Employees Stock Incentive Plans and Management Incentive Plans

12 Months Ended

Apr. 27, 2011

Employees' Stock Incentive Plans and Management Incentive Plans [Abstract]

Employees' Stock Incentive Plans and Management Incentive Plans

9.   Employees’ Stock Incentive Plans and Management Incentive Plans

As of April 27, 2011, the Company had outstanding stock option awards, restricted stock units and restricted stock awards issued pursuant to various shareholder-approved plans and a shareholder-authorized employee stock purchase plan. The compensation cost related to these plans recognized in selling, general and administrative expenses, and the related tax benefit was $32.7 million and $10.4 million for the fiscal year ended April 27, 2011, $33.4 million and $10.3 million for the fiscal year ended April 28, 2010, and $37.9 million and $12.8 million for the fiscal year ended April 29, 2009, respectively.

The Company has two plans from which it issued equity based awards, the Fiscal Year 2003 Stock Incentive Plan (the “2003 Plan”), which was approved by shareholders on September 12, 2002, and the 2000 Stock Option Plan (the “2000 Plan”), which was approved by shareholders on September 12, 2000 for a ten-year period. The Company’s primary means for issuing equity-based awards is the 2003 Plan. Pursuant to the 2003 Plan, the Management Development & Compensation Committee is authorized to grant a maximum of 9.4 million shares for issuance as restricted stock units or restricted stock. Any available shares may be issued as stock options. The maximum number of shares that may be granted under this plan is 18.9 million shares. Shares issued under these plans are sourced from available treasury shares.

Stock Options:

Stock options generally vest over a period of one to four years after the date of grant. Awards granted prior to Fiscal 2006 generally had a maximum term of ten years. Beginning in Fiscal 2006, awards have a maximum term of seven years.

In accordance with their respective plans, stock option awards are forfeited if a holder voluntarily terminates employment prior to the vesting date. The Company estimates forfeitures based on an analysis of historical trends updated as discrete new information becomes available and will be re-evaluated on an annual basis. Compensation cost in any period is at least equal to the grant-date fair value of the vested portion of an award on that date.

The Company presents all benefits of tax deductions resulting from the exercise of stock-based compensation as operating cash flows in the consolidated statements of cash flows, except the benefit of tax deductions in excess of the compensation cost recognized for those options (“excess tax benefits”) which are classified as financing cash flows. For the fiscal year ended April 27, 2011, $12.4 million of cash tax benefits was reported as an operating cash inflow and $8.6 million of excess tax benefits as a financing cash inflow. For the fiscal year ended April 28, 2010, $6.9 million of cash tax benefits was reported as an operating cash inflow and $2.4 million of excess tax benefits as a financing cash inflow. For the fiscal year ended April 29, 2009, $9.5 million of cash tax benefits was reported as an operating cash inflow and $4.8 million of excess tax benefits as a financing cash inflow.

As of April 27, 2011, there were no shares available for issuance under the 2000 Plan due to the expiration of the 2000 Plan in September 2010. During the fiscal year ended April 27, 2011, 7,465 shares were forfeited and returned to the plan. During the fiscal year ended April 27, 2011, 10,117 shares were issued from the 2000 Plan.

A summary of the Company’s 2003 Plan at April 27, 2011 is as follows:

	2003 Plan
	(Amounts in
	thousands)
Number of shares authorized		18,869
Number of stock option shares granted		(8,343	)
Number of stock option shares cancelled/forfeited and returned to the plan		236
Number of restricted stock units and restricted stock issued		(4,532	)
Shares available for grant as stock options		6,230

During Fiscal 2011, the Company granted 1,733,135 option awards to employees sourced from the 2000 and 2003 Plans. The weighted average fair value per share of the options granted during the fiscal years ended April 27, 2011, April 28, 2010 and April 29, 2009 as computed using the Black-Scholes pricing model was $5.36, $4.71, and $5.75, respectively. The weighted average assumptions used to estimate these fair values are as follows:

	Fiscal Year Ended
	April 27,			April 28,			April 29,
	2011			2010			2009
Dividend yield		3.9	%		4.3	%		3.3	%
Expected volatility		20.5	%		20.2	%		14.9	%
Expected term (years)		5.5			5.5			5.5
Risk-free interest rate		1.7	%		2.7	%		3.1	%

The dividend yield assumption is based on the current fiscal year dividend payouts. The expected volatility of the Company’s common stock at the date of grant is estimated based on a historic daily volatility rate over a period equal to the average life of an option. The weighted average expected life of options is based on consideration of historical exercise patterns adjusted for changes in the contractual term and exercise periods of current awards. The risk-free interest rate is based on the U.S. Treasury (constant maturity) rate in effect at the date of grant for periods corresponding with the expected term of the options.

A summary of the Company’s stock option activity and related information is as follows:

				Weighted
				Average
	Number of			Exercise Price		Aggregate
	Options			(per share)		Intrinsic Value
	(Amounts in thousands, except per share data)
Options outstanding at April 30, 2008		22,134		$	40.06	$	886,758
Options granted		1,551			50.91		78,978
Options exercised		(6,684	)		42.35		(283,064	)
Options cancelled/forfeited and returned to the plan		(2,901	)		47.77		(138,601	)
Options outstanding at April 29, 2009		14,100			38.59		544,071
Options granted		1,768			39.12		69,166
Options exercised		(2,921	)		35.46		(103,558	)
Options cancelled/forfeited and returned to the plan		(26	)		40.44		(1,068	)
Options outstanding at April 28, 2010		12,921			39.36		508,611
Options granted		1,733			46.42		80,460
Options exercised		(4,813	)		35.73		(171,980	)
Options cancelled/forfeited and returned to the plan		(73	)		42.81		(3,147	)
Options outstanding at April 27, 2011		9,768		$	42.38	$	413,944
Options vested and exercisable at April 29, 2009		10,933		$	36.18	$	395,558
Options vested and exercisable at April 28, 2010		9,300		$	37.59	$	349,600
Options vested and exercisable at April 27, 2011		5,744		$	40.65	$	233,507

The following summarizes information about shares under option in the respective exercise price ranges at April 27, 2011:

	Options Outstanding						Options Exercisable
			Weighted-		Weighted-				Weighted-
			Average		Average				Average		Weighted-
			Remaining		Remaining				Remaining		Average
Range of Exercise	Number		Life		Exercise Price		Number		Life		Exercise Price
Price Per Share	Outstanding		(Years)		Per Share		Exercisable		(Years)		Per Share
	(Options in thousands)
$29.18-$35.38		1,280		2.0	$	33.47		1,274		2.0	$	33.47
$35.39-$42.42		3,964		3.5		39.09		2,647		2.6		39.11
$42.43-$51.25		4,524		4.8		47.77		1,823		3.7		47.90
		9,768		3.9	$	42.38		5,744		2.8	$	40.65

The Company received proceeds of $154.8 million, $67.4 million, and $264.9 million from the exercise of stock options during the fiscal years ended April 27, 2011, April 28, 2010 and April 29, 2009, respectively. The tax benefit recognized as a result of stock option exercises was $21.0 million, $9.3 million and $14.3 million for the fiscal years ended April 27, 2011, April 28, 2010 and April 29, 2009, respectively.

A summary of the status of the Company’s unvested stock options is as follows:

				Weighted
				Average
				Grant Date
	Number of			Fair Value
	Options			(per share)
	(Amounts in thousands, except per share data)
Unvested options at April 28, 2010		3,621		$	5.36
Options granted		1,733			5.36
Options vested		(1,282	)		5.64
Options forfeited		(48	)		5.19
Unvested options at April 27, 2011		4,024		$	5.27

Unrecognized compensation cost related to unvested option awards under the 2000 and 2003 Plans totaled $7.7 million and $8.1 million as of April 27, 2011 and April 28, 2010, respectively. This cost is expected to be recognized over a weighted average period of 1.5 years.

Restricted Stock Units and Restricted Shares:

The 2003 Plan authorizes up to 9.4 million shares for issuance as restricted stock units (“RSUs”) or restricted stock with vesting periods from the first to the fifth anniversary of the grant date as set forth in the award agreements. Upon vesting, the RSUs are converted into shares of the Company’s stock on a one-for-one basis and issued to employees, subject to any deferral elections made by a recipient or required by the plan. Restricted stock is reserved in the recipients’ name at the grant date and issued upon vesting. The Company is entitled to an income tax deduction in an amount equal to the taxable income reported by the holder upon vesting of the award. RSUs generally vest over a period of one to four years after the date of grant.

Total compensation expense relating to RSUs and restricted stock was $23.2 million, $24.8 million and $26.6 million for the fiscal years ended April 27, 2011, April 28, 2010 and April 29, 2009, respectively. Unrecognized compensation cost in connection with RSU and restricted stock grants totaled $29.4 million, $29.8 million and $31.8 million at April 27, 2011, April 28, 2010 and April 29, 2009, respectively. The cost is expected to be recognized over a weighted-average period of 1.7 years.

A summary of the Company’s RSU and restricted stock awards at April 27, 2011 is as follows:

	2003 Plan
	(Amounts in thousands)
Number of shares authorized		9,440
Number of shares reserved for issuance		(5,851	)
Number of shares forfeited and returned to the plan		1,319
Shares available for grant		4,908

A summary of the activity of unvested RSU and restricted stock awards and related information is as follows:

				Weighted
				Average
				Grant Date
				Fair Value
	Number of Units			(Per Share)
	(Amounts in thousands,
	except per share data)
Unvested units and stock at April 30, 2008		2,087		$	39.88
Units and stock granted		577			49.69
Units and stock vested		(910	)		37.91
Units and stock cancelled/forfeited and returned to the plan		(32	)		46.52
Unvested units and stock at April 29, 2009		1,722			44.08
Units and stock granted		628			39.55
Units and stock vested		(834	)		40.59
Units and stock cancelled/forfeited and returned to the plan		(20	)		44.12
Unvested units and stock at April 28, 2010		1,496			44.13
Units and stock granted		574			46.74
Units and stock vested		(725	)		44.96
Units and stock cancelled/forfeited and returned to the plan		(49	)		43.47
Unvested units and stock at April 27, 2011		1,296		$	44.84

Upon share option exercise or vesting of restricted stock and RSUs, the Company uses available treasury shares and maintains a repurchase program that anticipates exercises and vesting of awards so that shares are available for issuance. The Company records forfeitures of restricted stock as treasury share repurchases. The Company repurchased approximately 1.4 million shares during Fiscal 2011.

Global Stock Purchase Plan:

The Company has a shareholder-approved employee global stock purchase plan (the “GSPP”) that permits substantially all employees to purchase shares of the Company’s common stock at a discounted price through payroll deductions at the end of two six-month offering periods. Currently, the offering periods are February 16 to August 15 and August 16 to February 15. From the February 2006 to February 2009 offering periods, the purchase price of the option was equal to 85% of the fair market value of the Company’s common stock on the last day of the offering period. Commencing with the August 2009 offering period, the purchase price of the option is equal to 95% of the fair market value of the Company’s common stock on the last day of the offering period. The number of shares available for issuance under the GSPP is a total of five million shares. During the two offering periods from February 16, 2010 to February 15, 2011, employees purchased 185,716 shares under the plan. During the two offering periods from February 16, 2009 to February 15, 2010, employees purchased 280,006 shares under the plan.

Annual Incentive Bonus:

The Company’s management incentive plans cover officers and other key employees. Participants may elect to be paid on a current or deferred basis. The aggregate amount of all awards may not exceed certain limits in any year. Compensation under the management incentive plans was approximately $45 million, $49 million and $38 million in fiscal years 2011, 2010 and 2009, respectively.

Long-Term Performance Program:

In Fiscal 2011, the Company granted performance awards as permitted in the Fiscal Year 2003 Stock Incentive Plan, subject to the achievement of certain performance goals. These performance awards are tied to the Company’s relative Total Shareholder Return (“Relative TSR”) Ranking within the defined Long-term Performance Program (“LTPP”) peer group and the 2-year average after-tax Return on Invested Capital (“ROIC”) metrics. The Relative TSR metric is based on the two-year cumulative return to shareholders from the change in stock price and dividends paid between the starting and ending dates. The starting value was based on the average of each LTPP peer group company stock price for the 60 trading days prior to and including April 29, 2010. The ending value will be based on the average stock price for the 60 trading days prior to and including the close of the Fiscal 2012 year end, plus dividends paid over the 2 year performance period. The Company also granted performance awards in Fiscal 2010 under the 2010-2011 LTPP and in Fiscal 2009 under the 2009-2010 LTPP. The compensation cost related to LTPP awards recognized in selling, general and administrative expenses (“SG&A”) was $21.5 million and the related tax benefit was $7.4 million for the fiscal year ended April 27, 2011. The compensation cost related to these plans, recognized in SG&A was $20.7 million, and the related tax benefit was $7.0 million for the fiscal year ended April 28, 2010. The compensation cost related to these plans, recognized in SG&A was $17.4 million, and the related tax benefit was $5.9 million for the fiscal year ended April 29, 2009.