Stock Incentive Plan

TJX has a Stock Incentive Plan under which options and other share-based awards may be granted to its directors, officers and key employees. This plan has been approved by TJX’s shareholders, and all share-based compensation awards are made under this plan. The Stock Incentive Plan, as amended with shareholder approval, has provided for the issuance of up to 695.7 million shares with 46.3 million shares available for future grants as of February 2, 2019. TJX issues shares under the plan from authorized but unissued common stock. All share amounts and per share data presented have been adjusted to reflect the two-for-one stock split completed on November 6, 2018.

Total compensation cost related to share-based compensation was $103.6 million, $101.4 million and $102.3 million in fiscal 2019, 2018 and 2017, respectively. As of February 2, 2019, there was $146.5 million of total unrecognized compensation cost related to nonvested share-based compensation arrangements granted under the plan. That cost is expected to be recognized over a weighted-average period of 2 years.

Stock Options

Options for the purchase of common stock are granted with an exercise price that is 100% of market price on the grant date, generally vest in thirds over a 3-year period starting 1 year after the grant, and have a 10-year maximum term. When options are granted with other vesting terms, the vesting information is reflected in the valuation.

The fair value of options is estimated as of the date of grant using the Black-Scholes option pricing model with the following weighted average assumptions:



	Fiscal Year Ended
	February 2, 2019			February 3, 2018			January 28, 2017
Risk-free interest rate	2.88		%	1.75		%	1.20		%
Dividend yield	1.4		%	1.5		%	1.2		%
Expected volatility factor	23.5		%	23.5		%	23.8		%
Expected option life in years	4.9			4.8			4.8
Weighted average fair value of options issued	$	11.85		$	7.16		$	7.28

The risk-free interest rate is for periods within the contractual life of the option based on the U.S. Treasury yield curve in effect at the time of grant. We use historical data to estimate option exercises, employee termination behavior and dividend yield within the valuation model. Expected volatility is based on a combination of implied volatility from traded options on our stock, and historical volatility during a term approximating the expected life of the option granted. The expected option life represents an estimate of the period of time options are expected to remain outstanding based upon historical exercise trends. Employee groups and option characteristics are considered separately for valuation purposes when applicable.

A summary of the status of TJX’s stock options and related weighted average exercise prices (“WAEP”) is presented below:



	Fiscal Year Ended
Shares in thousands	February 2, 2019				February 3, 2018				January 28, 2017
	Options		WAEP		Options		WAEP		Options		WAEP
Outstanding at beginning of year	55,260		$	27.52	54,706		$	24.35	57,372		$	20.84
Granted	6,143		53.98		9,404		36.61		8,610		37.52
Exercised	(11,670	)	21.88		(8,192	)	16.12		(10,530	)	15.42
Forfeitures	(680	)	38.59		(658	)	35.70		(746	)	33.08
Outstanding at end of year	49,053		$	32.02	55,260		$	27.52	54,706		$	24.35
Options exercisable at end of year	34,344		$	26.95	37,952		$	23.28	37,960		$	19.35

The total intrinsic value of options exercised was $284.4 million in fiscal 2019, $176.7 million in fiscal 2018 and $239.7 million in fiscal 2017.

The following table summarizes information about stock options outstanding that were expected to vest and stock options outstanding that were exercisable as of February 2, 2019:



Shares in thousands	Shares	Aggregate Intrinsic Value		Weighted Average Remaining Contract Life	WAEP
Options outstanding expected to vest ⁽¹⁾	13,672	$	98,458	8.8 years	$	43.73
Options exercisable	34,344	$	754,018	5.0 years	$	26.95
Total outstanding options vested and expected to vest	48,016	$	852,476	6.1 years	$	31.72


(1)	Reflects 14.6 million unvested options, net of anticipated forfeitures.

Stock Awards

TJX granted restricted stock units and performance share units under the Stock Incentive Plan during fiscal 2019. Restricted stock units, performance share units, and previously-granted performance-based stock awards are collectively referred to as stock awards. These awards were granted without a purchase price to the recipient and are subject to vesting conditions. Vesting conditions for performance share units and performance-based stock awards include specified performance criteria, generally for a period of three fiscal years. The grant date fair value of the stock awards is charged to income over the requisite service period during which the recipient must remain employed. The fair value of the stock awards is determined at date of grant in accordance with ASC Topic 718 and, for performance share units and performance-based stock awards, assumes that performance goals will be achieved at target. Performance share units, performance-based stock awards and related compensation costs recognized are adjusted, as applicable, for performance above or below the target specified in the award.

A summary of the status of our nonvested stock awards and changes during fiscal 2019 is presented below:



Shares in thousands	Stock Awards		Weighted Average Grant Date Fair Value
Nonvested at beginning of year	3,045		$	38.68
Granted	1,268		41.17
Vested	(859	)	35.03
Forfeited	(32	)	39.93
Nonvested at end of year	3,422		$	40.51

There were 1,267,802 shares of restricted stock unit and performance share unit awards, with a weighted average grant date fair value of $41.17, granted in fiscal 2019, 1,124,012 shares of performance-based stock awards, with a weighted average grant date fair value of $38.36, granted in fiscal 2018, and 1,027,146 shares of performance-based stock awards, with a weighted average grant date fair value of $39.25, granted in fiscal 2017. The fair value of performance-based stock awards that vested was $30.1 million in fiscal 2019, $35.2 million in fiscal 2018, and $38.5 million in fiscal 2017.

Other Awards

TJX also awards deferred shares to its outside directors under the Stock Incentive Plan. As of the end of fiscal 2019, a total of 607,552 of these deferred shares were outstanding under the plan.