13. Share-Based Compensation

Total compensation expense included in SG&A, and the associated tax benefits recognized related to the Company’s share-based compensation plans, were as follows:



	Thirteen weeks ended				Thirty-nine weeks ended
	October 28,		October 29,		October 28,		October 29,
	2017		2016		2017		2016
	($ in millions)
Options and shares purchased under the employee stock purchase plan	$	2	$	3	$	7	$	8
Restricted stock and restricted stock units		1		3		4		9
Total share-based compensation expense	$	3	$	6	$	11	$	17

Tax benefit recognized	$	1	$	2	$	3	$	5

Valuation Model and Assumptions

The Company uses the Black-Scholes option-pricing model to estimate the fair value of share-based awards. The Black-Scholes option-pricing model incorporates various and highly subjective assumptions, including expected term and expected volatility.

During the first quarter of 2017, in connection with the adoption of ASU 2016-09, we have made the accounting policy election to discontinue estimating forfeitures and will account for forfeitures as they occur.

The following table shows the Company’s assumptions used to compute share-based compensation expense for awards granted during the thirty-nine weeks ended October 28, 2017 and October 29, 2016:



		Stock Option Plans						Stock Purchase Plan
		October 28,			October 29,			October 28,			October 29,
		2017			2016			2017			2016
Weighted-average risk free rate of interest		2.1	%		1.4	%		0.9	%		0.4	%
Expected volatility		25	%		30	%		29	%		27	%
Weighted-average expected award life (in years)		5.4			5.7			1.0			1.0
Dividend yield		1.9	%		1.7	%		2.0	%		1.7	%
Weighted-average fair value	$	14.74		$	15.71		$	10.84		$	14.04

The information in the following table covers option activity under the Company’s stock option plans for the thirty-nine weeks ended October 28, 2017:



		Weighted-		Weighted-
	Number	Average		Average
	of	Remaining		Exercise
	Shares	Contractual Life		Price
	(in thousands)	(in years)		(per share)
Options outstanding at the beginning of the year	2,806			$	42.61
Granted	547				69.58
Exercised	(536)				21.38
Expired or cancelled	(19)				61.01
Options outstanding at October 28, 2017	2,798		6.7	$	51.82
Options exercisable at October 28, 2017	1,729		5.4	$	42.91
Options available for future grant at October 28, 2017	10,759

The total fair value of options vested as of October 28, 2017 and October 29, 2016 was $8 million and $9 million, respectively. The cash received from option exercises for the thirteen and thirty-nine weeks ended October 28, 2017 was $2 million and $12 million, respectively. The cash received from option exercises for the thirteen and thirty-nine weeks ended October 29, 2016 was $10 million and $24 million, respectively.

The total intrinsic value of options exercised (the difference between the market price of the Company’s common stock on the exercise date and the price paid by the optionee to exercise the option) is presented below:



	Thirteen weeks ended				Thirty-nine weeks ended
	October 28,		October 29,		October 28,		October 29,
	2017		2016		2017		2016
	($ in millions)
Exercised	$	5	$	19	$	20	$	45

The total tax benefit realized from option exercises was $2 million and $8 million for the thirteen and thirty-nine weeks ended October 28, 2017. The total tax benefit realized from option exercises was $7 million and $17 million for the corresponding prior-year periods.

The aggregate intrinsic value for stock options outstanding, outstanding and exercisable, and vested and expected to vest (the difference between the Company’s closing stock price on the last trading day of the period and the exercise price of the options, multiplied by the number of in-the-money stock options) is presented below:



	Thirty-nine weeks ended
	October 28,		October 29,
	2017		2016
	($ in millions)
Outstanding	$	5	$	78
Outstanding and exercisable	$	5	$	71
Vested and expected to vest	$	5	$	78

As of October 28, 2017 there was $7 million of total unrecognized compensation cost related to nonvested stock options, which is expected to be recognized over a remaining weighted-average period of 1.5 years. The following table summarizes information about stock options outstanding and exercisable at October 28, 2017:



	Options Outstanding				Options Exercisable
		Weighted-
		Average		Weighted-			Weighted-
		Remaining		Average			Average
Range of Exercise	Number	Contractual		Exercise	Number		Exercise
Prices	Outstanding	Life		Price	Exercisable		Price
	(in thousands, except prices per share and contractual life)
$9.85 to $24.75	344	2.7	$	16.77	344	$	16.77
$30.92 to $45.75	787	5.5		38.33	747		38.50
$48.55 to $62.11	704	6.9		61.05	472		61.35
$63.79 to $73.21	963	8.8		68.60	166		64.35
	2,798	6.7	$	51.82	1,729	$	42.91

Restricted Stock and Restricted Stock Units

Restricted shares of the Company’s common stock and restricted stock units (“RSU”) may be awarded to certain officers and key employees of the Company. Additionally, RSU awards are made to employees in connection with the Company’s long-term incentive program, and to nonemployee directors. Each RSU represents the right to receive one share of the Company’s common stock provided that the performance and vesting conditions are satisfied. There were 361,137 and 678,466 RSU awards outstanding as of October 28, 2017 and October 29, 2016, respectively.

Generally, awards fully vest after the passage of time, typically three years. However, RSU awards made in connection with the Company’s performance-based long-term incentive program are earned after the attainment of certain performance metrics and vest after the passage of time. Restricted stock is considered outstanding at the time of grant and the holders have voting rights. Dividends are paid to holders of restricted stock that vest with the passage of time. With regard to performance-based restricted stock, dividends will be accumulated and paid after the performance criteria are met. No dividends are paid or accumulated on RSU awards. Compensation expense is recognized using the market value at the date of grant and is amortized over the vesting period, provided the recipient continues to be employed by the Company.

Restricted stock and RSU activity for the thirty-nine weeks ended October 28, 2017 is summarized as follows:


			Weighted-
			Average	Weighted-
		Number	Remaining	Average
		of	Contractual	Grant Date
		Shares	Life	Fair Value
		(in thousands)	(in years)		(per share)
Nonvested at beginning of year		798		$	56.91
Granted		328			63.72
Vested		(286)			49.55
Expired or cancelled		(447)			64.74
Nonvested at October 28, 2017		393	1.5	$	59.07
Aggregate value ($ in millions)	$	23

The total value of awards for which restrictions lapsed during the thirty-nine weeks ended October 28, 2017 and October 29, 2016 was $14 million and $8 million, respectively. As of October 28, 2017, there was $10 million of total unrecognized compensation cost related to nonvested restricted awards.