Share-based grants for compensation and incentive purposes are made pursuant to the Equity and Incentive Compensation Plan (“EICP”). The EICP provides for grants of one or more of the following stock-based compensation awards to employees, non-employee directors and certain service providers upon whom the successful conduct of our business is dependent:

The EICP also provides for the deferral of stock-based compensation awards by participants if approved by the Compensation and Executive Organization Committee of our Board and if in accordance with an applicable deferred compensation plan of the Company. Currently, the Compensation and Executive Organization Committee has authorized the deferral of PSU and RSU awards by certain eligible employees under the Company’s Deferred Compensation Plan. Our Board has authorized our non-employee directors to defer any portion of their cash retainer, committee chair fees and RSUs awarded that they elect to convert into deferred stock units under our Directors’ Compensation Plan.

At the time stock options are exercised or PSUs and RSUs become payable, Common Stock is issued from our accumulated treasury shares. Dividend equivalents are credited on RSUs on the same date and at the same rate as dividends paid on our Common Stock. Dividend equivalents are charged to retained earnings and included in accrued liabilities until paid.

Awards to employees eligible for retirement prior to the award becoming fully vested are amortized to expense over the period through the date that the employee first becomes eligible to retire and is no longer required to provide service to earn the award. In addition, historical data is used to estimate forfeiture rates and record share-based compensation expense only for those awards that are expected to vest.

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
	July 4, 2021		June 28, 2020		July 4, 2021		June 28, 2020
Pre-tax compensation expense	$	16,826	$	12,915	$	32,482	$	25,490
Related income tax benefit	4,500		2,492		8,023		4,894

Compensation expenses for stock compensation plans are primarily included in selling, marketing and administrative expense. As of July 4, 2021, total stock-based compensation expense related to non-vested awards not yet recognized was $101,018 and the weighted-average period over which this amount is expected to be recognized was approximately 2.2 years.

The exercise price of each stock option awarded under the EICP equals the closing price of our Common Stock on the New York Stock Exchange on the date of grant. Each stock option has a maximum term of 10 years. Grants of stock options provide for pro-rated vesting, typically over a four-year period. Expense for stock options is based on grant date fair value and recognized on a straight-line method over the vesting period, net of estimated forfeitures.

A summary of activity relating to grants of stock options for the period ended July 4, 2021 is as follows:


Stock Options	Shares	Weighted-Average Exercise Price (per share)	Weighted-Average Remaining Contractual Term	Aggregate Intrinsic Value
Outstanding at beginning of the period	1,839,811	$99.72	4.8 years
Granted	32,155	$147.98
Exercised	(338,047)	$96.46
Forfeited	(3,009)	$102.58
Outstanding as of July 4, 2021	1,530,910	$101.44	4.6 years	$	111,076
Options exercisable as of July 4, 2021	1,344,804	$100.00	4.3 years	$	99,512

The weighted-average fair value of options granted was $24.12 and $21.31 per share for the periods ended July 4, 2021 and June 28, 2020, 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
	July 4, 2021		June 28, 2020
Dividend yields	2.2	%	2.1	%
Expected volatility	21.8	%	17.5	%
Risk-free interest rates	1.0	%	1.3	%
Expected term in years	6.3		6.7

Under the EICP, we grant PSUs to selected executives and other key employees. Vesting is contingent upon the achievement of certain performance objectives. We grant PSUs over 3-year performance cycles. If we meet targets for financial measures at the end of the applicable 3-year performance cycle, we award a resulting number of shares of our Common Stock to the participants. The number of shares may be increased to the maximum or reduced to the minimum threshold based on the results of these performance metrics in accordance with the terms established at the time of the award.

For PSUs granted, the target award is a combination of a market-based total shareholder return and performance-based components. For market-based condition components, market volatility and other factors are taken into consideration in determining the grant date fair value and the related compensation expense is recognized regardless of whether the market condition is satisfied, provided that the requisite service has been provided. For performance-based condition components, we estimate the probability that the performance conditions will be achieved each quarter and adjust compensation expenses accordingly. The performance scores of PSU grants during the six months ended July 4, 2021 and June 28, 2020 can range from 0% to 250% of the targeted amounts.

We recognize the compensation expenses associated with PSUs ratably over the 3-year term. Compensation expenses is based on the grant date fair value because the grants can only be settled in shares of our Common Stock. The grant date fair value of PSUs is determined based on the Monte Carlo simulation model for the market-based total shareholder return component and the closing market price of the Company’s Common Stock on the date of grant for performance-based components.

During the six months ended July 4, 2021 and June 28, 2020, we awarded RSUs to certain executive officers and other key employees under the EICP. We also awarded RSUs to non-employee directors.

We recognize the compensation expenses associated with employee RSUs over a specified award vesting period based on the grant date fair value of our Common Stock. We recognize expense for employee RSUs based on the straight-line method. The compensation expenses associated with non-employee director RSUs is recognized ratably over the vesting period, net of estimated forfeitures.

A summary of activity relating to grants of PSUs and RSUs for the period ended July 4, 2021 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	1,053,332	$135.11
Granted	382,841	$153.39
Performance assumption change (1)	144,722	$142.56
Vested	(308,664)	$115.57
Forfeited	(35,938)	$124.56
Outstanding as of July 4, 2021	1,236,293	$146.11

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
	July 4, 2021			June 28, 2020
Units granted	382,841			326,283
Weighted-average fair value at date of grant	$	153.39		$	163.30
Monte Carlo simulation assumptions:
Estimated values	$	66.44		$	80.08
Dividend yields	2.2		%	2.0		%
Expected volatility	26.4		%	17.3		%

Deferred PSUs, deferred RSUs and deferred stock units representing directors’ fees totaled 263,269 units as of July 4, 2021. Each unit is equivalent to one share of the Company’s Common Stock.