Stock Compensation Plans

12 Months Ended

Jan. 31, 2020

Share-based Payment Arrangement [Abstract]

STOCK COMPENSATION PLANS

The Company has two stock compensation plans under which awards may be made: the Employee Incentive Plan and the Directors Equity Compensation Plan, both of which were approved by the Company's stockholders. No award may be made under the Employee Incentive Plan after May 22, 2024 or under the Directors Equity Compensation Plan after May 25, 2027.

Under the Employee Incentive Plan, the maximum number of common shares authorized for issuance is 8.7 million. Awards may be made to employees of the Company in the form of stock options, stock appreciation rights, shares of stock (or rights to receive shares of stock) and cash. Awards made in the form of non-qualified stock options, tax-qualified incentive stock options or stock appreciation rights have a maximum term of 10 years from the grant date and may not be granted for an exercise price below fair market value.

The Company has granted time-vesting restricted stock units ("RSUs"), performance-based restricted stock units ("PSUs") and stock options under the Employee Incentive Plan. Stock options and RSUs typically vest in increments of 25% per year over four years. PSUs vest at the end of a three-year period. PSU grant terms provide that vesting is

contingent on the Company's performance against objectives established by the Compensation Committee of the Company's Board of Directors. The PSUs and RSUs require no payment from the employee. PSU and RSU payouts are in shares of Company stock at vesting (aside from fractional dividend equivalents, which are settled in cash). Compensation expense is recognized using the fair market value of the award at the date of grant and recorded ratably over the vesting period. However, PSU compensation expense may be adjusted over the vesting period based on interim estimates of performance against the established objectives. Award holders are not entitled to receive dividends or dividend equivalents on PSUs or RSUs granted prior to January 2017 or on unvested stock options. PSUs and RSUs granted in or after January 2017 accrue dividend equivalents that may only be paid or delivered upon vesting of the underlying stock units.

Under the Directors Equity Compensation Plan, the maximum number of shares of Common Stock authorized for issuance is 1.0 million (subject to adjustment); awards may be made to non-employee directors of the Company in the form of stock options or shares of stock but may not exceed $750,000 of total compensation (including without limitation, non-equity compensation and the grant-date fair value of options or stock awards, or any combination of options and stock awards) that may be awarded to any one participant in any single fiscal year of the Company in connection with his or her service as a member of the Board of Directors; provided, however, that this limitation shall not apply to a non-executive chairperson of the Board of Directors. Awards made in the form of stock options may have a maximum term of 10 years from the grant date and may not be granted for an exercise price below fair market value. Director options vest immediately. Director RSUs vest at the end of a one-year period.

The Company uses newly issued shares to satisfy stock option exercises and the vesting of PSUs and RSUs.

The fair value of each option award is estimated on the grant date using a Black-Scholes option valuation model and compensation expense is recognized ratably over the vesting period. The valuation model uses the assumptions noted in the following table. Expected volatilities are based on historical volatility of the Company's stock. The Company uses historical data to estimate the expected term of the option that represents the period of time that options granted are expected to be outstanding. The risk-free interest rate for periods within the expected term of the option is based on the U.S. Treasury yield curve in effect at the grant date.



	Years Ended January 31,
	2020		2019		2018
Dividend yield	2.2	%	2.2	%	1.8	%
Expected volatility	24.6	%	24.2	%	22.0	%
Risk-free interest rate	2.1	%	2.5	%	2.2	%
Expected term in years	4		4		5

A summary of the Company's stock option activity is presented below:



	Number of Shares (in millions)		Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Term in Years	Aggregate Intrinsic Value (in millions)
Outstanding at January 31, 2019	2.4		$	89.84	8.33	$	11.3
Granted	0.1		94.68
Exercised	(1.3	)	88.40
Forfeited/canceled	—		97.13
Outstanding at January 31, 2020	1.2		$	91.53	7.64	$	52.8
Exercisable at January 31, 2020	0.4		$	88.09	6.27	$	18.4

The weighted-average grant-date fair value of options granted for the years ended January 31, 2020, 2019 and 2018 was $16.57, $16.97 and $18.33, respectively. The total intrinsic value (market value on date of exercise less

grant price) of options exercised during the years ended January 31, 2020, 2019 and 2018 was $52.8 million, $16.3 million and $31.2 million, respectively.

A summary of the Company's RSU activity is presented below:



	Number of Shares (in millions)		Weighted-Average Grant-Date Fair Value
Non-vested at January 31, 2019	0.6		$	88.49
Granted	0.5		117.12
Vested	(0.3	)	86.84
Forfeited	(0.1	)	94.86
Non-vested at January 31, 2020	0.7		$	108.28

A summary of the Company's PSU activity is presented below:



	Number of Shares (in millions)		Weighted-Average Grant-Date Fair Value
Non-vested at January 31, 2019	0.5		$	85.30
Granted	0.1		134.12
Vested	(0.1	)	63.05
Forfeited/canceled	—		57.08
Non-vested at January 31, 2020	0.5		$	102.46

The weighted-average grant-date fair value of RSUs granted for the years ended January 31, 2019 and 2018 was $103.40 and $91.96, respectively. The weighted-average grant-date fair value of PSUs granted for the years ended January 31, 2019 and 2018 was $85.26 and $108.99, respectively. The total fair value of RSUs vested during the years ended January 31, 2020, 2019 and 2018 was $28.1 million, $24.3 million and $22.2 million, respectively. The total fair value of PSUs vested during the years ended January 31, 2020, 2019 and 2018 was $9.8 million, $2.7 million and $3.4 million, respectively.

As of January 31, 2020, there was $94.7 million of total unrecognized compensation expense related to non-vested share-based compensation arrangements granted under the Employee Incentive Plan and Directors Equity Compensation Plan. The expense is expected to be recognized over a weighted-average period of 3.0 years.

Total compensation cost for stock-based compensation awards recognized in income and the related income tax benefit was $33.2 million and $6.5 million for the year ended January 31, 2020, $34.1 million and $6.8 million for the year ended January 31, 2019 and $28.0 million and $8.5 million for the year ended January 31, 2018. Total stock-based compensation cost capitalized in inventory was not significant.