the twenty-six weeks ended August 1, 2020 is summarized as follows:


			Weighted-Average
	Number		Remaining		Weighted-Average
	of		Contractual		Grant Date
	Shares		Life		Fair Value
		(in thousands)		(in years)		(per share)
Nonvested at beginning of year		936			$	49.25
Granted		416				22.59
Vested		(67)				65.83
Performance adjustment ⁽¹⁾		(132)
Forfeited		(44)				43.45
Nonvested at August 1, 2020		1,109		1.4	$	37.65

Aggregate value ($ in millions)	$	42

(1)	This represents adjustments made to performance-based RSU awards and reflect changes in estimates based upon our current performance against predefined financial targets.

The total value of awards that vested during the twenty-six weeks ended August 1, 2020 and August 3, 2019 was $4 million and $5 million, respectively. As of August 1, 2020, there was $17 million of total unrecognized compensation cost related to nonvested awards.

Twenty-six weeks ended

August 1, 2020

August 3, 2019

($ in millions)

Outstanding

Outstanding and exercisable