STOCK COMPENSATION PLANS

6 Months Ended

Jun. 30, 2019

Share-based Payment Arrangement [Abstract]

STOCK COMPENSATION PLANS

We have various stock-based compensation programs under which awards, including stock options, performance stock units (“PSUs”) and performance stock, stock appreciation rights, restricted stock units (“RSUs”) and restricted stock may be granted to employees, non-employee directors and certain service providers upon whom the successful conduct of our business is dependent. These programs and the accounting treatment related thereto are described in Note 10 to the Consolidated Financial Statements included in our 2018 Annual Report on Form 10-K.

For the periods presented, compensation expense for all types of stock-based compensation programs and the related income tax benefit recognized were as follows:



	Three Months Ended				Six Months Ended
	June 30, 2019		July 1, 2018		June 30, 2019		July 1, 2018
Pre-tax compensation expense	$	13,156	$	13,088	$	23,712	$	23,546
Related income tax benefit	2,160		2,364		4,482		4,968

Compensation costs for stock compensation plans are primarily included in selling, marketing and administrative expense. As of June 30, 2019, total stock-based compensation cost related to non-vested awards not yet recognized was $76,244 and the weighted-average period over which this amount is expected to be recognized was approximately 2.2 years.

Stock Options

A summary of activity relating to grants of stock options for the period ended June 30, 2019 is as follows:



Stock Options	Shares		Weighted-Average Exercise Price (per share)	Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at beginning of year	5,394,382		$94.28	5.6 years
Granted	1,640		$109.74
Exercised	(2,001,947	)	$88.01
Forfeited	(63,264	)	$101.62
Outstanding as of June 30, 2019	3,330,811		$97.91	5.7 years	$	120,304
Options exercisable as of June 30, 2019	2,244,965		$96.41	4.6 years	$	84,449

The weighted-average fair value of options granted was $15.25 and $15.57 per share for the periods ended June 30, 2019 and July 1, 2018, respectively. The fair value was estimated on the date of grant using a Black-Scholes option-pricing model and the following weighted-average assumptions:



	Six Months Ended
	June 30, 2019		July 1, 2018
Dividend yields	2.7	%	2.3	%
Expected volatility	17.0	%	16.6	%
Risk-free interest rates	2.5	%	2.8	%
Expected term in years	6.5		6.6

The total intrinsic value of options exercised was $67,117 and $12,386 for the periods ended June 30, 2019 and July 1, 2018, respectively.

Performance Stock Units and Restricted Stock Units

A summary of activity relating to grants of PSUs and RSUs for the period ended June 30, 2019 is as follows:



Performance Stock Units and Restricted Stock Units	Number of units		Weighted-average grant date fair value for equity awards (per unit)
Outstanding at beginning of year	999,018		$101.57
Granted	442,672		$113.71
Performance assumption change (1)	53,544		$138.83
Vested	(372,037	)	$99.00
Forfeited	(55,481	)	$108.73
Outstanding as of June 30, 2019	1,067,716		$109.19


(1)	Reflects the net number of PSUs above and below target levels based on the performance metrics.

The following table sets forth information about the fair value of the PSUs and RSUs granted for potential future distribution to employees and non-employee directors. In addition, the table provides assumptions used to determine the fair value of the market-based total shareholder return component using the Monte Carlo simulation model on the date of grant.



	Six Months Ended
	June 30, 2019			July 1, 2018
Units granted	442,672			361,068
Weighted-average fair value at date of grant	$	113.71		$	97.92
Monte Carlo simulation assumptions:
Estimated values	$	48.40		$	29.17
Dividend yields	2.6		%	2.6		%
Expected volatility	20.3		%	20.4		%

The fair value of shares vested totaled $40,163 and $19,740 for the periods ended June 30, 2019 and July 1, 2018, respectively.

Deferred PSUs, deferred RSUs and deferred stock units representing directors’ fees totaled 338,651 units as of June 30, 2019. Each unit is equivalent to one share of the Company’s Common Stock.