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Share-Based Compensation | 3 Months Ended
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Apr. 04, 2026
Share-Based Payment Arrangement [Abstract] |
Share-Based Compensation | Share-Based Compensation Under our share-based compensation plan, we have authorization to provide awards to selected employees and non-employee directors in the form of stock options, restricted stock, restricted stock units, stock appreciation rights, performance stock, performance share units and other awards. Compensation expense included in net income for our share-based compensation plans is as follows:
| Three Months Ended
(In millions) | April 4, 2026 | March 29, 2025
Compensation expense | $ | 40 |  | $ | 34 |
Income tax benefit | (10) |  | (8) |
Total compensation expense included in net income | $ | 30 |  | $ | 26 |
Compensation expense included stock option expense of $12 million and $13 million in the first quarter of 2026 and 2025, respectively. We typically grant stock appreciation rights to selected non-U.S. employees. At April 4, 2026, outstanding stock appreciation rights totaled 381,142 with a weighted-average exercise price of $73.71 and a weighted-average remaining contractual life of 6.5 years; these units had an intrinsic value of $6 million, compared with $4 million at March 29, 2025. Stock Options Options to purchase our shares have a maximum term of ten years and generally vest ratably over a three-year period. Stock option compensation cost is calculated under the fair value approach using the Black-Scholes option-pricing model to determine the fair value of options granted on the date of grant. The expected volatility used in this model is based on historical volatilities and implied volatilities from traded options on our common stock. The expected term is based on historical option exercise data, which is adjusted to reflect any anticipated changes in expected behavior. We grant options annually on the first day of March. The assumptions used in our option-pricing model for these grants and the weighted-average fair value for these options are as follows:
| March 1, 2026 | March 1, 2025
Fair value of options at grant date | $ | 28.71 | $ | 22.01 |
Dividend yield | 0.1% | 0.1%
Expected volatility | 26.1% | 25.1%
Risk-free interest rate | 3.6% | 4.1%
Expected term (in years) | 4.8 | 4.8
The stock option activity during the first quarter of 2026 is provided below:
(Options in thousands) | Number of Options | Weighted- Average Exercise Price
Outstanding at January 3, 2026 | 6,792 |  | $ | 64.61 |
Granted | 883 |  | 98.65 |
Exercised | (1,005) |  | (56.17) |
Forfeited or expired | (16) |  | (84.88) |
Outstanding at April 4, 2026 | 6,654 |  | $ | 70.36 |
Exercisable at April 4, 2026 | 4,719 |  | $ | 63.07 |
At April 4, 2026, our outstanding options had an aggregate intrinsic value of $128 million and a weighted-average remaining contractual life of 6.1 years. Our exercisable options had an aggregate intrinsic value of $118 million and a weighted-average remaining contractual life of 4.8 years at April 4, 2026. The total intrinsic value of options exercised during the first quarter of 2026 and 2025 was $40 million and $4 million, respectively. Restricted Stock Units We issue restricted stock units that include the right to receive dividend equivalents and are settled in either cash or stock. Grants of restricted stock units vest in full on the third anniversary of the grant date. Compensation cost is determined using the fair value of these units based on the trading price of our common stock. For units payable in stock, we use the trading price on the grant date, while units payable in cash are remeasured using the price at each reporting period date. The activity for restricted stock units during the first quarter of 2026 is provided below:
| Units Payable in Stock |  | Units Payable in Cash
(Shares/Units in thousands) | Number of Shares | Weighted- Average Grant Date Fair Value |  | Number of Units | Weighted- Average Grant Date Fair Value
Outstanding at January 3, 2026, nonvested | 359 |  | $ | 75.99 |  |  | 673 |  | $ | 78.48 |
Granted | 75 |  | 98.65 |  |  | 202 |  | 98.65 |
Vested | (98) |  | (73.19) |  |  | (213) |  | (73.18) |
Forfeited | — |  | — |  |  | (8) |  | (68.21) |
Outstanding at April 4, 2026, nonvested | 336 |  | $ | 81.85 |  |  | 654 |  | $ | 86.40 |
The fair value of the restricted stock unit awards that vested and/or amounts paid under these awards is as follows:
| Three Months Ended
(In millions) | April 4, 2026 | March 29, 2025
Fair value of awards vested | $ | 28 |  | $ | 20 |
Cash paid | 21 |  | 14 |
Performance Share Units The activity for our performance share units during the first quarter of 2026 is as follows:
(Units in thousands) | Number of Units | Weighted- Average Grant Date Fair Value
Outstanding at January 3, 2026, nonvested | 396 |  | $ | 81.57 |
Granted | 156 |  | 98.65 |
Outstanding at April 4, 2026, nonvested | 552 |  | $ | 86.40 |
Cash paid under these awards totaled $17 million and $16 million in the first quarter of 2026 and 2025, respectively.

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