Stock-Based Compensation

6 Months Ended

Jul. 02, 2011

Stock-Based Compensation [Abstract]

Stock-Based Compensation

Note 7. Stock-Based Compensation

Net income included stock-based compensation expense related to stock options, performance units (“PUs”), restricted stock units (“RSUs”) and restricted stock of $9 million and $20.7 million for the three and six months ended July 2, 2011, respectively, and $8.6 million and $16.2 million for the three and six months ended July 3, 2010, respectively. Total stock-based compensation expense was included in “Marketing, general and administrative expense” in the unaudited Consolidated Statements of Income.

In February and April 2011, the Company granted its annual stock-based compensation awards to eligible employees and directors, respectively. Awards granted to retirement-eligible employees vest in full upon retirement; as such, awards to these employees are treated as though the awards were fully vested at the date of grant. Compensation expense related to awards granted to retirement-eligible employees of $4.5 million and $.6 million was recognized and included in stock-based compensation expense during the six months ended July 2, 2011 and July 3, 2010, respectively.

As of July 2, 2011, the Company had approximately $72 million of unrecognized compensation cost related to unvested stock options, PUs, RSUs and restricted stock under the Company’s stock-based compensation plans. The unrecognized compensation expense is expected to be recognized over the remaining weighted-average requisite service period of approximately three years for stock options and RSUs, two years for PUs, and one year for restricted stock.

Through the second quarter of 2011, exercises of stock options and releases of RSUs and PUs were settled using shares of the Company’s common stock held in the ESBT. Subsequent to the quarter ended July 2, 2011, the ESBT was terminated and the Company began using shares of the Company’s common stock held in treasury to settle exercises of stock options and releases of RSUs.