Annual report pursuant to Section 13 and 15(d)

Stock-Based Compensation

v3.3.1.900
Stock-Based Compensation
12 Months Ended
Jan. 30, 2016
Share-based Compensation [Abstract]  
Stock-Based Compensation
Stock-Based Compensation
We grant stock-based compensation awards to employees and non-employee directors under our equity compensation plan. On May 16, 2014, our stockholders approved the J. C. Penney Company, Inc. 2014 Long-Term Incentive Plan (2014 Plan), which has a fungible share design in which each stock option will count as one share issued and each stock award will count as two shares issued. The 2014 Plan reserved 16 million shares or 32 million options for future grants and will terminate on May 31, 2019.  In addition, shares underlying any outstanding stock award or stock option grant canceled prior to vesting or exercise become available for use under the 2014 Plan. Under the terms of the 2014 Plan, all grants made after January 31, 2014 reduce the shares available for grant under the 2014 Plan. As of January 30, 2016, a maximum of 11.5 million shares of stock were available for future grant under the 2014 Plan.

Our stock option and restricted stock award grants have averaged about 2.3% of outstanding stock over the past three years. Authorized shares of the Company's common stock are used to settle the exercise of stock options, granting of restricted shares and vesting of restricted stock units.
 
Stock-based Compensation Cost
The components of total stock-based compensation costs are as follows:
($ in millions)
2015
 
2014
 
2013
Stock awards
$
32

 
$
20

 
$
14

Stock options
12

 
13

 
14

Total stock-based compensation(1)
$
44

 
$
33

 
$
28

 
 
 
 
 
 
Total income tax benefit recognized for stock-based compensation arrangements
$

 
$

 
$


(1)
Excludes $9 million, $3 million and $18 million for 2015, 2014 and 2013, respectively, of stock-based compensation costs reported in restructuring and management transition charges (Note 17).














Stock Options 
The following table summarizes stock option activity during the year ended January 30, 2016:
 
 
Shares (in thousands)
 
Weighted - Average Exercise Price Per Share
 
Weighted - Average Remaining Contractual Term (in years)
 
Aggregate Intrinsic Value ($ in millions)(1) 
Outstanding at January 31, 2015
 
14,575

 
$
32

 
 
 
 
Granted
 
5,119

 
8

 
 
 
 
Exercised
 
(4
)
 
8

 
 
 
 
Forfeited/canceled
 
(3,594
)
 
32

 
 
 
 
Outstanding at January 30, 2016
 
16,096

 
24

 
5.2
 
$
0.1

Exercisable at January 30, 2016
 
9,170

 
36

 
2.8
 
$

 
(1)
The intrinsic value of a stock option is the amount by which the market value of the underlying stock exceeds the exercise price of the option at year end.

Cash proceeds, tax benefits and intrinsic value related to total stock options exercised are provided in the following table:
($ in millions)
 
2015
 
2014
 
2013
Proceeds from stock options exercised
 
$

 
$

 
$
7

Intrinsic value of stock options exercised
 

 

 
2

Tax benefit related to stock-based compensation
 

 

 

Excess tax benefits realized on stock-based compensation
 

 

 


 
As of January 30, 2016, we had $11 million of unrecognized and unearned compensation expense, net of estimated forfeitures, for stock options not yet vested, which will be recognized as expense over the remaining weighted-average vesting period of approximately two years.
 
Our weighted-average fair value of stock options at grant date was $3.48 in 2015, $3.78 in 2014 and $7.15 in 2013. We primarily used the binomial lattice valuation model in 2015 and 2013 and the Monte Carlo simulation model in 2014 to determine the fair value of the stock options granted using the following assumptions:
 
 
2015
 
2014
 
2013
Weighted-average expected option term
 
4.6 years
 
4.1 years
 
4.3 years
Weighted-average expected volatility
 
51.46%
 
60.00%
 
62.00%
Weighted-average risk-free interest rate
 
1.50%
 
1.60%
 
0.64%
Weighted-average expected dividend yield (1)
 
—%
 
—%
 
—%
Expected dividend yield range (1)
 
—%
 
—%
 
—%


(1) Following the May 1, 2012 payment, we discontinued the quarterly $0.20 per share dividend.
 
Stock Awards
The following table summarizes our non-vested stock awards activity during the year ended January 30, 2016:  
 
Time-Based Stock Awards
 
Performance-Based Stock Awards
(shares in thousands)
Number of Units
 
Weighted-Average Grant Date Fair Value
 
Number of Units
 
Weighted-Average Grant Date Fair Value
Non-vested at January 31, 2015
6,769

 
$
10

 
533

 
$
7

Granted
3,429

 
8

 
2,403

 
8

Vested
(1,728
)
 
16

 
(278
)
 
8

Forfeited/canceled
(772
)
 
9

 
(101
)
 
8

Non-vested at January 30, 2016
7,698

 
9

 
2,557

 
7


 
As of January 30, 2016, we had $50 million of unrecognized compensation expense related to unearned employee stock awards, which will be recognized over the remaining weighted-average vesting period of approximately two years. The aggregate market value of shares vested during 2015, 2014 and 2013 was $16 million, $4 million and $25 million, respectively, compared to an aggregate grant date fair value of $27 million, $9 million and $42 million, respectively.

In addition to the grants above, on March 19, 2015, we granted approximately 2.5 million phantom units as part of our management incentive compensation plan, which are similar to RSUs in that the number of units granted was based on the price of our stock, but the units will be settled in cash based on the value of our stock on the vesting date, limited to $15.54 per phantom unit. The fair value of the awards is remeasured at each reporting period and was $7.26 per share as of January 30, 2016. Compensation expense, which is variable, is recognized over the vesting period with a corresponding liability, which is recorded in Other accounts payable and accrued expenses and Other liabilities in our Consolidated Balance Sheets, of $17 million as of January 30, 2016. Awards granted include approximately 154,000 fully vested RSUs to directors during 2015 with a fair value of $8.64 per RSU award.