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
	November 3,		October 28,		November 3,		October 28,
	2018		2017		2018		2017
	($ in millions)
Options and shares purchased under the employee stock purchase plan	$	2	$	2	$	5	$	7
Restricted stock and restricted stock units		5		1		11		4
Total share-based compensation expense	$	7	$	3	$	16	$	11

Tax benefit recognized	$	1	$	1	$	2	$	3

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 subjective assumptions, including expected term and expected volatility.

The following table shows the Company’s assumptions used to compute share-based compensation expense for awards granted during the thirty-nine weeks ended November 3, 2018 and October 28, 2017:



		Stock Option Plans						Stock Purchase Plan
		November 3,			October 28,			November 3,			October 28,
		2018			2017			2018			2017
Weighted-average risk free rate of interest		2.7	%		2.1	%		1.8	%		0.9	%
Expected volatility		37	%		25	%		47	%		29	%
Weighted-average expected award life (in years)		5.5			5.4			1.0			1.0
Dividend yield		3.1	%		1.9	%		2.4	%		2.0	%
Weighted-average fair value	$	12.42		$	14.74		$	15.16		$	10.84

The information in the following table covers option activity under the Company’s stock option plans for the thirty-nine weeks ended November 3, 2018:



		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	2,739			$	52.45
Granted	397				44.95
Exercised	(134)				31.47
Expired or cancelled	(96)				60.68
Options outstanding at November 3, 2018	2,906		6.3	$	52.12
Options exercisable at November 3, 2018	2,025		5.2	$	49.83
Options available for future grant at November 3, 2018	8,245

The total fair value of options vested as of November 3, 2018 and October 28, 2017 was $8 million for both periods. The cash received from option exercises was $4 million for the thirty-nine weeks ended November 3, 2018. The total tax benefit realized from option exercises was $1 million for the thirty-nine weeks ended November 3, 2018. There were no option exercises during the thirteen weeks ended November 3, 2018.

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
	November 3, 2018		October 28, 2017		November 3, 2018		October 28, 2017
	($ in millions)
Exercised	$	—	$	5	$	3	$	20

The aggregate intrinsic value for stock options outstanding, and outstanding and exercisable (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
		November 3,	October 28,
		2018	2017
	($ in millions)
Outstanding	$	17	$	5
Outstanding and exercisable	$	15	$	5

As of November 3, 2018 there was $5 million of total unrecognized compensation cost related to nonvested stock options, which is expected to be recognized over a remaining weighted-average period of 1.4 years.

The following table summarizes information about stock options outstanding and exercisable at November 3, 2018:



	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 $18.84	240	1.9	$	17.10	240	$	17.10
$24.75 to $34.75	395	4.2		32.16	356		31.88
$44.78 to $45.75	660	7.4		44.92	299		45.08
$46.64 to $62.11	694	5.9		60.63	661		61.19
$63.79 to $73.21	917	7.7		68.60	469		67.19
	2,906	6.3	$	52.12	2,025	$	49.83

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 vesting conditions are satisfied. There were 878,319 and 361,137 RSU awards outstanding as of November 3, 2018 and October 28, 2017, 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 November 3, 2018 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		374		$	59.15
Granted (1)		683			47.31
Vested		(105)			64.31
Cancelled (2)		(73)			60.34
Nonvested at November 3, 2018		879	2.1	$	49.23
Aggregate value ($ in millions)	$	43


(1)	Approximately 0.4 million performance-based RSUs were granted during the first quarter of 2018 and are included as granted in the table above. The number of performance-based RSUs that are ultimately earned may vary from 0% to 200% of target depending on the achievement relative to the Company’s predefined financial performance targets.
(2)	In addition to forfeitures of restricted stock and RSUs, cancellations include adjustments that were made to performance-based RSUs previously granted. These adjustments reflect changes in estimates based upon the Company’s current performance against predefined financial targets.

The total value of awards for which restrictions lapsed during the thirty-nine weeks ended November 3, 2018 and October 28, 2017 was $7 million and $14 million, respectively. As of November 3, 2018, there was $33 million of total unrecognized compensation cost related to nonvested restricted awards.