Share-Based Compensation

9 Months Ended

Oct. 01, 2016

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

The Company has share-based compensation and employee stock purchase plans under which shares of the Company’s Class A common stock are available for future grants and sales.

Pre-tax share-based compensation expense recognized in the statements of operations was $21 million and $26 million for the nine month periods ended October 1, 2016 and October 3, 2015, respectively. Tax related benefits of $7 million and $9 million were also recognized for the nine month periods ended October 1, 2016 and October 3, 2015, respectively.

The fair value of share-based compensation is estimated on the date of grant using a binomial model. Volatility is based on an average of the implied volatility in the open market and the annualized volatility of the Company’s stock price over its entire stock history. Stock option grants in the table below include both stock options, all of which were non-qualified, and stock appreciation rights ("SARs") that will be settled in the Class A common stock or cash. Restricted stock grants are valued at the market closing price on the grant date.

The following table shows the weighted-average assumptions used for grants of SARs as well as the fair value based on those assumptions:



	Nine Months Ended
	October 1, 2016		October 3, 2015
Expected dividend yield	0%		0%
Forfeiture rate	9.01%		10.24%
Volatility	43.14%		33.98%
Risk free interest rate	1.29%		1.53%
Range of interest rates	0.25% - 1.75%		0.02% - 2.14%
Expected weighted-average life	5.33 years		5.32 years
Fair value of SARs granted (in millions)	$	12	$	12
Weighted-average grant date fair value of SARs granted (per underlying share)	$	20.06	$	35.25

The following table summarizes the stock awards activity:



	Nine Months Ended October 1, 2016
Stock Awards	Shares			Weighted- Average Exercise Price
Outstanding at beginning of period	1,397,611			$	56.68
Granted	618,866			51.83
Exercised	(58,384		)	39.71
Forfeited	(52,858		)	65.26
Expired	(5,577		)	81.27
Outstanding at end of period	1,899,658			55.22
Exercisable at end of period	933,358			43.92
Intrinsic value of exercised SARs (in millions)	$	2

The following table summarizes information about stock awards outstanding at October 1, 2016:



	Outstanding		Exercisable
Aggregate intrinsic value (in millions)	$	26	$	20
Weighted-average remaining contractual term	7.1 years		5.2 years

There were no stock options issued during the nine months ended October 1, 2016.

A summary of the status of the Company's restricted stock awards, restricted stock units, performance stock awards and performance stock units activity was as follows:



	Nine Months Ended October 1, 2016
Restricted Stock Awards and Units	Shares		Weighted-Average Grant Date Fair Value
Outstanding at beginning of period	605,193		$	77.82
Granted
Restricted Stock Awards	381,278		51.60
Restricted Stock Units	31,194		51.42
Total shares granted	412,472
Released	(234,402	)	56.46
Forfeited	(28,112	)	79.34
Outstanding at end of period	755,151		70.25



	Nine Months Ended October 1, 2016
Performance Stock Awards and Units	Shares		Weighted-Average Grant Date Fair Value
Outstanding at beginning of period	341,703		$	73.30
Granted
Performance Stock Awards	178,378		50.34
Performance Stock Units	—
Total shares granted	178,378
Released	(111,325	)	46.58
Forfeited	(6,819	)	74.22
Outstanding at end of period	401,937		70.44

As of October 1, 2016, total unearned compensation costs related to the Company’s share-based compensation plans was $54 million which will be amortized over the weighted average remaining service period of 2.6 years.