Note 8 – Stock-Based Compensation

We grant stock-based compensation to employees (associates) and non-employee directors under our 2009 Long-Term Incentive Plan (2009 Plan).  As of October 29, 2011, there were approximately eight million shares of stock available for future grant under the 2009 Plan.   

The following table presents total stock-based compensation costs and related income tax benefits in the unaudited Interim Consolidated Statements of Operations:

 

Stock-Based Compensation Costs

($ in millions)	Three Months Ended											Nine Months Ended
		Oct. 29,				Oct. 30,								Oct. 29,						Oct. 30,
		2011				2010								2011						2010
Stock awards	$	2		$		3						$		14				$		15
Stock options		5				7								19						21
Total stock-based compensation costs	$	7	(1)		$		10						$		33		(1)		$		36
Total related income tax benefit	$	3		$		2						$		13				$		12

 

(1)     Excludes $6 million of stock-based compensation costs reported in restructuring and management transition charges (see Note 10).

 

Stock Options

On March 15, 2011, we made an annual grant of approximately 2.4 million stock options to associates at an option price of $36.58, with a fair value of $11.40 per option.

 

The following table summarizes stock option activity during the nine months ended October 29, 2011:

 

(options in thousands)		Stock Options			Weighted-Average Exercise Price
Outstanding at January 29, 2011		15,013		$	36
Granted		2,409			37
Exercised		(635	)		20
Forfeited or expired		(502	)		37
Outstanding at October 29, 2011		16,285			37
Exercisable at October 29, 2011		10,883			41

 

As of October 29, 2011, there was $30 million of unrecognized compensation expense, net of estimated forfeitures, for unvested stock options, which will be recognized over the remaining weighted-average vesting period of approximately one year.

 

Stock Awards

On March 15, 2011, we made our annual grant of approximately 822,000 restricted stock unit awards to associates. These awards consisted of approximately 367,000 time-based restricted stock units and approximately 455,000 performance-based restricted stock units. The time-based restricted stock units vest one-third on each of the first three anniversaries of the grant date provided that the associate remains continuously employed with the Company during that time. The performance-based unit grant is a target award with a payout matrix ranging from 0% to 200% based on 2011 EPS (defined as per common share income from continuing operations, excluding any unusual and/or extraordinary items as determined by the Human Resources and Compensation Committee of the Board). In addition to the performance requirement, this award also includes a time-based vesting requirement, which is the same as the requirement for the time-based restricted stock unit award. Upon vesting, both the time-based restricted stock units and the performance-based restricted stock units will be paid out in shares of Company common stock.

 

On May 25, 2011, we granted approximately 38,000 restricted stock units to non-employee Board members. Restricted stock unit grants during the nine months ended October 29, 2011 also included 73,000 restricted stock units, consisting of ad-hoc awards to associates and dividend equivalents on outstanding awards. Dividend equivalents on outstanding awards are forfeited if vesting conditions are not met.

 

Stock awards that vested during the nine months ended October 29, 2011 included the final one-third, or approximately 107,000, of our March 2008 annual grant of time-based restricted stock unit awards and one-third, or approximately 379,000, of our March 2010 restricted stock unit awards (time-based and performance-based), as well as the vesting of approximately 123,000 individual restricted stock unit awards.

 

The following table summarizes non-vested stock award activity during the nine months ended October 29, 2011:

 

(awards in thousands)			Non-Vested Stock Awards			Weighted- Average Grant Date Fair Value
Outstanding at January 29, 2011			2,028		$	27
Granted			933			36
Vested			(609	)		34
Forfeited			(79	)		32
Outstanding at October 29, 2011			2,273			29

 

As of October 29, 2011, there was $28 million of unrecognized compensation expense related to unearned associate stock awards, which will be recognized over the remaining weighted-average vesting period of approximately one year.

 

On June 14, 2011, we announced that Ronald B. Johnson had been elected our next Chief Executive Officer.  Upon commencement of his employment on November 1, 2011, Mr. Johnson was granted approximately 1.7 million restricted stock units, which will vest on January 27, 2012, so long as he remains continuously employed by us through such date, provided, however, that the restricted stock units will immediately vest if his employment with us terminates as a result of his death or disability, if he terminates his employment with us for good reason or if we terminate his employment other than for cause.  The restricted stock units were valued at approximately $32 per share, the price of our common stock at close of business on his start date of November 1, 2011. The associated stock-based compensation of approximately $53 million will be recognized over the expected service period to the vesting date.