19. Stock-Based Compensation

Long-term Stock Incentive Plan

On September 23, 2010, the Board of Directors approved the 2010 Stock Incentive Plan (the “2010 Stock Plan”) to amend and restate the former 2001 Stock Incentive Plan (the “2001 Stock Plan”). The 2010 Stock Plan was approved by the Company’s shareholders and became effective on December 17, 2010. The Company’s 2001 Stock Plan provided for the granting of either Incentive Stock Options or non-qualified options to purchase shares of common stock, as well as the award of shares of restricted stock. The 2010 Stock Plan generally incorporates the provisions of the 2001 Stock Plan and includes certain modifications to: increase the aggregate number of shares that may be issued under the plan to 18 million shares; add the ability to grant other stock-based awards; expand the classification of employees and directors eligible to receive awards; modify certain change in control provisions; and extend the term of the 2010 Stock Plan to September 30, 2021.

As of July 28, 2012, there were approximately 7.3 million shares under the 2010 Stock Plan available for future grants. All of the Company’s prior stock option plans have expired as to the ability to grant new options. The Company issues new shares of common stock when stock option awards are exercised.

Impact on Results

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

	Fiscal Years Ended
	July 28,			July 30,			July 31,
	2012			2011			2010
	(millions)
Compensation expense	$	28.4		$	19.7		$	10.0
Income tax benefit	$	(10.7	)	$	(7.6	)	$	(3.8	)

Stock Options

Stock option awards outstanding under the Company’s current plans have been granted at exercise prices that are equal to or exceed the market value of its common stock on the date of grant. Such options generally vest over four or five years and expire no later than ten years after the grant date. The Company recognizes compensation expense ratably over the vesting period, net of estimated forfeitures. 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 as follows:

Expected Term — The estimate of expected term is based on the historical exercise behavior of grantees, 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 historical practice of not paying dividends on its common stock.

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
	July 28, 2012			July 30, 2011			July 31, 2010
Expected term (years)		3.9			3.8			3.9
Expected volatility		41.7	%		46.9	%		47.6	%
Risk-free interest rate		0.9	%		1.3	%		2.2	%
Expected dividend yield		0	%		0	%		0	%
Weighted-average grant date fair value	$	4.77		$	5.31		$	4.07

A summary of the stock option activity under all plans during Fiscal 2012 is as follows:

	July 28, 2012
	Number of Shares			Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Terms		Aggregate Intrinsic Value ^(a)
	(thousands)					(years)		(millions)
Options outstanding- July 30, 2011		13,829.6		$	8.46		6.4	$	106.4
Granted		3,091.1			13.29
Exercised		(2,378.5	)		6.94
Cancelled/Forfeited		(439.2	)		11.27
Options outstanding – July 28, 2012		14,103.0		$	9.69		6.4	$	130.1

Options vested and expected to vest at July 28, 2012 ^(b)		13,648.0		$	10.01		6.4	$	126.8
Options exercisable at July 28, 2012		6,466.4		$	7.60		4.6	$	73.1

^(a) The intrinsic value is the amount by which the market price at the end of the period of the underlying share of stock exceeds the exercise price of the stock option.

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

As of July 28, 2012, there was $23.8 million of total unrecognized compensation cost related to non-vested options, which is expected to be recognized over a remaining weighted-average vesting period of 2.4 years. The total intrinsic value of options exercised during Fiscal 2012 was approximately $25.5 million, Fiscal 2011 was approximately $21.4 million, and during Fiscal 2010 was approximately $20.3 million. The total fair value of options that vested during Fiscal 2012, Fiscal 2011 and Fiscal 2010, was approximately $10.3 million, $8.4 million, and $6.4 million, respectively.

Restricted Equity Awards

The 2010 Stock Plan also allows for the issuance of shares of restricted stock and restricted stock units (“RSUs”). Any shares of restricted stock or RSUs are counted against the shares available for future grant limit as three shares for every one restricted share or unit granted. In general, if options are cancelled for any reason or expire, the shares covered by such options again become available for grant. If a share of restricted stock or an RSU unit is forfeited for any reason, three shares become available for grant.

Shares of restricted stock and RSUs are issued with either service-based or performance-based conditions, and some even have market-based conditions (collectively, “Restricted Equity Awards”). Service-based Restricted Equity Awards entitle the holder to receive unrestricted shares of common stock of the Company at the end of a vesting period, subject to the grantee’s continuing employment. Service-based Restricted Equity Awards generally vest over a 4 year period of time.

Performance-based or market-based Restricted Equity Awards also entitle the holder to receive shares of common stock of the Company at the end of a vesting period. However, such awards are subject to (a) the grantee’s continuing employment, (b) the Company’s achievement of certain performance goals over a pre-defined performance period and (c) in the case of market-based conditions, the Company’s achievement of certain market-based goals over the pre-defined performance period. Both performance-based and market-based Restricted Equity Awards generally vest over a 3 year period of time.

The fair values of both service-based and performance-based Restricted Equity Awards are based on the fair value of the Company’s unrestricted common stock at the date of grant. However, for market-based Restricted Equity Awards, the effect of the market conditions is reflected in the fair value of the awards on the date of grant using a Monte-Carlo simulation model. A Monte-Carlo simulation model estimates the fair value of the market-based award based on the expected term, risk-free interest rate, expected dividend yield and expected volatility measure for the Company and its peer group.

Compensation expense for both service-based and performance-based Restricted Equity Awards is recognized over the vesting period based on the grant-date fair values of the awards that are expected to vest based upon the service and performance-based conditions. However, compensation expense for market-based Restricted Equity Awards is recognized over the vesting period regardless of whether the market conditions are expected to be achieved.

A summary of Restricted Equity Awards activity during Fiscal 2012 is as follows:

	Service-based Restricted Equity Awards					Performance-based Restricted Equity Awards					Market-based Restricted Equity Awards
	Number of Shares			Weighted- Average Grant Date Fair Value Per Share		Number of Shares			Weighted- Average Grant Date Fair Value Per Share		Number of Shares			Weighted- Average Grant Date Fair Value Per Share
	(thousands)					(thousands)					(thousands)
Nonvested at July 30, 2011		922.3		$	12.64		1,352.8		$	12.23		437.0		$	12.34
Granted		858.9			15.10		574.6			12.74		54.7			12.33
Vested		(328.8	)		12.65		—			—		—			—
Cancelled/Forfeited		(246.3	)		13.18		(452.4	)		11.38		(165.1	)		11.23
Nonvested at July 28, 2012		1,206.1		$	14.27		1,475.0		$	12.69		326.6		$	12.90

	Service-based Restricted Equity Awards		Performance-based Restricted Equity Awards		Market-based Restricted Equity Awards

Total unrecognized compensation at July 28, 2012 (millions)	$	12.6	$	9.1	$	2.0
Weighted-average years expected to be recognized over (years)		3.1		1.4		1.5

Additional information pertaining to Restricted Equity Awards activity is as follows:

	Fiscal Years Ended
	July 28, 2012		July 30, 2011		July 31, 2010
Service-based Restricted Equity Awards:
Weighted-average grant date fair value of awards granted	$	15.10	$	13.53	$	10.18
Total fair value of awards vested (millions)	$	5.0		1.5		1.9

Performance-based Restricted Equity Awards:
Weighted-average grant date fair value of awards granted	$	12.74	$	13.02	$	8.91
Total fair value of awards vested (millions)		—		—		—

Market-based Restricted Equity Awards:
Weighted-average grant date fair value of awards granted	$	12.33	$	13.77	$	7.62
Total fair value of awards vested (millions)		—		—		—