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STOCK OPTION PLANS | 12 Months Ended
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Feb. 02, 2019
STOCK OPTION PLANS |
STOCK OPTION PLANS | 12.STOCK OPTION PLANS The Company grants options for common shares (“stock options”) to employees under various plans at an option price equal to the fair market value of the stock option at the date of grant. The Company accounts for stock options under the fair value recognition provisions. Under this method, the Company recognizes compensation expense for all share-based payments granted. The Company recognizes share-based compensation expense, net of an estimated forfeiture rate, over the requisite service period of the award. Stock options typically expire 10 years from the date of grant. Stock options vest between one and five years from the date of grant. At February 2, 2019, approximately 22 million common shares were available for future option grants under the 2011 and 2014 Long-Term Incentive Plans (the “Plans”). In addition to the stock options described above, the Company awards restricted stock to employees and non-employee directors under various plans. The restrictions on these awards generally lapse between one and five years from the date of the awards. The Company records expense for restricted stock awards in an amount equal to the fair market value of the underlying shares on the grant date of the award, over the period the awards lapse. As of February 2, 2019, approximately 6 million common shares were available under the Plans for future restricted stock awards or shares issued to the extent performance criteria are achieved. The Company has the ability to convert shares available for stock options under the Plans to shares available for restricted stock awards. Under the Plans, four shares available for option awards can be converted into one share available for restricted stock awards. Equity awards granted are based on the aggregate value of the award on grant date. This can affect the number of shares granted in a given year as equity awards. Excess tax benefits related to equity awards are recognized in the provision for income taxes. Equity awards may be approved at one of four meetings of its Board of Directors occurring shortly after the Company’s release of quarterly earnings. The 2018 primary grant was made in conjunction with the June meeting of the Company’s Board of Directors. All awards become immediately exercisable upon certain changes of control of the Company. Stock Options Changes in options outstanding under the stock option plans are summarized below:
|  | Shares |  | Weighted- |
|  | subject |  | average |
|  | to option |  | exercise |
|  | (in millions) |  | price |
Outstanding, year-end 2015 |  | 34.9 |  | $ | 18.26 |
Granted |  | 4.8 |  | $ | 37.10 |
Exercised |  | (4.9) |  | $ | 14.20 |
Canceled or Expired |  | (0.5) |  | $ | 28.35 |
Outstanding, year-end 2016 |  | 34.3 |  | $ | 21.32 |
Granted |  | 7.0 |  | $ | 23.00 |
Exercised |  | (3.8) |  | $ | 14.08 |
Canceled or Expired |  | (0.8) |  | $ | 28.29 |
Outstanding, year-end 2017 |  | 36.7 |  | $ | 22.23 |
Granted |  | 2.7 |  | $ | 27.88 |
Exercised |  | (4.4) |  | $ | 15.34 |
Canceled or Expired |  | (0.9) |  | $ | 28.05 |
Outstanding, year-end 2018 |  | 34.1 |  | $ | 23.42 |
A summary of options outstanding, exercisable and expected to vest at February 2, 2019 follows:
|  |  |  | Weighted-average |  |  |  |  | Aggregate |
|  |  |  | remaining |  | Weighted-average |  | intrinsic |
|  | Number of shares |  | contractual life |  | exercise price |  | value |
|  | (in millions) |  | (in years) |  |  |  |  | (in millions) |
Options Outstanding |  | 34.1 |  | 5.73 |  | $ | 23.42 |  | 229 |
Options Exercisable |  | 22.7 |  | 4.50 |  | $ | 20.95 |  | 201 |
Options Expected to Vest |  | 11.2 |  | 8.14 |  | $ | 28.33 |  | 27 |
Restricted stock Changes in restricted stock outstanding under the restricted stock plans are summarized below:
|  | Restricted |  |  |  |
|  | shares |  | Weighted-average |
|  | outstanding |  | grant-date |
|  | (in millions) |  | fair value |
Outstanding, year-end 2015 |  | 7.6 |  | $ | 28.01 |
Granted |  | 3.6 |  | $ | 37.03 |
Lapsed |  | (3.5) |  | $ | 28.52 |
Canceled or Expired |  | (0.3) |  | $ | 30.70 |
Outstanding, year-end 2016 |  | 7.4 |  | $ | 32.09 |
Granted |  | 5.8 |  | $ | 23.04 |
Lapsed |  | (3.6) |  | $ | 31.05 |
Canceled or Expired |  | (0.4) |  | $ | 29.26 |
Outstanding, year-end 2017 |  | 9.2 |  | $ | 26.78 |
Granted |  | 4.6 |  | $ | 27.99 |
Lapsed |  | (4.4) |  | $ | 25.93 |
Canceled or Expired |  | (0.6) |  | $ | 26.57 |
Outstanding, year-end 2018 |  | 8.8 |  | $ | 27.86 |
The weighted-average grant date fair value of stock options granted during 2018, 2017 and 2016 was $6.78, $4.71 and $7.48, respectively. The fair value of each stock option grant was estimated on the date of grant using the Black-Scholes option-pricing model, based on the assumptions shown in the table below. The Black-Scholes model utilizes accounting judgment and financial estimates, including the term option holders are expected to retain their stock options before exercising them, the volatility of the Company’s share price over that expected term, the dividend yield over the term and the number of awards expected to be forfeited before they vest. Using alternative assumptions in the calculation of fair value would produce fair values for stock option grants that could be different than those used to record stock-based compensation expense in the Consolidated Statements of Operations. The increase in the fair value of the stock options granted during 2018, compared to 2017, resulted primarily from an increase in the Company’s share price, which decreased the expected dividend yield, an increase in the weighted average expected volatility and the weighted average risk-free interest rate also contributed to the increase in fair value. The decrease in the fair value of the stock options granted during 2017, compared to 2016, resulted primarily from a decrease in the Company’s share price, which increased the expected dividend yield, partially offset by an increase in the weighted average expected volatility and the weighted average risk-free interest rate. The following table reflects the weighted-average assumptions used for grants awarded to option holders:
|  | 2018 |  | 2017 |  | 2016 |
Weighted average expected volatility |  | 24.50 | % | 22.78 | % | 21.40 | %
Weighted average risk-free interest rate |  | 2.82 | % | 2.21 | % | 1.29 | %
Expected dividend yield |  | 2.00 | % | 2.20 | % | 1.40 | %
Expected term (based on historical results) |  | 7.2 | years | 7.2 | years | 7.2 | years
The weighted-average risk-free interest rate was based on the yield of a treasury note as of the grant date, continuously compounded, which matures at a date that approximates the expected term of the options. The dividend yield was based on our history and expectation of dividend payouts. Expected volatility was determined based upon historical stock volatilities; however, implied volatility was also considered. Expected term was determined based upon historical exercise and cancellation experience. Total stock compensation recognized in 2018, 2017 and 2016 was $154, $151 and $141, respectively. Stock option compensation recognized in 2018, 2017 and 2016 was $25, $32 and $28, respectively. Restricted shares compensation recognized in 2018, 2017 and 2016 was $129, $119 and $113, respectively. The total intrinsic value of stock options exercised was $58, $55 and $105 in 2018, 2017 and 2016, respectively. The total amount of cash received in 2018 by the Company from the exercise of stock options granted under share-based payment arrangements was $65. As of February 2, 2019, there was $214 of total unrecognized compensation expense remaining related to non-vested share-based compensation arrangements granted under Plans. This cost is expected to be recognized over a weighted-average period of approximately two years. The total fair value of options that vested was $30, $29 and $28 in 2018, 2017 and 2016, respectively. Shares issued as a result of stock option exercises may be newly issued shares or reissued treasury shares. Proceeds received from the exercise of options, and the related tax benefit, may be utilized to repurchase the Company’s common shares under a stock repurchase program adopted by the Company’s Board of Directors. During 2018, the Company repurchased approximately three million common shares in such a manner.

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- Definition The entire disclosure for compensation-related costs for equity-based compensation, which may include disclosure of policies, compensation plan details, allocation of equity compensation, incentive distributions, equity-based arrangements to obtain goods and services, deferred compensation arrangements, employee stock ownership plan details and employee stock purchase plan details. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 718 -URI http://asc.fasb.org/topic&trid=2228938 Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 50 -URI http://asc.fasb.org/subtopic&trid=2208855 + Details
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