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Share-Based Compensation

3 Months Ended

May 01, 2021

12. Share-Based Compensation

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


	Thirteen weeks ended
	May 1,		May 2,
($ in millions)	2021		2020
Options and shares purchased under the stock purchase plan	$	2	$	2
Restricted stock units and performance stock units		6		1
Total share-based compensation expense	$	8	$	3

Tax benefit recognized	$	1	$	—

Valuation Model and Assumptions

We use 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 table below shows assumptions used to compute share-based compensation expense for awards granted during the thirteen weeks ended May 1, 2021 and May 2, 2020:


		Stock Option Plans						Stock Purchase Plan
	May 1,			May 2,			May 1,			May 2,
	2021			2020			2021			2020
Weighted-average risk free rate of interest		0.9	%		0.6	%		0.2	%		2.2	%
Expected volatility		47	%		42	%		48	%		48	%
Weighted-average expected award life (in years)		5.5			5.5			1.0			1.0
Dividend yield		1.5	%		4.9	%		5.6	%		3.8	%
Weighted-average fair value	$	20.22		$	5.03		$	6.35		$	11.91

The information in the table below provides activity under our stock option plans for the thirteen weeks ended May 1, 2021:


		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	3,540			$	47.17
Granted	183				53.82
Exercised	(125)				31.93
Expired or cancelled	(102)				55.05
Options outstanding at May 1, 2021	3,496		5.6	$	47.83
Options exercisable at May 1, 2021	2,680		4.5	$	52.49
Options available for future grant at May 1, 2021	5,455

The total fair value of options vested during the thirteen weeks ended May 1, 2021 and May 2, 2020 was $4 million and $5 million, respectively. The cash received and related tax benefits realized from option exercises during the thirteen weeks ended May 1, 2021 was $4 million and $1 million, respectively.

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

The aggregate intrinsic value for stock options outstanding, and outstanding and exercisable (the difference between our 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:

As of May 1, 2021, 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 1.8 years.

The table below summarizes information about stock options outstanding and exercisable at May 1, 2021:


	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)
$21.60 - $34.24	1,130	6.6	$	24.34	581	$	26.91
$34.75 - $52.13	540	4.7		44.46	532		44.47
$52.82 - $79.23	1,826	5.2		63.35	1,567		64.68
	3,496	5.6	$	47.83	2,680	$	52.49

Restricted Stock Units and Performance Stock Units

Restricted stock units (“RSU”) are awarded to certain officers, key employees of the Company, and nonemployee directors. Additionally, performance stock units (“PSU”) are awarded to certain officers and key employees. Each RSU and PSU award represents the right to receive one share of our common stock provided that the applicable performance and vesting conditions are satisfied.

Generally, RSU awards fully vest after the passage of time, typically three years for employees and one year for nonemployee directors, provided there is continued service with the Company until the vesting date, subject to the terms of the award. PSU awards are earned only after the attainment of performance goals in connection with the relevant performance period and vest after an additional one-year period. No dividends are paid or accumulated on any RSU or PSU awards. Compensation expense is recognized using the market value at the date of grant and is amortized over the vesting period.

RSU and PSU activity for the thirteen weeks ended May 1, 2021 is summarized as follows:


			Weighted-Average
	Number		Remaining		Weighted-Average
	of		Contractual		Grant Date
	Shares		Life		Fair Value
		(in thousands)		(in years)		(per share)
Nonvested at beginning of year		1,348			$	38.48
Granted		414				54.01
Vested		(468)				44.98
Performance adjustment ⁽¹⁾		186
Forfeited		(16)				29.88
Nonvested at May 1, 2021		1,464		2.2	$	42.57

Aggregate value ($ in millions)	$	62

(1)	This represents adjustments made to PSUs and reflect changes in estimates based upon our current performance against predefined financial targets.

The total value of awards that vested during the thirteen weeks ended May 1, 2021 and May 2, 2020 was $21 million and $4 million, respectively. As of May 1, 2021, there was $40 million of total unrecognized compensation cost related to nonvested awards.

Thirteen weeks ended

($ in millions)

May 1, 2021

May 2, 2020