Share-Based Compensation

9 Months Ended

Oct. 31, 2015

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

11. Share-Based Compensation

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

	Thirteen weeks ended				Thirty-nine weeks ended
	October 31,		November 1,		October 31,		November 1,
	2015		2014		2015		2014
	($ in millions)
Options and shares purchased under the employee stock purchase plan	$	3	$	3	$	9	$	9
Restricted stock and restricted stock units		3		3		8		9
Total share-based compensation expense	$	6	$	6	$	17	$	18

Tax benefit recognized	$	3	$	1	$	6	$	5
Excess income tax benefit from settled equity-classified share-based awards reported as a cash flow from financing activities					$	33	$	11

Valuation Model and Assumptions

The Company uses a Black-Scholes option-pricing model to estimate the fair value of share-based awards. The Black-Scholes option-pricing model incorporates various and highly subjective assumptions, including expected term and expected volatility. The following table shows the Company’s assumptions used to compute the share-based compensation expense:

	Stock Option Plans						Stock Purchase Plan
	October 31,			November 1,			October 31,			November 1,
	2015			2014			2015			2014
Weighted-average risk free rate of interest		1.52	%		2.12	%		0.22	%		0.14	%
Expected volatility		30	%		39	%		24	%		24	%
Weighted-average expected award life		6.0 years			6.1 years			1.0 year			1.0 year
Dividend yield		1.61	%		2.0	%		1.7	%		2.0	%
Weighted-average fair value	$	16.07		$	14.91		$	10.20		$	7.11

The information in the following table covers options granted under the Company’s stock option plans for the thirty-nine weeks ended October 31, 2015:

	Shares		Weighted- Average Term		Weighted-Average Exercise Price
	(in thousands, except price per share and weighted-average term)
Options outstanding at the beginning of the year		5,569			$	25.89
Granted		694				62.29
Exercised		(2,447)				25.64
Expired or cancelled		(55)				48.68
Options outstanding at October 31, 2015		3,761		6.3	$	32.44
Options exercisable at October 31, 2015		2,531		5.1	$	22.13
Options vested and expected to vest at October 31, 2015		3,720		6.3	$	32.17
Options available for future grant at October 31, 2015		13,037

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

	Thirteen weeks ended				Thirty-nine weeks ended
	October 31,		November 1,		October 31,		November 1,
	2015		2014		2015		2014
	($ in millions)
Exercised	$	31	$	6	$	96	$	21

The aggregate intrinsic value for stock options outstanding and for stock options exercisable (the difference between the Company’s 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:

	Thirty-nine weeks ended
	October 31,		November 1,
	2015		2014

	($ in millions)
Outstanding	$	133	$	170
Outstanding and exercisable	$	116	$	138
Vested and expected to vest	$	133	$	169

As of October 31, 2015 there was $9 million of total unrecognized compensation cost related to nonvested stock options, which is expected to be recognized over a weighted-average period of 1.5 years.

The cash received from option exercises for the thirteen and thirty-nine weeks ended October 31, 2015 was $25 million and $63 million, respectively. The cash received from option exercises for the thirteen and thirty-nine weeks ended November 1, 2014 was $4 million and $17 million, respectively. The total tax benefit realized from option exercises was $12 million and $37 million for the thirteen and thirty-nine weeks ended October 31, 2015, respectively, and was $2 million and $7 million for the corresponding prior-year periods.

The following table summarizes information about stock options outstanding and exercisable at October 31, 2015:

	Options Outstanding						Options Exercisable

			Weighted- Average		Weighted- Average				Weighted- Average
Range of Exercise	Number		Remaining		Exercise		Number		Exercise
Prices	Outstanding		Contractual Life		Price		Exercisable		Price

	(in thousands, except prices per share and contractual life)
$9.85 to $18.80		870		3.9	$	13.28		870	$	13.28
$18.84 to $24.75		899		4.8	$	19.81		899	$	19.81
$30.92 to $36.59		790		6.7	$	32.84		616	$	32.44
$45.08 to $73.21		1,202		8.9	$	55.47		146	$	45.70
		3,761		6.3	$	32.44		2,531	$	22.13

Restricted Stock and Restricted Stock Units

Restricted shares of the Company’s common stock and restricted stock units (“RSU”) may be awarded to certain officers and key employees of the Company. RSU awards generally are made to executives outside of the United States and to nonemployee directors. Additionally, RSU awards are made in connection with the Company’s long-term incentive program. Each RSU represents the right to receive one share of the Company’s common stock provided that the vesting conditions are satisfied. There were 588,308 and 734,295 RSU awards outstanding as of October 31, 2015 and November 1, 2014, respectively.

Generally, awards fully vest after the passage of time, typically three years. However, RSU awards made in connection with the Company’s long-term incentive program vest after the attainment of both certain performance metrics and the passage of time. Restricted stock is considered outstanding at the time of grant and the holders have voting rights. Dividends are paid to holders of restricted stock that vest with the passage of time. With regard to performance-based restricted stock, dividends will be accumulated and paid after the performance criteria are met. No dividends are paid or accumulated on RSU awards.

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

Restricted stock and RSU activity for the thirty-nine weeks ended October 31, 2015 is summarized as follows:

			Weighted-Average
			Grant Date Fair
	Number of Shares		Value per Share

	(in thousands, except price per share)
Nonvested at the beginning of the year		1,038	$	37.96
Granted		154		63.72
Vested		(312)		32.33
Expired or cancelled		(68)		37.97
Nonvested at October 31, 2015		812	$	45.02
Aggregate value ($ in millions)	$	37
Weighted-average remaining contractual life (in years)		1.1 years

The weighted grant-date fair value per share was $63.72 and $45.24 for the thirty-nine weeks ended October 31, 2015 and November 1, 2014, respectively . The total value of awards for which restrictions lapsed for the thirty-nine weeks ended October 31, 2015 and November 1, 2014 was $10 million and $14 million, respectively. As of October 31, 2015, there was $12 million of total unrecognized compensation cost net of forfeitures related to nonvested restricted awards.