Stock-based Compensation

Long-term Stock Incentive Plans

The Company's stock-based compensation awards are currently issued under the 2010 Incentive Plan, which was approved by its stockholders on August 5, 2010. However, any prior awards granted under the1997 Incentive Plan remain subject to the terms of that plan. Any awards that expire, are forfeited, or are surrendered to the Company in satisfaction of taxes are available for issuance under the 2010 Incentive Plan. On September 24, 2013, the Company registered with the SEC an additional 1.7 million shares of its Class A common stock for issuance pursuant to the 2010 Incentive Plan. As of March 29, 2014, 3.8 million shares remained available for future issuance under the Company's incentive plans.

Equity awards that may be made under the Company's incentive plans include, but are not limited to, (i) stock options, (ii) restricted stock, and (iii) restricted stock units ("RSUs").

Impact on Results

A summary of the total expense and the associated income tax benefits recognized related to stock-based compensation arrangements is as follows:



	Fiscal Years Ended
	March 29, 2014				March 30, 2013			March 31, 2012
	(millions)
Compensation expense	$	93		^(a)	$	88		$	78
Income tax benefit	$	(34	)		$	(29	)	$	(26	)


^(a)	Includes approximately $10 million of accelerated stock-based compensation expense recorded within restructuring and other charges in the consolidated statement of income for Fiscal 2014 (see Note 12). All other stock-based compensation expense is recorded within SG&A expenses.

Stock Options

Stock options are granted to employees and non-employee directors with exercise prices equal to the fair market value of the Company's Class A common stock on the date of grant. Options generally become exercisable ratably (graded-vesting schedule) over a three-year vesting period, subject to continuing employment. Stock options expire seven years from the date of grant.

The Company uses the Black-Scholes option pricing model to estimate the fair value of stock options granted, which requires the input of both subjective and objective assumptions including the following:

Expected Term — The estimate of expected term is based on the historical exercise behavior of employees and non-employee directors, as well as the contractual life of the option grants.

Expected Volatility — The expected volatility factor is based on the historical volatility of the Company's common stock for a period equal to the stock option's expected term.

Expected Dividend Yield — The expected dividend yield is based on the Company's quarterly cash dividend of (i) $0.20 per share for grants made during and after the fourth quarter of Fiscal 2011, but prior to the first quarter of Fiscal 2013, (ii) $0.40 per share for grants made during and after the first quarter of Fiscal 2013, but prior to the third quarter of Fiscal 2014, and (iii) $0.45 per share for grants made during and after the third quarter of Fiscal 2014.

Risk-free Interest Rate — The risk-free interest rate is determined using the implied yield for a traded zero-coupon U.S. Treasury bond with a term equal to the option's expected term.

The Company's weighted average assumptions used to estimate the fair value of stock options granted during the fiscal years presented were as follows:



	Fiscal Years Ended
	March 29, 2014		March 30, 2013		March 31, 2012
Expected term (years)	4.2		4.5		4.7
Expected volatility	32.9	%	44.3	%	44.7	%
Expected dividend yield	0.98	%	1.05	%	0.72	%
Risk-free interest rate	1.1	%	0.6	%	1.3	%
Weighted-average option grant date fair value	$45.83		$47.89		$49.13

A summary of stock option activity during Fiscal 2014 is as follows:



	Number of Shares		Weighted-Average Exercise Price		Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value^(a)
	(thousands)				(years)	(millions)
Options outstanding at March 30, 2013	2,954		$	91.26	4.1	$	231
Granted	840		179.45
Exercised	(673	)	78.18
Cancelled/Forfeited	(95	)	155.44
Options outstanding at March 29, 2014	3,026		$	116.66	4.1	$	143

Options vested and expected to vest at March 29, 2014^(b)	2,965		$	115.49	4.1	$	143
Options exercisable at March 29, 2014	1,804		$	85.06	3.0	$	134


^(a)	Aggregate intrinsic value is the amount by which the market price of Class A common stock at the end of the period exceeds the exercise price of the stock option, multiplied by the number of options.


^(b)	The number of options expected to vest takes into consideration expected forfeitures.

Additional information pertaining to the Company's stock option plans is as follows:



	Fiscal Years Ended
	March 29, 2014		March 30, 2013		March 31, 2012
	(millions)
Aggregate intrinsic value of stock options exercised^(a)	$	63	$	76	$	101
Cash received from the exercise of stock options	52		49		61
Tax benefits realized on exercise	24		29		36


^(a)	Aggregate intrinsic value is the amount by which the market price of Class A common stock exceeded the stock option's exercise price when exercised, multiplied by the number of options.

As of March 29, 2014, there was $23 million of total unrecognized compensation expense related to nonvested stock options granted expected to be recognized over a weighted-average period of 1.4 years.

Service-based RSUs and Restricted Stock Awards

The Company grants service-based RSUs to certain of its senior executives and restricted shares of Class A common stock to its non-employee directors.

Service-based RSUs granted to executives generally vest over a three to five-year period, subject to the executive's continuing employment. The fair values of service-based RSUs are based on the fair value of the Company's Class A common stock on the date of grant, adjusted to reflect the absence of dividends for restricted securities not entitled to dividend equivalents.

Restricted shares granted to non-employee directors vest ratably over a three-year period and are accounted for at fair value on the date of grant. Holders of restricted shares are entitled to receive cash dividends in connection with the payments of dividends on the Company's Class A common stock.

A summary of restricted stock and service-based RSU activity during Fiscal 2014 is as follows:



	Restricted Stock				Service- based RSUs
	Number of Shares		Weighted-Average Grant Date Fair Value		Number of Shares		Weighted-Average Grant Date Fair Value
	(thousands)				(thousands)
Nonvested at March 30, 2013	5		$	134.28	98		$	79.52
Granted	3		164.76		—		—
Vested	(3	)	118.57		(88	)	71.07
Forfeited	—		—		(3	)	154.55
Nonvested at March 29, 2014	5		$	159.71	7		$	145.88



	Restricted Stock		Service- based RSUs
Total unrecognized compensation at March 29, 2014 (millions)	$	0.2	$	0.3
Weighted-average period expected to be recognized over (years)	1.5		1.3

Additional information pertaining to restricted stock and service-based RSU activity is as follows:



	Fiscal Years Ended
	March 29, 2014		March 30, 2013		March 31, 2012
Restricted Stock:
Weighted-average grant date fair value of awards granted	$	164.76	$	173.33	N/A
Total fair value of awards vested (millions)	$	1	$	1	N/A
Service-based RSUs:
Weighted-average grant date fair value of awards granted	N/A		$	150.17	$	140.86
Total fair value of awards vested (millions)	$	16	$	22	$	15

Performance-based RSUs

The Company grants performance-based RSUs to senior executives and other key executives, as well as certain of its other employees. Performance-based RSUs generally vest (i) upon the completion of a three-year period of time (cliff vesting), subject to the employee's continuing employment and the Company's achievement of certain performance goals established at the beginning of the three-year performance period or (ii) ratably, over a three-year period of time (graded vesting), subject to the employee's continuing employment during the applicable vesting period and the achievement by the Company of certain performance goals in the initial year of the three-year vesting period. For performance-based RSUs subject to cliff vesting, the number of shares that may be earned ranges between 0% (if the specified threshold performance level is not attained) and 150% (if performance meets or exceeds the maximum achievement level) of the awards originally granted. If actual performance exceeds the pre-established threshold, the number of shares earned is calculated based on the relative performance between specified levels of achievement.

Beginning in July 2012, certain of the cliff vesting performance-based RSU awards granted by the Company, in addition to being subject to continuing employment requirements and the Company's performance goals noted above, are also subject to a market condition in the form of a total shareholder return ("TSR") modifier. The actual number of shares that vest at the end of the respective three-year period is determined based on the Company's achievement of the three-year performance goals described above, as well as its TSR relative to the S&P 500 over the related three-year performance period. At the end of the three-year performance period, if the performance condition is achieved at or above the pre-established threshold, the number of shares earned is further adjusted by a TSR modifier payout percentage, which ranges between 75% and 125%, based on the Company's TSR performance relative to that of the S&P 500 index over the respective three-year period. Depending on the total level of achievement, the actual number of shares that vest for performance-based RSU awards with a TSR modifier may range from 0% to 187.5% of the awards originally granted.

The fair value of the Company's performance-based RSUs that are not subject to a TSR modifier is based on the fair value of the Company's Class A common stock on the date of grant, adjusted to reflect the absence of dividends for those securities that are not entitled to dividend equivalents. The fair value of the Company's performance-based RSUs with a TSR modifier is determined on the date of grant using a Monte Carlo simulation valuation model. This pricing model uses multiple simulations to evaluate the probability of the Company achieving various stock price levels to determine its expected TSR performance ranking. The assumptions used to estimate the fair value of performance-based RSUs with a TSR modifier granted during the fiscal years ended March 29, 2014 and March 30, 2013 were as follows:



	Fiscal Year Ended
	March 29, 2014		March 30, 2013
Expected term (years)	2.9		3.0
Expected volatility	32.6	%	34.0	%
Expected dividend yield	0.98	%	1.13	%
Risk-free interest rate	0.4	%	0.3	%
Weighted-average grant date fair value	$169.14		$136.16

A summary of performance-based RSU without TSR Modifier and performance-based RSU with TSR Modifier activity during Fiscal 2014 is as follows:



	Performance-based RSUs — without TSR Modifier				Performance-based RSUs — with TSR Modifier
	Number of Shares		Weighted-Average Grant Date Fair Value		Number of Shares		Weighted-Average Grant Date Fair Value
	(thousands)				(thousands)
Nonvested at March 30, 2013	1,015		$	112.80	73		$	136.16
Granted	307		171.93		78		169.14
Change due to performance/market condition achievement	141		76.33		—		—
Vested	(627	)	85.79		—		—
Forfeited	(38	)	141.80		(6	)	150.32
Nonvested at March 29, 2014	798		$	148.93	145		$	153.29



	Performance-based RSUs — without TSR Modifier		Performance-based RSUs — with TSR Modifier
Total unrecognized compensation at March 29, 2014 (millions)	$	41	$	9
Weighted-average period expected to be recognized over (years)	1.5		1.9

Additional information pertaining to performance-based RSU without TSR Modifier and performance-based RSU with TSR Modifier activity is as follows:



	Fiscal Years Ended
	March 29, 2014		March 30, 2013		March 31, 2012
Performance-based RSUs — without TSR Modifier:
Weighted-average grant date fair value of awards granted	$	171.93	$	137.45	$	124.43
Total fair value of awards vested (millions)	$	109	$	106	$	56
Performance-based RSUs — with TSR Modifier:
Weighted-average grant date fair value of awards granted	$	169.14	$	136.16	N/A
Total fair value of awards vested (millions)	$	—	$	—	N/A