Stock-based Compensation

6 Months Ended

Jan. 31, 2021

Share-based Payment Arrangement [Abstract]

We provide compensation benefits by issuing stock options, unrestricted stock and restricted stock units (including time-lapse restricted stock units, EPS performance restricted stock units, total shareholder return (TSR) performance restricted stock units, and free cash flow (FCF) performance restricted stock units). In 2021, we issued time-lapse restricted stock units, unrestricted stock and TSR performance restricted stock units. We have not issued stock options, FCF performance restricted stock units, or EPS performance restricted stock units in 2021.

In determining stock-based compensation expense, we estimate forfeitures expected to occur. Total pre-tax stock-based compensation expense and tax-related benefits recognized in Earnings from continuing operations were as follows:


	Three Months Ended				Six Months Ended
	January 31, 2021		January 26, 2020		January 31, 2021		January 26, 2020
Total pre-tax stock-based compensation expense	$	18	$	18	$	34	$	31
Tax-related benefits	$	3	$	3	$	6	$	6

Total pre-tax stock-based compensation expense and tax-related benefits recognized in Earnings from discontinued operations were as follows:


	January 26, 2020
	Three Months Ended		Six Months Ended
Total pre-tax stock-based compensation expense	$	1	$	2
Tax-related benefits	$	—	$	—

The following table summarizes stock option activity as of January 31, 2021:


	Options	Weighted- Average Exercise Price		Weighted- Average Remaining Contractual Life	Aggregate Intrinsic Value
	(Options in thousands)			(In years)
Outstanding at August 2, 2020	1,423	$	45.42
Granted	—	$	—
Exercised	—	$	—
Terminated	—	$	—
Outstanding at January 31, 2021	1,423	$	45.42	6.4	$	7
Exercisable at January 31, 2021	1,130	$	48.00	6.1	$	3

The total intrinsic value of options exercised during the six-month period ended January 26, 2020 was $1. We measured the fair value of stock options using the Black-Scholes option pricing model.

We expense stock options on a straight-line basis over the vesting period, except for awards issued to retirement eligible participants, which we expense on an accelerated basis. As of January 31, 2021, total remaining unearned compensation related to nonvested stock options was $1, which will be amortized over the weighted-average remaining service period of less than one year.

The following table summarizes time-lapse restricted stock units, EPS performance restricted stock units and FCF performance restricted stock units as of January 31, 2021:


	Units	Weighted-Average Grant-Date Fair Value
	(Restricted stock units in thousands)
Nonvested at August 2, 2020	1,866	$	43.18
Granted	876	$	48.43
Vested	(731)	$	42.73
Forfeited	(94)	$	46.75
Nonvested at January 31, 2021	1,917	$	45.58

We determine the fair value of time-lapse restricted stock units and EPS performance restricted stock units based on the quoted price of our stock at the date of grant. We expense time-lapse restricted stock units on a straight-line basis over the vesting period, except for awards issued to retirement-eligible participants, which we expense on an accelerated basis. We expensed EPS performance restricted stock units on a graded-vesting basis, except for awards issued to retirement-eligible participants, which we expensed on an accelerated basis. The actual number of EPS performance restricted stock units issued at the vesting date was either 0% or 100% of the initial grant, depending on actual performance achieved. We estimated expense based on the number of awards expected to vest. As of January 31, 2021, there were no EPS performance target grants outstanding.

In 2019, we issued approximately 388 thousand FCF performance restricted stock units for which vesting is contingent upon achievement of free cash flow (defined as Net cash provided by operating activities less capital expenditures and certain investing and financing activities) compared to annual operating plan objectives over a three-year period. An annual objective was established each fiscal year for three consecutive years. Performance against these objectives will be averaged at the end of the three-year period to determine the number of underlying units that will vest at the end of the three years. The actual number of FCF performance restricted stock units issued at the vesting date could range from 0% to 200% of the initial grant depending on actual performance achieved. The fair value of FCF performance restricted stock units is based upon the quoted price of our stock at the date of grant. We expense FCF performance restricted stock units over the requisite service period of each objective. As of January 31, 2021, we have granted all of the issued FCF performance restricted stock units, which are included in the table above. There were 243 thousand FCF performance target grants outstanding at January 31, 2021, with a weighted-average grant-date fair value of $44.10.

As of January 31, 2021, total remaining unearned compensation related to nonvested time-lapse restricted stock units and FCF performance restricted units was $49, which will be amortized over the weighted-average remaining service period of 1.8 years. The fair value of restricted stock units vested during the six-month periods ended January 31, 2021, and January 26,

2020, was $35, and $32, respectively. The weighted-average grant-date fair value of the restricted stock units granted during the six-month period ended January 26, 2020 was $46.81.

The following table summarizes TSR performance restricted stock units as of January 31, 2021:


	Units	Weighted-Average Grant-Date Fair Value
	(Restricted stock units in thousands)
Nonvested at August 2, 2020	1,254	$	47.83
Granted	521	$	54.93
Vested	(236)	$	39.39
Forfeited	(273)	$	41.57
Nonvested at January 31, 2021	1,266	$	53.67

We estimated the fair value of TSR performance restricted stock units at the grant date using a Monte Carlo simulation.

Assumptions used in the Monte Carlo simulation were as follows:


	2021	2020
Risk-free interest rate	0.15%	1.48%
Expected dividend yield	2.85%	2.95%
Expected volatility	29.99%	27.01%
Expected term	3 years	3 years

We recognize compensation expense on a straight-line basis over the service period, except for awards issued to retirement eligible participants, which we expense on an accelerated basis. As of January 31, 2021, total remaining unearned compensation related to TSR performance restricted stock units was $35, which will be amortized over the weighted-average remaining service period of 2.0 years. In the first quarter of 2021, recipients of TSR performance restricted stock units earned 50% of the initial grants based upon our TSR ranking in a performance peer group during a three-year period ended July 31, 2020. In the first quarter of 2020, recipients of TSR performance restricted stock units earned 0% of the initial grants based upon our TSR ranking in a performance peer group during a three-year period ended July 26, 2019. The fair value of TSR performance restricted stock units vested during the six-month period ended January 31, 2021 was $11. The grant-date fair value of the TSR performance restricted stock units granted during 2020 was $63.06.

The excess tax benefits of $1 in the six-month periods ended January 31, 2021, and January 26, 2020, on the exercise of stock options and vested restricted stock were presented as cash flows from operating activities. Cash received from the exercise of stock options was $4 for the six-month period ended January 26, 2020, and is reflected in cash flows from financing activities in the Consolidated Statements of Cash Flows.