TJ Maxx 2014 Annual Report Download - page 82

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The fair value of options is estimated as of the date of grant using the Black-Scholes option pricing model with
the following weighted average assumptions:
Fiscal Year Ended
January 31,
2015
February 1,
2014
February 2,
2013
Risk-free interest rate 1.79% 1.42% 0.70%
Dividend yield 1.2% 1.0% 1.0%
Expected volatility factor 24.2% 25.9% 29.0%
Expected option life in years 4.5 4.4 4.5
Weighted average fair value of options issued $12.00 $11.92 $10.28
The risk-free interest rate is for periods within the contractual life of the option based on the U.S. Treasury yield
curve in effect at the time of grant. We use historical data to estimate option exercises, employee termination behavior
and dividend yield within the valuation model. Expected volatility is based on a combination of implied volatility from
traded options on our stock, and historical volatility during a term approximating the expected life of the option
granted. The expected option life represents an estimate of the period of time options are expected to remain
outstanding based upon historical exercise trends. Employee groups and option characteristics are considered
separately for valuation purposes when applicable.
Stock Options: A summary of the status of TJX’s stock options and related weighted average exercise prices
(“WAEP”) is presented below (shares in thousands):
Fiscal Year Ended
January 31, 2015 February 1, 2014 February 2, 2013
Options WAEP Options WAEP Options WAEP
(53 weeks)
Outstanding at beginning of year 32,628 $28.30 36,620 $22.31 40,944 $18.27
Granted 4,849 59.70 4,742 56.71 4,951 45.09
Exercised (6,981) 20.39 (8,258) 17.71 (8,385) 15.90
Forfeitures (418) 48.76 (476) 34.74 (890) 23.35
Outstanding at end of year 30,078 $34.91 32,628 $28.30 36,620 $22.31
Options exercisable at end of year 21,001 $25.75 22,473 $20.19 24,050 $17.02
The total intrinsic value of options exercised was $286.3 million in fiscal 2015, $289.8 million in fiscal 2014 and
$223.8 million in fiscal 2013.
The following table summarizes information about stock options outstanding that were expected to vest and
stock options outstanding that were exercisable as of January 31, 2015:
Shares in thousands Shares
Aggregate
Intrinsic
Value
Weighted
Average
Remaining
Contract Life WAEP
Options outstanding expected to vest 8,354 $ 81,276 9.0 years $56.21
Options exercisable 21,001 $843,971 5.3 years $25.75
Total outstanding options vested and expected to vest 29,355 $925,247 6.3 years $34.42
Options outstanding expected to vest represents total unvested options of 9.0 million adjusted for anticipated
forfeitures.
Performance-Based Restricted Stock and Performance-Based Deferred Stock Awards: TJX grants
performance-based restricted stock and performance-based deferred stock awards (collectively, “performance-
based stock awards”) under the Stock Incentive Plan. These awards are granted without a purchase price to the
recipient and are subject to vesting conditions, including specified performance criteria aligned with management
incentive plans for a period generally of one to three years. The grant date fair value of the awards is charged to
income over the requisite service period during which the recipient must remain employed. The fair value of the
awards is determined at date of grant in accordance with ASC Topic 718 and assumes that performance goals will be
achieved. If such goals are not met, or only partially met, awards and related compensation costs recognized are
reduced on a pro rata basis.
F-20