Stock-based Compensation

3 Months Ended

Jun. 28, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

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 the 1997 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.

Refer to Note 20 in the Fiscal 2014 10-K for a detailed description of the Company's stock-based compensation awards, including information related to vesting terms, service and performance conditions, and payout percentages.

Impact on Results

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



	Three Months Ended
	June 28, 2014			June 29, 2013
	(millions)
Compensation expense	$	23		$	22
Income tax benefit	$	(8	)	$	(8	)

The Company issues its annual grants of stock-based compensation awards in the first half of the fiscal year. Due to the timing of the annual grants and other factors, stock-based compensation expense recognized during the three-month period ended June 28, 2014 is not indicative of the level of compensation expense expected to be incurred for the full Fiscal 2015.

Stock Options

A summary of stock option activity under all plans for the three months ended June 28, 2014 is as follows:



	Number of Options
	(thousands)
Options outstanding at March 29, 2014	3,026
Granted	15
Exercised	(164	)
Cancelled/Forfeited	(19	)
Options outstanding at June 28, 2014	2,858

Service-based RSUs and Restricted Stock Awards

The fair values of restricted stock awards granted to non-employee directors are determined based on the fair value of the Company's Class A common stock on the date of grant. The weighted-average grant date fair values of restricted stock awards granted, which entitle holders to receive cash dividends in connection with the payments of dividends on the Company's Class A common stock, were $162.36 and $164.76 per share during the three-month periods ended June 28, 2014 and June 29, 2013, respectively.

A summary of restricted stock and service-based RSU activity during the three months ended June 28, 2014 is as follows:



	Number of Shares
	Restricted Stock		Service-based RSUs
	(thousands)
Nonvested at March 29, 2014	5		7
Granted	3		12
Vested	(3	)	—
Nonvested at June 28, 2014	5		19

Performance-based RSUs

The fair value of the Company's performance-based RSUs that are not subject to a market condition in the form of a total shareholder return ("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 weighted average assumptions used to estimate the fair value of performance-based RSUs with a TSR modifier granted during the three-month periods ended June 28, 2014 and June 29, 2013 were as follows:



	Three Months Ended
	June 28, 2014		June 29, 2013
Expected term (years)	3.0		3.0
Expected volatility	29.8	%	33.1	%
Expected dividend yield	1.09	%	0.96	%
Risk-free interest rate	0.9	%	0.4	%
Weighted-average grant date fair value per share	$169.47		$171.07

The weighted-average grant date fair values of performance-based RSUs that do not contain a TSR modifier granted during the three-month periods ended June 28, 2014 and June 29, 2013 were $158.00 and $164.49 per share, respectively.

A summary of performance-based RSU activity during the three months ended June 28, 2014 is as follows:



	Number of Shares
	Performance-based RSUs — without TSR Modifier		Performance-based RSUs — with TSR Modifier
	(thousands)
Nonvested at March 29, 2014	798		145
Granted	138		79
Change due to performance/market condition achievement	83		—
Vested	(422	)	—
Forfeited	(14	)	(8	)
Nonvested at June 28, 2014	583		216

- 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.

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